Monday, March 30, 2009

So what's in the auto bailout for us?

I once bought two cars with a Discover card. It wasn't as dumb as it sounds.

We had the cash and trade-in, but it was late in the month and we could still get a big interest payment at the credit union if we bought charged the cars and paid off the card in full the next month.

And we weren't even aiming for cash-back rewards, though the bump as nice. And 25 years ago, my wife really liked Fieros, except for that unplanned spontaneous combustion part. We didn't buy one.

So it was interesting today to poke around President Obama's auto industry bailout package to see what might be in it for us potential buyers. It isn't clear.

Take the cash-for clunkers idea. It's called scrappage incentives in Washington-speak. Paying people to ditch their old gas-guzzling rust buckets for something thrifty with higher than average gas mileage sounds good at first. But we need to see some numbers. Many drivers of old gas-guzzling rust buckets don't have spare cash for new cars right now, or the higher insurance, taxes and other costs that come with. And where do we put the junk yards? It's not easy going green.

And what would we get for the money? Automakers around the world have turned out some pretty nifty rides over the last several decades. They've turned out some market clunkers too.
Who can replace Harley Earle?

Sunday, March 29, 2009

Driving naked is not an option

Dropping your car insurance to cut costs in a financial emergency can become the most expensive money you'll ever save.

You need a car to find work and get to it. And when money is tight, driving without insurance is just too risky, financial planner Doug Dunham told me in a financial planning story I recently wrote.

Driving naked - without any insurance - isn't a choice. The best thing that can happen is you get pulled over, can't produce proof of insurance and end buying the stuff anyway along with however many hundreds in penalties and court costs to get your license back after a suspension. The worst thing that can happen is you have an accident and get stuck with liability and property damage on top of that.

Theoretically, you can put up a bond to cover potential damages ahead of time, but if you've got that kind of cash, buying the insurance is cheaper.

So, what do you do? First, look for the least amount of insurance you can get by with - offers a rundown of each state's requirements, but you may need higher coverage, especially if your finance company insists. You are driving their loan collateral after all.

Next, look for the cheapest source you can afford. Lately, online direct sellers such as Safe Auto in Ohio and 21st Century in California are pitching their low quotes for minimum state required coverage. Online sales have been growing faster than traditional agency or brokerage sales for a couple years now, industry watchers say.

But think that choice through before you make it too. Industry statistics show that on a dollar-for-premium-written-dollar basis, complaints about the generally smaller online providers can run three or more times higher than are filed against the good hands-good neighbors guys. Check out any company you are looking at.

Finally, talk with your current insurance agent about any breaks you can negotiate. Your carrier will want to keep you if you've been a good client and, regrettable as it may be, you are commuting less than before.

Wednesday, March 25, 2009

Using retro chic savings to salvage an unplanned retirement

I already realize that some of the what seemed dumb personal finance moves I made years ago are becoming unexpected sources of some needed income now.

Now some of the rest of the world is catching up too. The Wall Street Journal, where headline writers also liked to use the word 'fusty' way back when I worked there to describe retro chic financial moves, reports a growing interest in whole life insurance policies like Grandpa bought.

Financial self-help author Pamela Yellen even incorporates some retro chic insurance investing in some of the wealth building systems she sells. You want to check out some basics about life insurance and annuities before you decide if that approach feels right for you.

Retro chic saving styles are creeping into other conversations too. Old fashioned thrift would go a long way to ease an interest, insurance and taxes jam we've worked ourselves into, writes a Motley Fool contributor.

Meantime, contributors to a round table on what the recession is doing to casinos offer some heartening words for some of us who haven't heard many of those lately.
The most successful survivors of the current recession, they conclude, will be government workers, business owners who sell infrastructure stuff to the government, and recent retirees who learn to live with a very low overhead.

We're trying.

Tuesday, March 24, 2009

IRS tells homebuyers, we can wait.

IRS Commissioner Doug Shulman recently offered homebuyers advice that I don't remember hearing ever come out of a tax chief's mouth before.

Don't file your taxes too quickly if you plan on claiming a new first-time homebuyers credit, Shulman urged taxpayers recently. Check out your options and think about asking for a six-month filing deadline extension, to Oct. 15, if that works out better for you, he said. You do need to file that request by April 15, however.

Briefly, singles can claim a dollar-for-dollar tax reduction up to $4,000 - and married couples can claim up to $8,000 - buying a home this year if they haven't owned one in the last three years.

Falling home prices and a crocus-like bloom in late winter home sales may make this an even better deal for first-time buyers. H&R Block offers a rundown of the key points to consider about the tax credit, as well as similar, but less attractive credit for purchases in 2008.

But weigh your filing choices too, Shulman suggests. Waiting until Oct 15 to file, if you buy a home before then, may get your tax credit into your hands faster than waiting until you file your return for 2009 a year from now. Or, if you've already filed, filing an amended return after you buy could do the same things. But you also can wait a year and claim the money on your return for 2009 if you think the tax reduction might do more good then.

Sunday, March 22, 2009

Three (credit) card monte...who gets stung?

Credit card companies don't really play three card monte with our plastic, of course. But some similarities to the classic street con are startling.

You've got dealers throwing out all kinds of offers hoping we'll think one of them is the elusive queen. You've got ropers, advertising the good life you can buy on borrowed time, and shills, living fantastic lives in those ads and whom we never see write checks for the stuff they charge. And there's muscle, those increasingly insistent calls and letters we get if we don't pay on time.

But now the game may be changing. Growing numbers of borrowers are having trouble paying on time. It's a blood-from-turnips problem with the recession, not irresponsibility on their parts.
So, more credit card lenders are hiking costs, which makes things worse for the borrowers.

Borrowers who can are fighting back. Basically, the financial system finds a lot more of us are using debit cards these days. There's no rocket science involved. As credit cards get more expensive, many debit cards are getting cheaper and more flexible.

There is a catch, though. It's harder to overspend with a debit card because your limit is what is in your account. And in a consumer-powered economy, it's tough imagining much stimulus from the few hundred dollars or less that may be left over when the plastic clears.

Anybody hear canaries coughing?

Friday, March 20, 2009

Tax rebates, refunds are real head-scratchers this year

Plan on spending some extra quality time with your favorite tax professional this filing season. IRS recently reported we've been muffing a new calculation on about one in seven of some early returns it received.

The problem is the $300, $600 or other stimulus checks we started receiving just after filing season ended a year ago. You may have more money coming if your income, family size or other circumstances changed a lot in 2008. It's an easy calculation for many to miss, Turbo Tax's Bob Meighan told Forbes, because the payments were tax free and many people are simply ignoring those calculations.

Stimulus and rebate calculations may be even more complicated a year from now, tax people say. That's because the government is jiggling payroll deductions to deliver the payments one pay period at a time in your regular check instead of mailing a lump sum later.

Sounds simple, but if yours is a two-income household or you work more than one job, it's going to be very easy to get your withholding out of whack and maybe lose part of the refund you expect next year, reports Bill Toland of the Pittsburgh (Pa.) News-Gazette.

Until then, put on an extra pot of coffee and start planning now to avoid headaches later. H&R Block recaps recent tax changes you need to know about besides the 2008 rebates. And recently updated its now classic list of the nearly dozen deductions we mess up the most.

Tuesday, March 17, 2009

Springtime special at the IRS

More than 250 IRS offices around the nation --and three in Kansas City -- will be open between 9 a.m. and 2 p.m. to provide free tax preparation and other services to taxpayers. Hundreds of other volunteer sites, on a list you can link to here, will be open too.

That may not be the favorite way taxpayers would choose to spend the first Saturday of spring, but IRS knows that this economy -and some first time calculations for things such as unemployment benefits or potential job search deductions - may make filing especially challenging this year, said Commissioner Doug Shulman.

"Our Super Saturday service will help people get refunds quickly," Shulman said. "Also, if you think you owe taxes and can't pay, please come in and talk to us about it. There are steps we can take to help."

Three Kansas City area taxpayer assistance centers, at 5800 East Bannister Road in Kansas City, 3730 South Elizabeth Ave in Independence and 5799 Broadmoor in Mission will be open for the event. IRS' main toll free tax information number, 1-800-829-1040 also will be open then.

Free tax preparation and filing help will be offered only to taxpayers with incomes below $42,000. Other help, such as working out payment plans or figuring out tax rules, will be available for everyone, regardless of income.

Monday, March 16, 2009

Free stimulus help for just $999, one night only

Somewhere in America, someone already is making a gazillion bucks applying for free government money from the new federal stimulus package.

In fact, they have been doing that since 1999, according to a date on one of the slides a really persuasive pitchman showed at a hotel ballroom conference I checked out to learn, in the sponsor's words, "How to Profit from the Trillion-Dollars in Government Bailouts and Programs!"

The Federal Trade Commission is skeptical.

I haven't seen numbers yet, but more observers are noticing that scam artists appear to be using the new federal stimulus programs and the current recession to try to rip us off. Some of them have always tried, of course, but now they've got new headlines to work with.

I would have stuck around to learn more, but I'm job hunting and I'm not putting even a bargain $999 today only on my credit card. Plus if you are persistent and patient enough, you can find the same information about stimulus grants, government jobs and other genuinely useful help straight from the government itself.

To be fair though, I missed by chance to earn $150,000 as a caretaker on a tropical island too. It would have been fun and $150,000 Australian would have been nice.

Saturday, March 14, 2009

Profiting from our mistakes...or at least salvaging something

Doing something dumb with your money need not be financially fatal.

Case in point. I was doing some research recently for a Kansas City Star story about budgeting for a job loss and came across a video clip from a Texas television station in which financial planner Jim Lacamp talked about looking for quick cash in unlikely places.

Two of them especially grabbed me. Lacamp mentioned borrowing from cash value life insurance policies and also cashing in some of that credit insurance you might have bought when you applied for some of your plastic. Many planners think both those insurance products are poor choices for many of us.

None of us makes perfect decisions. I bought some whole life when I converted my GI life insurance 40 years ago, have added more of it since then, and generally kept my mouth shut when planners I respect extol the virtues of the term insurance I didn't buy.

And it's paid off, in at least a small way. We haven't had to tap our whole life policies to buy groceries yet and don't expect to. But we have begun using the continuing dividends to pay premiums and keep the coverage going. And, if the economy remains really bad for really long, our insurance savings are another source of help against cashing in retirement savings. I wish I could claim to have been really wise back in the day, but the truth is I didn't know better back then.

So, hang loose. You often can find something to salvage from almost anything. And if your job looks shaky right now, don't panic. There are both some practical things you can do and some broader things you should remember to get through the rough spots. Good luck.

Tuesday, March 10, 2009

Prying another nickel from my cold clenched fist.

It takes me longer to shop Hy-Vee or Price Chopper as the recession continues.

More people seem to be taking time these days to stop and compare house brand versus name brand labels on soup, canned tomatoes and other stuff we stock up on than did before. Their carts block the aisles more often.

Even The New York Times has noticed. Atlanta's glitterati apparently have begun clipping coupons. Trend watchers are divided over whether frugality is a passing fancy or more permanent.

But there are some points of the frugal arts you might not learn on the back of a can of beans. Lots of good commentators like Kiplinger's crank out all sorts of lists of stuff we pay too much for.

What's trickier is that being frugal sometimes requires spending money too. Sometimes you do it just to shave a few more pennies on a tight budget, posts Other times, as the editors at MarketWatch wrote recently, you need to spend money, even scarce money, to improve your situation later on.

Some days you do both. I'm heading down to FedEx soon after I post this, because they are printing free resumes today for job hunters. I'm stopping off for a cup of really good dark roast afterward too. I've got a coupon for a freebie.

Sunday, March 8, 2009

The old rocking chair's got me personal finance blues

I feel too young for pension payments.

But as a 60-something boomer fighting a brutal job market in an imploding news industry, I recently applied anyway. I'm thinking defensively. A lot of good financial planners I've talked with over the years generally advise rolling your 401(k) savings into an IRA and taking them with you when you leave a job.

I decided to do the same thing with a handful of old fashioned traditional pension benefits I earned back before employers switched to 401(k)s. Briefly, I'm rolling as much as I can as a lump sum into an IRA that I hope not to need for a few more years. That still leaves maybe about $800 a month in payments the plan rules won't let me roll over. I'm taking that too, even though it would be worth a bunch more if I waited another four years or so.

So, why now? Because I don't know what would happen to the money if my former employer got deeper into its financial jam and either filed bankruptcy protection or simply shut down the plan to save money.

Theoretically, many of our pensions our insured by a 35-year-old federal agency known as the Pension Benefit Guaranty Corp. They've fielded some biggies, including the Enron collapse. But the agency is currently running $11 billion in the red and we don't know how many auto workers' pensions might be coming over the hill soon.

PBGC isn't a totally reassuring deal in the best times. The agency currently pledges to protect up to $4,500 a month in traditional pension checks for covered workers. But whether you are protected depends on your plan's rules, your age, how well the plan is funded and what PBGC can recover if it needs to take over.

There's plenty of wiggle room there. And even that theoretical $4,500 a month drops quickly to below $3,000 if you are younger than 65, have a spouse who will still need money if you die.

PBGC won't protect your 401(k) savings if your employer goes broke. Another agency in the Labor Department is supposed to assure that those funds are shielded from creditors. But that can be tricky too, because if your employer goes bust, your claims for your 401(k) money get bumped way down the list of who gets paid with what's left.

So, two things to do. Talk to the people running your retirement money, find out what happens worst case, and plan accordingly. Then, if it looks really bad, remember that those new fangled plastic coffee cans that Folgers, Maxwell House and others have been switching too will hold up a lot better than the old fashioned steel cans when buried in the back yard.