Torching your credit cards won't make you rich, but it might help

Credit cards begin melting at 360 degrees Fahrenheit, but don't actually start burning until 455 or higher. Never mind how I know.

I thought of that recently when Jim Wang at Bargaineering.com shared a nifty illustration from Mint.com, an online budgeting help provider, that tracks the descent into credit card hell. It's only funny if you haven't been there, however.

The bad news is that while new credit card legislation is changing some of the ways you want to manage your credit cards, which Leslie McFadden outlines at Bankrate.com., there aren't any new shortcuts out of a jam once you are in it. In fact, some once instinctive moves, like stashing away a card you don't use much, requesting lower interest rates, or bailing out of a card contract if the issuer offers an unwanted change in the terms, all can backfire now, she writes.

Basically, you have three ways to work your way out of a credit card pit. You can take out a consolidation loan. You can start using a secured card --on which you set the credit line with your own money until your records improve. Or if you have a decent low rate card on which you aren't maxed out or you can get one, you may be able to transfer some balances around to save a few dollars.

In any case, you need a systematic plan to pay down the debt as soon as possible. It probably will look a lot like this rolling down plan DePaul University once suggested.

You also may think at some point that credit cards seem tougher to deal with than the mortgage. That may be true. As Ray Bradbury vividly told us years ago, paper burns at Farenheit 451.

Keeping the clunker - what it costs and when to let go

Consumer Reports a couple years ago calculated that you could basically save the price of a new car by driving your old one longer -- 15 years and 200,000 miles.

Lord knows, I've tried. Ms. KTnomics, who took the Vespa to work today, and I have had two vehicles in our lives that we've pushed to within an oil change of 150,000 miles. Thieves stole and wrecked our '85 Jeep Wagoneer, which easily would have made 200K or more otherwise. The '96 Saturn just wore out.

You learn a lot keeping a car that long. Regular maintenance is critical, of course. But you also find yourself prioritizing maintenance and repair as time passes. Edmunds.com outlines the priorities succinctly here. Your first money pays for safety- your own or others. Next you spend what you need to avoid breaking down. Keeping the car running comes after that.

Where you save money is obvious. There are no more car payments when your loan is paid off. Your property taxes, licensing fees and insurance costs drop when your car gets older. On the flip side, you'll probably make some major decisions about repairs as time passes too.

People who are better with wrenches than I am say repairing generally is more economical than replacing for the first decade or so. But think hard and do the math when Kelly, Edmunds or comparisons on Autotrader.com estimate your car's value is approaching the $2,000 or $3,000 range or its mileage nears 150,000. You can do a lot of the work yourself, but remember that many of the jobs may not be as fast or easy as the instructions say.

The cash for clunkers plan to stimulate car sales adds a new calculation to the works, says CBS News consumer reporter Ray Martin. The plan's tax credit for up to $4,500 might offset the depreciation that will occur when you drive your new car off the dealer's lot.

Again, do the math. Come replacement time, buying a good used car may be even more cost efficient.

Michael Jackson's financial Thriller still climbing the charts

Michael Jackson has long been a source of awe and wonder for financial planning types.

Anyone would be who, as The New York Times reported a while back, builds an estimated fortune of $500 million, then runs it into the ground by outspending income by maybe $20 million to $30 million a year until some serious head-scratching by big banks and private equity companies is needed to figure it out.

Now another chapter is opening. Hours after Jackson was stricken - and even before his death was confirmed - online prices for his memorabilia began jumping. Tee shirt hawkers seized opportunities too.

But the big money may still be ahead. Celebrities, and particularly pop and film stars, often continue making money after their deaths. Elvis led a list of 20 that Forbes compiled a few years ago. Observers of the glitterati have been speculating for years how Jackson might compare.

Given both the complexity of Jackson's financial affairs and an astonishing array of memorabilia that may be poised to hit the market, the only sure prediction seems to be that the headlines will be breathless.

There are lessons for us mere mortals in all this too.

Income must exceed outgo or upkeep will be our downfall, an old saying goes. We get that. We're all somewhere in the same boat Jackson was before his death. We simply see fewer zeroes on the loan statements and payment checks we deal with.

And many of our financial lives will continue after our deaths too. We have spouses to provide for, kids to put through college or grandkids, maybe a business to pass on or a good cause we'd like to help. Fewer than half of us have made any plans to do any of that, estate planners estimate. More than 75 percent of us worry how our families will fare financially if we were to die now, the Life and Health Insurance Foundation for Education calculates.

Both are easy fixes. Start now.

Kicking tires...when older is better at your auto dealers

Some commentators like Washington's emerging cash for clunkers plan. Others hate it.

I think there are some car-buying basics we need to look at before each of us decides which camp we belong in. Car and Driver's Jared Gall recently outlined some rising pressure sales tactics buyers are likely to encounter when they visit car lots. Some, like artfully steering our attention around different corners of price worksheets, seem elegant. Others, like 'misplacing' your trade-in's keys, just seem wrong.

Either way, forecasters tell us to brace for some potentially head-swimming sales incentives both from Washington and Detroit. Whether we should bite depends, for each of us, how much it pays or not to buy new cars now.

We need to look at some of the hidden costs of owning a car to answer that. You know the big ones - depreciation, insurance costs, property taxes and licensing fees, and maintenance - which all go up when you spiff up your ride. Analysts at Edmunds.com offer a nifty online calculator that lets you check specifics for almost any car you might drive in the U.S.

Two new wrinkles to consider are tax breaks, which may be limited, and the growing availability of hybrids, for which you need to balance your potential fuel savings and scheduled maintenance costs against big ticket bills when, say, the batteries go dead.

Do your own math. But I suspect many of us will find that keeping what we've got, or buying used to avoid the depreciation hit taken by the first owner, will go farther than the $3,500 to $4,500 price break the government's offering.

Shell shocked by the economy? Or is it just post-traumatic stress?

Comedian George Carlin isn't the first person many of us think of when we try to figure out economic trends. But his classic riff on the evolution of shell shock, about one minute into this YouTube video, popped into my head as I tried to sort through Kansas City Fed president Tom Hoenig's estimate of our coming inflation prospects last week on CNBC.

Economic forecasters worry that all the stimulus money that no one is spending fast could send inflation rates skyrocketing when enough of us feel confident enough to start spending again. Some of them fret about rerunning the bad old days of stagflation 30 years ago, when prices soared but the rest of the economy sputtered along. Something like that could happen again, though blogger Steve Saville, among others, argues we should call it an 'inflationary recession.'

I don't care as much about what to call it as much as I wonder how to deal with it. Last time around, former Fed chairman Paul Volcker slammed on the monetary brakes to stop the price increases. It worked, though a lot of us went through the windshield. I really don't want to do that again because bouncing back now seems tougher than 30 years ago,

But maybe we won't have to do that. When you think about it, surviving a recession is pretty good street-level training for dealing with inflation too. Either way, your most pressing problem at the kitchen table level is that your dollars don't go as far as you need them to. The Bureau of Labor Statistics has a calculator to help you measure how well you're keeping up or not. Many financial planning websites across the country also offer this calculator to help you tweak your own consumer price index projections.

Many of your basic strategies for dealing with recession or inflation are the same too. Jilian Mincer, a former Kansas City colleague now at The Wall Street Journal outlines the basics. You need to control spending, clamp down on debt, build a cushion and regularly review your investments to make sure they are appropriate what's happening at the moment. And those second, third and other income sources we cultivated to get through the recession will become more valuable if prices start going nuts again.

Of course, they're behind you all the way. It's closer to your wallet.

I counted maybe eight references in President Obama's 89-page outline for regulatory reform to one of the most important questions consumers and investors need to ask. How well do you trust financial advisers?

We'd all like to believe that advisers always make recommendations with our best interests in mind. That's what many of them tell us they do, after all. Truth is, financial services providers have been using a double standard for more than a half century now, which President Obama's plan may or may not abolish.

Financial advisers who are regulated by the SEC or by state securities commissioners must apply what's called a fiduciary standard when they deal with our affairs. That means they are required to consider the client's interests above all others, including their own, when they work.

Brokers and others who are self-policed by independent industry groups such as the Financial Regulatory Authority, or FINRA, apply what's called a suitability standard, which increasingly is regarded as looser than the fiduciary standard.

Suitability standards require only that a recommended action be appropriate in your situation and whoever is making that recommendation isn't required to tell you, for example, that you can get the same thing cheaper or better from a competitor down street. Fiduciary standards require an adviser to tell you that too.

President Obama's recommendations Wednesday call for a "harmonization" of the two approaches to meet a more uniformly fiduciary standard. Financial planners groups, the brokerage industry, insurance providers and consumers' groups generally are clapping politely and elbowing each other for dibs on who specifically gets to write expected new rules.

Harmonizing may be difficult to pull off, Diahann Lassus, chairman of the National Association of Personal Financial Advisors, told Kitchentablenomics, because "fiduciary standards fundamentally are concerned with the providing of service while suitability primarily involves product distribution."

Both long time fiduciary advocate NAPFA and the larger national Financial Planning Association, a more recent convert, favor putting the Securities and Exchange Commission in charge of enforcing the standards.

But FINRA chairman and chief executive Rick Ketchum argues that his independent regulators would be a good choice too because, he claims, they have better track records than the federal agency handling consumer complaints.

I'm still agnostic on those arguments. But I still think our best tactic is to do some homework and ask all the questions we can think of to anyone who wants our business.

Getting real about retirement, part 2: You're on your own

eBay lists gold watches for less than $25. That has got to be a sign that your retirement package might not be all you hoped for someday.

Authorities estimate maybe one-third of the companies that offered matching contributions to our 401(k) plans 18 months ago have stopped matching now. Another third may pull the plug this year. And there are some pretty big names on the list, reports the Pension Rights Center, which keeps a running tally.

Many employers used to kick 50 cents into our 401(k)s for each $1 we put in, up to about 6 percent of our salary. Stopping that saves small companies maybe a couple million a year and bigger companies can save ten times that, human resources consultants calculate.

But the cuts also threaten to throw many of us individually into poverty when we retire, say authorities such as Rockefeller Foundation vice president Janice Nittoli, who explains how in a Wall Street Journal op-ed piece.

The reasons - and the remedies - seem clear. We as individuals don't save squat. And when our employers cut contributions, our two most frequent reactions - either to cut our own contributions too or to do nothing - are the wrong ones, writes Katy Marquardt in U.S. News and World Report.

Fellow freelancer Mark Miller says your better move is to seize control of the situation and use your own money to replace what the boss stopped providing. Few of us are maxing our 401(k) contributions anyway, so you can put more there and get the same tax-deferred growth you have now. And Kimberly Lankford of Kiplinger's Personal Finance adds, you also might put some of the extra money into a traditional or Roth IRA if that provides you a better deal.

It's time to get real about retirement

Career choices get even tougher when potential early retirement is on the table too.

Older workers who get downsized often say finding new jobs is harder for them than for younger workers. But tapping your retirement savings too early is risky too, even if you are old enough to avoid some potentially hefty penalties, researchers say. Retiring before you are ready roughly triples your chances of a bleaker future, insurance giant Prudential reports.

Few of us appear to be ready. Charles Schwab finds that nearly four in 10 of us are saving nothing for retirement, which seems to be something that someone reports every year. That's not just a U.S. phenomenon either. Researchers in the United Kingdom not long ago calculate that half the savers in 23 countries aren't salting away enough money for secure old ages either.

Solutions in those countries are basically the same as here, say contributors to the British-born www.six-steps.org website. Take control. Know yourself. Save a little and often. Invest for the future. Get advice when you need it.

Things get trickier if you are pressed for time. The Ohio Patrolmen's Benevolent Association recently listed some suggested priorities for its members, whose jobs often make time horizons shorter than those of us who've worked office or assembly line jobs. You know the drill, though. Cut debt, live within your means, save for emergencies and invest for your future.

The rules change if you have no time. Borrowing may be smart - The Wall Street Journal's Brett Arends recently ran some ideas about when red ink might be your better choice. Liz Pulliam Weston at MSN Money Central offers suggestions about which bills you don't pay if you are squeezed that hard, but also writes that, financially, you can cut into the bone too if you really need to.

Take the cash or keep the clunker? It's a toss-up

Mission auto dealer Tim Doherty insists its just a coincidence he switched to selling fuel-sipping Nissans from gas-guzzling Chryslers just as Congress appeared to be putting final touches on a cash for clunkers plan to encourage buying higher mileage cars.

"We could see a year ago that Chrysler wasn't going to be a viable stand-alone franchise for much longer," said Doherty, who a few weeks ago became one of 789 Chrysler dealers axed by the company in its bankruptcy proceeding. So, when an opportunity to buy the O'Neill Nissan franchise in nearby Overland Park arose, Doherty moved. And, with the formal opening of his new Keystone Nissan franchise Friday, the business continues what has been a series of dealerships 50 years in the same downtown Mission location.

And cash for clunkers? Auto dealers are optimistic. Similar plans have been boosting sales in Europe. Skeptics are less sure. Basically, here's the deal as it stood Friday.

You would trade in a clunker, EPA rated at less than 18 miles per gallon and get $3,500 to $4,500 to buy something that gets a minimum 2-4 more miles per gallon. How much you get depends on what you buy and how much the rated mileage improves.

Critics see a lot of problems. Michigan automotive marketing consultant Mike Karagozian forecasts less than spectacular results and a bad deal for taxpayers. Automotive special equipment makers worry that their jobs and businesses are threatened.

Other observers just don't see how the math works out for motorists who, by AAA's calculations, are spending about $9,400 a year to own an operate their cars. Time's Brad Tuttle is just one commentator who figures that even $4,500 is a crummy trade-in price for some gas guzzlers.

Here are two links to help you crunch some of your own numbers. One is is to the Kelley Blue Book, and a list of the sometimes surprising cars most likely to qualify for the payments. The other is to an AAA worksheet to help you compare potential before and after operating costs.

Happy motoring.

ID thieves feel the recession too

Identity thieves aren't making as much money as they did a few years ago, say consultants at Javelin Security and Research in Pleasanton, Calif.

Thievery is up -nearly 10 million Americans lost $48 billion to identity thieves last year. Online merchants lost maybe $21 billion more in potential sales when scam-shy consumers sat on their wallets, Javelin calculates.

However, thieves aren't making money like they used to, researchers found. That's partly because potential victims are getting savvier about guarding information online. But there's a recession on too and those of us who aren't spending anything until it's over are presenting potential thieves with fewer targets of opportunity.

There is at least one exception to that observation, other consultants say, and it is in a wedding aisle near you.

Nothing this year says I love you so much as a good cross-cut paper shredder, say execurives at Kroll Fraud Solutions. The New York financial services industry security consultant is hitting publicity circuits this week to warn that peak wedding season is also a prime time for identity theft.

Gift registries, online wedding planning services, honeymoon sweepstakes and giveaways and the like are all venues that scam artists potentially can hack or set up to pry important personal information from where we stash it, Kroll warns. Cell phones, laptops and similar personal gear that we may be careful about during a whirl of wedding and honeymoon preparations also are identity gold mines.

All are easy to overlook when there are seemingly more immediate potential scams to worry about. But to be safe as possible, be as stingy with personal and financial information as you can, Kroll recommends. And when you must provide it - to Social Security and the department of motor vehicles if you are changing names, utility companies if you are moving to a new home, and the IRS - keep good track of everything and store originals, such as new Social Security cards, someplace safe.

Paying more car insurance to drive fewer miles

My car insurance is going up $10 for the next six months.

It's not a bad deal. We're still only paying $370 to cover two claims-free, suburban-driven compacts. I don't know what to think of what we're getting for the money. We've been driving a lot less on our now tighter budget. Mrs. Ktnomics is using her 70 mpg Vespa more when the weather is nice.

The insurance company said, when it told us the new premium, that our bail bond coverage is higher, we get more money to replacement income if we need to take time off work to testify in court, and it will pay higher first-aid costs if someone is injured in our accident. I've never used any of those things in the 47 years I've been licensed.

Turns out that a lot of us are paying more to drive less, though Insurance Information Institute statistics show the amounts vary widely. So far this year, State Farm, the nation's largest auto insurer, has increased rates in 25 states and trimmed them in 12 for an overall average increase of 1.2 percent. And the Missouri and Kansas hikes, 3.8 percent and 2.2 percent respectively, are mild compared to what some competitors are posting, said spokesperson Tamara O'Connor in Kansas City.

Insurance companies say claims experience drives the changes. Vehicle repair costs, medical bills, lawsuits and everything else that my now $370 helps cover are creeping higher. Others say the recession is a force too. Insurers reportedly worry they'll get burned by pent-up claims demand as the economy improves.

Some may worry they'll be scorched by consumers too. We're getting pickier about what we buy. New on-line competitors are grabbing market share from traditional agents. And one group of industry watchers, at Marketscout.com, suggests that some traditional agents' competitive elbows are getting sharper too.

Smokey Robinson and the Miracles offered some of the best advice for consumers 40 years ago. Who knew?

When should I save and when should I spend?

Kmart has a heck of a deal on work pants right now, which provoked some debate around the ktnomics table on spending versus saving. That's a decision made differently when money is tight.

On the one hand, I could really use the pants. They're cheaper than blue jeans; they're pretty useful for some of the part time work I've been picking up, and the 10-year-old pair that I'd replace are two inches too big around the waist and looking ratty. Plus if the inflation hawks are right, this may be the best deal I'll get for a long time.

On the other hand, I could use the $16.99 too. I may need it more for something else later. I can make the old ones last longer, and an adjustable web belt from Mickey's Surplus will take care of that waistline adjustment. Plus, if the inflation hawks are right, that's already almost seven gallons of gas.

Some commentators say dilemmas like this help prolong the country's economic problems. They believe that, laudable as our new found commitment to thrift might be, somebody needs to spend something to get money flowing again. That's the whole point of economic stimulus.

Could be. But here on the home front, having a cash reserve becomes even more reassuring when income is unpredictable. Six months or more - to be tapped only in spurting-blood priority emergencies is ideal. But even having just a $500 stash will get you a long way through most jams.

The real question may be what will happen when we feel comfortable about spending again? There's a lot of money out there not circulating much. If prices rise because we try to spend it all at once, will we still be saving because we can't afford stuff? Maybe Yogi Berra would know.

GM's bankruptcy makes your retirement harder too

Financial planners like to use the image of a three-legged stool when they talk about retirement planning.

The metaphor and idea behind it are simple. To live comfortably in retirement, most of us need income from three different sources: Social Security, our employer's pension plan, if there is one, and additional money that we should be saving or investing.

Now, wreckage from Detroit's imploding automakers is knocking some of the legs out from under that stool, according to contributors who've taken an in-depth look for the Financial Times of London. You don't have to be in the auto industry, or even own a Chevy, to feel the tremors.

Former U.S. Labor Secretary Robert Reich draws some strong parallels between what's happening with GM and in the rest of the economy. And you don't have to agree with his politics to wonder, as he does, what taxpayers may be be buying with our $60 billion investment.

But I think an unsigned editorial raises a more interesting idea - the U.S. has no real retirement-security plan because we've relied on our employers' pension plans to carry that load. Even Poland has a surer plan, reports Forbes.

Mending the mess is possible, but will take time and some presumably unpopular tax changes, say commentators such as Thomas Mackell Jr. at Huffingtonpost.com. We each have our own heavy lifting to do as well.

If you have time, and a job, you also have resources to deal with the most challenging problems, says the Certified Financial Planning Board of Standards. If not, there is a fourth leg under the stool too. Good luck with the job hunt.

Got a pulse? Be a tax professional. That must change, IRS chief declares

In Missouri, like many places, it's tougher to become a tattoo artist than a tax preparer.

California and Oregon require tax preparers to meet some state-specified education requirements before taking on clients, but most everywhere else, anyone with a pulse can hang out a shingle.

IRS Commissioner Doug Shulman pledged Thursday to try to change that and come up with ways that our individual tax preparers can help improve the accuracy and quality of the returns we file each year.

Shulman wants us to help too. He's planning a still-to-be scheduled series of meetings across the U.S. in the near future to hear changes we want, along with recommendations from lawyers, accountants, our tax preparers and others in the industry, and get the proposals in hand by the end of the year.

About 80 percent or so of U.S. taxpayers seek professional help during the filing season, Shulman estimated. Tax returns are among the biggest financial transactions Americans engage in every year, he said.

Drowsy oversight hurts both IRS and taxpayers, observers say. No one even knows how many complaints about inept or abusive tax work are filed each year because IRS doesn't count them, one group of Treasury Department investigators found. And inconsistent IRS procedures were allowing even preparers with records of tax abuse to remain in business, a second group reported.

So now, "we want to put everything on the table," Shulman said Thursday. "At this early and critical stage of the process, we need hear from the broades possible range of stakeholders.

One significant stakeholder is applauding the effort.

"For many years, H&R Block has strong supported efforts to upgrade training, professionalism and ethics among all tax preparers," said Richard Breeden, chairman of the world's largest tax service chain.

"We believe that all tax assistance providers should be trained and licensed as necessary to insure that tax returns are prepared accurately every time," Breeden said.

Set it. Forget it. Regret it.

Target-date mutual funds - those investment choices in your college savings plan and retirement account that automatically readjust to cut risk as time passes - went on the fritz big time in 2008.

Congress already plans next week to look into why that happened. Morningstar, the mutual fund rating organization, is ramping up its coverage of the funds.

Losses averaged 23 percent and in some cases exceeded 41 percent, according to research cited in a new Prudential white paper, Strengthening Target-Date Funds with Guarantees to Enhance Retirement Security, released today. The reason seems simple in hindsight. The 2008 market meltdown hit everything in its path like a Gulf Coast hurricane.

But vulnerability to a bear market is only one potential risk that comes with such funds, writes author Christine Marcks. Target-dates also contain what she called a zero balance risk and a purchasing power risk.

Cutting these risks - that you might run out of money too soon or that your retirement income won't keep up with inflation - may require additional action five to 10 years before reaching your target date, Marcks said.

You may have other choices too. But finding them will take more action on your part. Investments don't run well on autopilot.

Credit crunches and the 20 percent solution...we're lost in the 50's again.

I was a little kid in the 1950s. Hula hoops, Davy Crockett hats and tail fins were cool. Polio scares, Jim Crow laws and duck-and-cover drills weren't.

So, how are we going to like it if or when another 1950's icon, the 20 percent down payment comes back? Beats me, but it would be a big change for many home and car buyers.

What's good is that it is hard to mess up funding something in which the borrower has a 20 percent stake. But coming up with that 20 percent would be tough for many of us, at least until we wrapped our minds around it.

Twenty percent down payments and comparatively rigid loan terms - 30 years for homes and three to four years for autos - were pretty much what you paid to buy those things before the 70's. Ironically, historians say that our parents and grandparents paid those terms because their parents and grandparents went through something like what we are doing now.

Now forecasters see signs that we're headed back to a long patch of conservative lending. Repos and busted loans rattle lenders too. Not everyone is cheering. Canada, which already tried going there to head off a U.S.-scale melt down, found that more than a fourth of its citizens abhor the thought.

U.S. News & World Report contributor Rick Newman predicts the best deals for car buyers may come before the new reality sets in. Maybe so, but save as much as possible and as close to 20 percent as you can. It could cover your credit history's rusty spots as good as new.