Monday, March 30, 2020

Why the Right Is Right.

One of the best explanations I've heard.


https://youtu.be/eW3Vo-XvFoI

Nancy Pelosi: Number One Enemy of the American People


Weathering the COVID-19 Crisis

It's important to fully screen information you may be getting from various media sources. Some, like MSNBC and CNN are sensationalizing this crisis in order to get you in a fearful state and go against the Trump administration, which the hate. And hate is the right word. Chuck Todd, Chris Hayes, Rachel Maddow come immediately to mind. Avoid these people.

If you must, ad the end of this article, I've included a few articles if you are a glutton for punishment. These people are nuts.

So having said that, more rational minds are needed, and many are available.

How you weather this storm is up to you, but I've assembled some articles that may be of help.

Weathering The Storm: Coronavirus And Its Financial Impact On Homeowners

One way or another, future historians will consider the Coronavirus Pandemic among the most noteworthy events of the early 21st Century. Schools and businesses are shut down, and, throughout the country, Americans have been directed to “shelter in place,” remaining at home other than for essential activities. Layoffs and unemployment claims have skyrocketed; economists are already predicting at least a recession, maybe a depression.

Managing Your Finances Through Hard Times

Investopedia's mission is to help people be in control of their financial lives, and that mission is just as important as ever given the health and economic crisis we are all living through. We've organized the most important information about a variety of financial topics that are particularly relevant in today's financial markets that will impact your investments and your personal finances. From managing your portfolio through volatility to the latest on student loan interest and mortgages, this guide is here to help you plan for and react to the current economic realities.

How to Stay Healthy, Hopeful and Productive

Keep a schedule. Treat working from home just like working at work: Decide what time you’re going to start working, when your lunch break is, and what time you clock out. Designate an area as your “office” and try to only be there when you’re working. If you treat work too loosely, you can lose whole days to unproductivity — or never stop working. Having a schedule will also help kids who are used to the structure of school.

Stay aware of time outside of a work environment, too. During isolation, it can be easy to oversleep or stay up too late, which can be bad for mental health. Keep setting alarms and stick to a general bedtime if you can. 

Practice self-care. Social isolation can be mentally and emotionally draining, and staying at home certainly isn’t great for your physical health, which is why it’s more important than ever to practice self-care. If you’re anxious about the state of the world or the health of your family and friends, this might be a good time to pick up journaling, start meditating, or even connect with a therapist who can meet with you online. If the constant influx of news is stressing you out, grant yourself permission to only check the news at certain times of day.

If your lifestyle is feeling a little more sedentary than normal, you might consider picking up an at-home exercise app or adding bike rides to your routine. If you can get outside to get some fresh air and sunshine without putting yourself into a crowded place, try to do so every day. 

Stay social. Just because you can’t go get coffee with a friend or throw a dinner party doesn’t mean you can’t still be social! This is a great time to bring back the good old fashioned phone call — or get a little more personal with video chatting via Facetime or Google Hangouts. Have a virtual coffee date from the comfort of your own home, or play board games online. Settling in for some Netflix? Download the Netflix Party browser extension to watch TV shows and movies in real time with your friends. 

Take action. If you’re feeling helpless, you’re not alone. But there are ways you can help without leaving the house! Donate to nonprofits that are struggling, buy gift cards to support businesses that are suffering without in-person shoppers, see if your local hospital is accepting homemade fabric masks, or offer to grocery shop for an elderly or immunocompromised neighbor. 

Dealing with social distancing can be difficult, but we’re all facing it together! That means there are plenty of resources being circulated to help everyone handle this changing landscape. By taking these tips to heart, you can give yourself a solid foundation to get through whatever you’re facing and come out the other side stronger.



Occupy Democrats Posts Facebook Meme Asking GOP Senators ‘to Die’
Paul Krugman Blasts Our Response to Virus as ‘Worst in the World,’ but He Proves Again His Talent for Always Being Wrong

Chuck Todd Asks a Question So Disgusting That Not Even Joe Biden Can Play Along

The Washington Post’s Gleeful Hot Take on the Crashing Economy Gets the Thrashing It Deserves

Left-Wing Intellectuals Are Thrilled: Corona And Dreams Of The End Of Capitalism





Saturday, March 28, 2020

How Crisis Legislation Can Have "Unintended" Consequences

Little of the Democratic Party's wish list made in into the COVID-10 Relief Bill. That's a relief in itself. But we will hear of these again, I'm sure. The devil in is in the details, and Democrats will in the future try to sneak progressive and undemocratic issues into bills that have nothing to do with the issue at hand. 

On Friday, the House passed the massive $2 trillion-plus coronavirus relief package (click the link to read the entire bill) which the Senate had passed on Wednesday. There is way too much in this bill which is just pork, though the main features are certainly needed.

There’s a lot in those 880 pages, and much of it is problematic: The bill is neither targeted and temporary, nor directed exclusively at the coronavirus—as scholars at The Heritage Foundation and its president, Kay C. James, have explained.

Before the bill made it through the Senate, House Speaker Nancy Pelosi, D-Calif., temporarily derailed it by insisting that any relief bill include a left-wing wish list unrelated to the ongoing pandemic and the economic slowdown that it’s causing.

Pelosi succeeded in delaying the relief package by several days, but she failed to capitalize on what her No. 2 lieutenant, Rep. Jim Clyburn, D-S.C., called a “tremendous opportunity to restructure things to fit our vision.”

Can you imagine that she wanted the following items included in the bill which have nothing to do with the current crisis, and should not be in any bill, by the way? 
  • Mandated “diversity” on corporate boards and in banks.
  • Required airlines to disclose and reduce emissions.
  • Mandated that states allow voting by mail.
  • Increased union bargaining power.
  • Expanded tax credits for wind and solar power.
  • Prohibiting universities from disclosing the citizenship status of their students.
  • Provided a bailout for some private pensions.
  • Federal takeover of state elections.
In the end, Pelosi supported the bill wholeheartedly.

But despite her self-proclaimed success in turning the Senate bill upside down, progressives in her party are not happy with it.

Rep. Alexandria Ocasio-Cortez, D-N.Y., thinks that the relief package favors the businesses that employ the vast majority of Americans. She had threatened to delay the bill’s passage.

Even before this relief package becomes law, politicians on both sides of the aisle were already calling for another one to follow, so expect Pelosi and the progressives to try again to make the wishes on their wish list come true.

Monday, March 23, 2020

Managing Your Finances Through Hard Times

Excellent article from Investopedia, with many links to additional resources.

Investopedia's mission is to help people be in control of their financial lives, and that mission is just as important as ever given the health and economic crisis we are all living through. We've organized the most important information about a variety of financial topics that are particularly relevant in today's financial markets that will impact your investments and your personal finances. From managing your portfolio through volatility to the latest on student loan interest and mortgages, this guide is here to help you plan for and react to the current economic realities.

Read the full article here

Monday, March 16, 2020

If You Must, Avoid Mistakes Using a HELOC

A home equity line of credit, or HELOC, has long been a popular way to tap the equity in your home and get your hands on a quick infusion of cash. In the past, one big plus of using a HELOC—rather than an unsecured loan or credit card—was that you could deduct the interest you paid on up to $100,000 of the balance.

But under the new Tax Cuts and Jobs Act of 2017, the rules have changed. And if you're not clear on how the new law affects you, you could make some mistakes with your HELOC that could cost you big-time! Once you make these errors, it can be difficult or impossible to undo them. So, it's crucial that you're clear on what you can (and can't) do with a HELOC today.

1. Not understanding the new HELOC rules

If you opened your account before Jan. 1, 2018, you could take out a HELOC and spend the money on anything. Whether you spent this cash to fund a child's college tuition or foot the bill for a wedding or even a new boat, you could deduct the interest on this loan as an expense in your itemized tax deductions, just like you deduct the interest on your regular mortgage.

The 2017 Tax Cuts and Jobs Act changed all that. Now, you can deduct the interest only to the extent that the balance on your HELOC is used to buy, build, or substantially improve the home that secures this debt. This applies to all HELOCs; it doesn't matter when you took out your HELOC or when you spent the money; there is no provision grandfathered in.

Now, if you file your tax returns and take a deduction for HELOC interest expenses, you need to show proof of what you want to write off, according to Ralph DiBugnara, president of HomeQualified in New York City.

If you can't prove that this interest was paid on a loan used to buy, build, or improve your home, the IRS could disallow your deduction—and you could potentially face back taxes and penalties.
2. Using the wrong funds to pay for home improvements
As tempting as it may be to try to get credit card rewards and a tax deduction on the interest, don't count on using your non-HELOC credit cards and cash to pay for home improvements, and then using your HELOC to pay off the balance.

While no specific IRS guidelines have been issued on this point, "I would err on the side of caution," says Kevin Michels, a financial planner in Draper, UT. "Taking out a $10,000 HELOC to pay off a credit card you used to make a home improvement technically isn't using your HELOC proceeds to make a home improvement. It's using the proceeds to pay off a credit card."

To be safe, spend your HELOC funds directly on qualifying expenses.
3. Not knowing what qualifies as a 'substantial' home improvement
If you're trying to use your HELOC for qualifying purposes, or trying to track the percentage of your HELOC balance that qualifies as home improvement expense, make sure you know what kinds of expenses you can use. To qualify, the improvements must increase the value of your home.

"For example, repairs that simply maintain the home in good condition, like painting, do not count," says Michels. "The money must be spent on improvements that increase the value, like remodeling a kitchen, building an addition, or constructing a deck."

But in some cases, fixing and maintaining projects can be construed as material improvements. For example, normally paint is part of maintenance and repair and does not qualify. However, if you add a room to your house, you can count all the expenses of adding the room, including the paint.
4. Using your HELOC funds for mixed purposes
Technically, you can use some of your HELOC funds for vacations, eating out, and general household spending, and some of it for major home improvements, and still deduct the interest on the portion that is for the home improvements.

"If you take out a $50,000 loan and spend half of it on remodeling your kitchen and the other half to pay off debt, you can still deduct 50% of the interest," says Michels.

Co-mingling funds for different purposes is seldom a good idea, however. It can get messy. What if you've made purchases and payments from a HELOC account for qualifying and nonqualifying purchases over a period of years? Talk about complicated!

Because the new tax law for HELOCs does not have provisions grandfathered in, there's no doubt many taxpayers will find themselves trying to determine what percentage of their HELOC balance qualifies in the next several years. For previous purchases, you'll have to do the best you can. Save records and documents, in case you are ever audited and need to show how you arrived at the percentage of your HELOC balance that qualifies for the interest deduction.

Going forward, however, you'll save yourself a lot of trouble if you use your HELOC fund for one purpose at a time, whenever possible.
5. Deducting interest when the HELOC is not secured by the same home on which you spent the money

According to the IRS, in order to take the deduction, you must not only spend the money to buy, build, or substantially improve your home, the HELOC must be secured by that home. If the HELOC is secured by a different real estate property, the interest on your HELOC is not deductible.

6. Deducting interest on loans over the IRS limits
Even if you use HELOC funds for qualifying purposes, the amount of the debt on which you can deduct interest may be subject to one of these limits: 

  • $100,000 home equity loan or line of credit limit: You can deduct interest on only up to $100,000 of home equity debt. If you have a home equity line of credit balance of more than $100,000, you can deduct interest only on $100,000 of that debt.
  • $750,000 cap on total mortgage debt: You can generally deduct interest only on your first $750,000 of mortgage debt, including first mortgages and HELOCs. The cap is higher—$1 million—if you obtained the qualifying mortgage debt and HELOCs before Dec. 15, 2017. 
Total debt limit based on the purchase price of the home: In addition to the above caps, you can deduct interest only on your total home mortgage debt. That includes your first mortgage and any HELOC, up to the total amount you paid for your home. So if you paid $250,000 for your home and took out a $25,000 HELOC, you can deduct the interest on only up to $275,000. 

7. Not taking deductions to which you are entitled
Since HELOCs have become more complicated, you might think it's better to not deduct any interest from this loan at all. But being afraid to take legitimate deductions is a costly, and unnecessary, mistake. If you used your HELOC for qualifying expenses to buy, build, or substantially improve your home, these deductions are worth taking, so save your receipts and records. Don't miss out!
8. Considering only the tax aspects of having a HELOC

Even if you can't deduct the interest, getting a HELOC can still be a cost-effective way to borrow money.

"The average rate is in the 4% range, so it's still a less expensive way to borrow than a credit card would be," says DiBugnara. "The closing costs are very minimal, they are quick to close on, and they offer an interest-only payment option."

In addition, with a home equity line of credit, you pay interest only on your outstanding balance. You can pay it down when you have extra money, knowing you can take money out again when you need it.

"As long as you're making that money work for you—for instance investing in other property—and your rate of return is greater than your cost of the HELOC, it's a good tool," says DiBugnara. "I think if you're taking out a HELOC for other purposes, you should be conscious that you're not getting a tax break, but that you are using the HELOC for the purpose you got it for."

Friday, March 13, 2020

What Is a Good Credit Score?

For a score with a range between 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most credit scores fall between 600 and 750. Higher scores represent better credit decisions and can make creditors more confident that you will repay your future debts as agreed.

Credit scores are used by lenders, including banks providing mortgage loans, credit card companies, and even car dealerships financing auto purchases, to make decisions about whether or not to offer your credit (such as a credit card or loan) and what the terms of the offer (such as the interest rate or down payment) will be. There are many different types of credit scores. FICO® Scores* and scores by VantageScore are two of the most common types of credit scores, but industry-specific scores also exist.

What Is a Good FICO® Score?

One of the most well-known types of credit score are FICO® Scores, created by the Fair Isaac Corporation. FICO® Scores are used by many lenders, and often range from 300 to 850. A FICO® Score of 670 or above is considered a good credit score, while a score of 800 or above is considered exceptional.
Credit ScoreRating% of PeopleImpact
300-579Very Poor16%Credit applicants may be required to pay a fee or deposit, and applicants with this rating may not be approved for credit at all.
580-669Fair17%Applicants with scores in this range are considered to be subprime borrowers.
670-739Good21%Only 8% of applicants in this score range are likely to become seriously delinquent in the future.
740-799Very Good25%Applicants with scores here are likely to receive better than average rates from lenders.
800-850Exceptional21%Applicants with scores in this range are at the top of the list for the best rates from lenders.

What Is a Good VantageScore?

Scores by VantageScore are also types of credit scores that are commonly used by lenders. The VantageScore was developed by the 3 major credit bureaus including Experian, Equifax, and TransUnion. The latest VantageScore 3.0 model uses a range between 300 and 850. A VantageScore above 660 is considered good, while a score above 780 is considered excellent.

Credit ScoreRating% of PeopleImpact
300-499Very Poor5%Applicants will not likely be approved for credit.
500-600Poor21%Applicants may be approved for some credit, though rates may be unfavorable and with conditions such as larger down payment amounts.
601-660Fair13%Applicants may be approved for credit but likely not at competitive rates.
661-780Good38%Applicants likely to be approved for credit at competitive rates.
781-850Excellent23%Applicants most likely to receive the best rates and most favorable terms on credit accounts.

Why Credit Scores Matter

Credit scores are decision-making tools that lenders use to help them anticipate how likely you are to repay your loan on time. Credit scores are also sometimes called risk scores because they help lenders assess the risk that you won't be able to repay the debt as agreed.

Having good credit is important because it determines whether you'll qualify for a loan. And, depending on the interest rate of the loan you qualify for, it could mean the difference between hundreds and even thousands of dollars in savings. A good credit score could also mean that you are able to rent the apartment you want, or even get cell phone service that you need.

Think of your credit scores like a report card that you might review at the end of a school term, but instead of letter grades, your activity ends up within a scoring range. However, unlike academic grades, credit scores aren't stored as part of your credit history. Rather, your score is generated each time a lender requests it, according to the credit scoring model of their choice.

Every time you set a major financial goal, like becoming a homeowner or getting a new car, your credit is likely to be a part of that financing picture. Your credit scores will help lenders determine whether or not you qualify for a loan and how good the terms of the loan will be.

However, credit scores are usually not the only things lenders will look at when deciding to extend you credit or offer you a loan. Your credit report also contains details which could be taken into consideration, such as the total amount of debt you have, the types of credit in your report, the length of time you have had credit accounts and any derogatory marks you may have. Other than your credit report and credit scores, lenders may also consider your total expenses against your monthly income (known as your debt-to-income ratio), depending on the type of loan you're seeking.

Factors That Affect Your Credit Scores

The information that impacts a credit score varies depending on the scoring model being used. Credit scores are generally affected by elements in your credit report, such as:
  • Payment history for loans and credit cards, including the number and severity of late payments
  • Credit utilization rate
  • Type, number and age of credit accounts
  • Total debt
  • Public records such as a bankruptcy
  • How many new credit accounts you've recently opened
  • Number of inquiries for your credit report
FICO® Score Factors:
  • Most influential: Payment history on loans and credit cards
  • Highly influential: Total debt and amounts owed
  • Moderately influential: Length of credit history
  • Less influential: New credit and credit mix (the types of accounts you have)
VantageScore Factors:
  • Most influential: Payment history
  • Highly influential: Age and type of credit, percent of credit limit used
  • Moderately influential: Total balances and debt
  • Less influential: Recent credit behavior and inquiries, available credit
Credit Scores Do Not Consider the Following Information:
  • Your race, color, religion, national origin, sex or marital status (U. S. law prohibits credit scoring formulas from considering these facts, any receipt of public assistance or the exercise of any consumer right under the Consumer Credit Protection Act.)
  • Your age
  • Your salary, occupation, title, employer, date employed or employment history (However, lenders may consider this information in making their overall approval decisions.)
  • Where you live
  • Soft inquiries. Soft inquiries are usually initiated by others, like companies making promotional offers of credit or your lender conducting periodic reviews of your existing credit accounts. Soft inquiries also occur when you check your own credit report or when you use credit monitoring services from companies like Experian. These inquiries do not impact your credit score.
How to Improve Your Credit Scores

If you reviewed your credit information and discovered that your credit scores aren't quite where you thought they'd be, you're not alone. Since your credit scores use information drawn from your credit report, your credit activity provides a continually-updated basis of data about how responsible you are with the credit you're currently using. At Experian, we provide information that can help you see your credit in new ways and take control of your financial future. You can learn more about:
When you know the kinds of activities in your credit that can affect your scores, you can work to take better care of your credit, too. Things like late payments, liens or bankruptcies all have varying levels of impact in your credit scores since they're reflected on your credit report, too. Getting familiar with your credit report can help you see the impact these kind of events can have in your credit.

How to Get Your FICO® Score for Free

Understand the reasons that help or hurt your FICO® Score, including your payment history, how much credit you are using, as well as other factors that influence your overall credit.

Get Your FICO® Score
Minimum Credit Scores

There is no minimum credit score needed to apply for most loans or credit cards. However, you are less likely to qualify for a loan or credit card and less likely to receive favorable rates when your credit score is low. If you are trying to qualify for a conventional loan or credit card with a low credit score, you may wish to wait until your credit improves, so you can ensure you get the best rates possible.

Some mortgage servicers such as the FHA provide general guidelines for those with credit scores on the lower end:
  • FHA mortgage loans require a minimum of 580 or higher with a 3.5% down payment.
  • For FHA applicants under 580, qualification for a loan is still possible, but a 10% down payment would be required along with meeting other requirements. See FHA's site for more information.
  • What to Do If You Don't Have a Credit Score
In some cases, you might not have enough credit history to have a credit score. Depending on your age, there are several ways to establish credit.

If you are under 21, you must have a cosigner or be able to demonstrate that you have an adequate source of income to pay back any credit that is extended. With responsible usage, a parent cosigning a credit card (or adding you as an authorized user to one of their accounts) is a great way to help establish a positive credit history.

For others, the best way to establish credit may be to work with your bank or credit union to open an account with a small credit limit to get you started. Opening a secured credit card is another way to get started building your credit. Then, with time and good account management, a good credit history (and scores) will be within your reach.

Common Credit Score Facts

Credit Reports and Credit History

Credit scores are not included with credit reports. Additionally, credit scores are not stored as part of your credit history. Your credit score is calculated only when your credit score is requested. Your credit score can change over time, based on your credit history—including late payments, amount of available debt, and more.

Joint Accounts

Joint accounts are meant to help individuals who cannot qualify for a loan by themselves. With joint accounts, all of the joint account holders, guarantors, and/or cosigners are responsible for repaying the debt. The joint account, along with its credit history, appears on the credit report for all account holders. When all payments are made on time, the joint account can help build positive credit. However, if someone defaults on payments, all of the joint account holders will see the default on their own credit reports. Depending on the severity of the late payments and negative information, everyone's credit scores could be impacted significantly.

Marriage

When you get married, your credit scores (or reports) won't merge with your spouse's. Joint accounts you share may appear on both of your credit reports, but your credit history will remain independent.
Checking Your Own Credit

Another common question is whether checking your own credit report or score can hurt it. The answer is no. Checking your own credit scores doesn't lower them. Checking your own credit report creates a special kind of inquiry (known commonly as a soft inquiry) that isn't considered in credit score calculations. Without the risk of harming your scores by checking your credit report and scores frequently, don't steer away from viewing them as often as you need to.

Reprinted from Experian.com

Thursday, March 12, 2020

Top 10 Most Common Financial Mistakes

1: Excessive/Frivolous Spending

Great fortunes are often lost one dollar at a time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you're enduring financial hardship, avoiding this mistake really matters – after all, if you're only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

2: Never-Ending Payments

Ask yourself if you really need items that keep you paying every month, year after year. Things like cable television, music services or fancy gym memberships can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning yourself from financial hardship.

3: Living on Borrowed Money

Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don't be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you'll spend more than you earn.

4: Buying a New Car

Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years and lose money on every trade.

Sometimes a person has no choice but to take out a loan to buy a car, but how much does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. Unless you tow a boat or trailer or need an SUV to earn a living, is an eight-cylinder engine worth the extra cost of taking out a large loan?

If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive, and if you're buying more car than you need, you're burning through money that could have been saved or used to pay off debt.

5: Spending Too Much on Your House

When it comes to buying a house, bigger is not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance, and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

6: Using Home Equity Like a Piggy Bank

Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you'll end up paying way more for your home than it's worth, which virtually ensures that you won't come out on top when you decide to sell.

7: Living Paycheck to Paycheck

In March 2018, the U.S. household personal savings rate was just 3.1%, according to Federal Reserve data. Many households are living paycheck to paycheck, and an unforeseen problem can easily become a disaster if you are not prepared. The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you'll have very few options.

Many financial planners will tell you to keep three months' worth of expenses in an account where you can access it quickly. Loss of employment or changes in the economy could drain your savings and place you in a cycle of debt paying for debt. A three-month buffer could be the difference between keeping or losing your house.

8: Not Investing

If you do not get your money working for you in the markets or through other income-producing investments, you cannot stop working - ever. Making monthly contributions to designated retirement accounts is essential for a comfortable retirement. Take advantage of tax-deferred retirement accounts and/or your employer-sponsored plan. Understand the time your investments will have to grow and how much risk you can tolerate. Consult a qualified financial advisor to match this with your goals if possible.

9: Paying Off Debt With Savings

You may be thinking that if your debt is costing 19% and your retirement account is making 7%, swapping the retirement for the debt means you will be pocketing the difference. But it's not that simple. In addition to losing the power of compounding, it's very hard to pay back those retirement funds, and you could be hit with hefty fees. With the right mindset, borrowing from your retirement account can be a viable option, but even the most disciplined planners have a tough time placing money aside to rebuild these accounts. When the debt gets paid off, the urgency to pay it back usually goes away. It will be very tempting to continue spending at the same pace, which means you could go back into debt again. If you are going to pay off debt with savings, you have to live like you still have a debt to pay - to your retirement fund.

10: Not Having a Plan

Your financial future depends on what is going on right now. People spend countless hours watching TV or scrolling through their social media feeds, but setting aside two hours a week for their finances is out of the question. You need to know where you are going. Make spending some time planning your finances a priority.

The Bottom Line

To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn't the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority, along with spending time developing a sound financial plan.

Tuesday, March 10, 2020

A New Challenge

I challenge anyone reading this to spend two hours with this video of Jim Rohn. It's a classic. You'll be glad you did.


Sunday, March 8, 2020

Why You Should NOT Vote for Bernie

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.


3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it.

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.


Saturday, March 7, 2020

General Comments on Markets and Portfolios

Markets and Coronavirus

Stocks are down again. Don't worry. Fluctuations (even large ones) are normal. It's been a bout of market volatility that will likely be seared into our memories for a long time. News that the coronavirus had spread beyond China caused a rapid repricing of the consensus view that an earnings recovery was right around the corner in 2020, and that the stock market's torrid valuation-driven advance in 2019 was justified.

That consensus quickly crumbled as it became clear that there could be a temporary but nevertheless significant shock to both the demand and the supply side of the global economy. And even the Fed's "emergency" half point rate cut did not halt the market slide.

As fewer people travel and go on cruises and possibly are forced to work from home, demand could come down. As countries take turns going into various forms of lock down, supply chains could be affected as well. It's a double shock to the system. With valuations reaching a lofty 19.1 times the forward (next 12 months) price/earnings multiple at the recent high, any derailment of the bullish narrative was poised to trigger a reset of sorts—and that's what just happened.

The timing could not have been worse for a market that was priced for perfection.

Corrections in perspective

After a swift 20% decline in the S&P 500 (measured from intra-day peak to intra-day low), let's assess the damage and see what we can learn from history.

While the drop has been one for the record books in terms of speed, to me it doesn't really look that much different from other corrections of this magnitude. Markets generally go down faster than they go up (fear is a more powerful emotion than greed), and last week was certainly no exception. This is especially true given that investor sentiment had reached pretty ebullient levels at the recent highs. When everyone is on the same side of the boat, the adjustment can be swift.

The odds of a 15% correction at any time in a calendar year is about 1 in 3 historically, yet the market over the long term still manages to advance around 10%–11% per year. So, on the surface, last week's reset shouldn't be that alarming. But, of course, it's the unknowns that keep us up at night, and after an 11-year expansion and a 5-fold increase in the stock market, investors are understandably worried that maybe now we will get that recession so many have been worried about.

Not all recessions are equal

Many people understandably fear that if we get a recession it will be like the last recession, which also coincided with one of the worst financial crises in history. But those are the exceptions rather than the rule. A recession generally only turns into a financial crisis if there are large financial imbalances present in the form of excessive debt levels or leverage, which then have to be unwound as financial conditions tighten. That was certainly the case in 2008.

The other condition that can worsen a recession is a buildup of capital investments (plant & equipment) and inventories. The classic inventory cycle is one where companies sit idle and lay off workers while they try to unload unsold products.

I don't see much evidence in the US that we have the conditions for either an inventory cycle or a financial crisis. What I do think could happen, however, is that this double whammy of a demand and supply shock could trigger a technical recession, i.e., a quarter or 2 of negative GDP growth and negative earnings growth, but that doesn't have the trappings of a typical recession in which there are many layoffs and tightening financial conditions.

While the "R" word would certainly grab headlines and could make people even more worried that the party is over, my sense is that the stock market will look through this and that the price and valuation (and earnings) reset will be a one-off event.

More stimulus is coming

In the wake of the Fed’s recent rate cut, the markets now pricing in 2 more rate cuts in 2020. I believe the Fed is likely to go along and cut rates at its next meeting in March. What's more, if the US does end up resorting to some sort of China-like lock down response (which is still very much an unknown right now), it's entirely plausible that we could see a fiscal response as well, maybe a temporary freeze on payroll taxes, or something like that.

A combined fiscal-monetary easing in the US and even globally would also go a long way to offset the deflationary impact of a spreading coronavirus. In my view, that should help reverse the tide that is now taking stocks down. Add to this the presumably temporary nature of the hit to both demand and supply, and it's not that hard to see the market come back as strongly as it has been falling.

Some base building is in order

Having said that, a lot of damage has been done following this swift 20% decline, and my sense is that it's going to take some time to build a new base from which the market can eventually rally back to new highs. So my guess is that we will see a sharp rebound at some point (maybe even soon), but that such a rebound will fail at the typical retracement levels and then retest the lows as it builds a base.

Time will tell whether we will see a bounce now or later. But the timing of the rebound shouldn't really matter for the average long-term investor who holds a diversified portfolio of stocks and bonds that align with their investment time frame, financial situation, and risk tolerance.

Don’t try to time the market.

But don’t just sit around, either: If you suffer a relatively big loss in your portfolio (how big? you’ll know when it happens), it would probably be dumb to just saunter around outside with your hands in your pockets, whistling and skipping. Take some action:

I spent part of last weekend doing an analysis of my current holdings to see if they still meet my investment criteria. (They do, except one company, which I’m not sure I would invest in knowing what I know now.)

If I had better diversified my investments, I wouldn’t have been hit as hard as I was (down 15%). I’d been meaning to diversify into more non-energy stuff, including growth funds, so I’m treating this as another one of those lessons the markets always teach us. But I still have more than 50 percent in bonds and money markets, so it's not all that bad. 

Long term, I think I'm OK. In the meantime, I'm getting a 5% yield on my portfolio overall. 

Happy Investing.

Friday, March 6, 2020

What Is Freaking Me out Right Now

Other than the collapse of the energy markets? Which is killing my energy portfolio -- but I have to think long term. But interest rates have a bad omen about them.

A year ago, the 10-year Treasury yield was 2.6%. Today, it's continued its plunge -- falling off a cliff -- to .73%, as I write this. That is after a low this morning of .67%.

Of course the Fed didn't help, by cutting the Fed rate by .5% last week. Stupid idea. There is nothing wrong with the economy -- recent market activity is all psychological, not fundamental -- and they are not keeping their powder dry in case of a real weakness in the economy.

This has all the hallmarks of a bubble or "buying panic." Either we are going permanently lower in rates -- joining the "zombie" financial systems of Japan and Europe -- or we unwind a la the "taper tantrums" of the past and rates shoot higher, which could also now destabilize the financial system because everyone is positioned the other way.

Either zero/negative rates, which would destroy the banking system, savers, and older Americans whose medical inflation is way outpacing their income gains; or, rates rip higher. In that case, a repeat of the 1994 bond market blowup that ultimately bankrupted Orange County, Calif., comes to mind. Keep in mind, inflation from supply shortages is possible this year, and wages were still growing 3% as of this morning's jobs report. That could easily become a catalyst for a bond market selloff.

Cities are already struggling to balance their books, despite the decade-long expansion. One of their biggest obligations is paying the pensions of past and present workers. Let's say a town has $50 million owed in 2030. Well, it needs a lot more money today to hit that future target because there's no return left in "safe" fixed income products. What is the town supposed to do, invest in stocks? That's not actuarily sound, obviously. So they need to put more money aside today for pensions out of a fixed budget. That means less going to the rest of the services they need to provide: schools, roads, policing, trash pickup, etc. They can either cut back those services or raise the cost of them. Or, they can raise taxes generally to bring in more income. Not good for you and me either way.

The same principle, applied to companies that still have big pensions, means more of their earnings have to go to pensions and less is available to reinvest in the business, pay current salaries, etc. AT&T, GM, Ford, and General Electric were highlighted by Barron's last year for owing in pensions almost as much as their combined market cap. Airlines including Delta and American already had less than 70% of their pensions funded. I cannot imagine what will happen now that rates have absolutely cratered. Although it will certainly favor newer tech companies with 401(k) plans instead of pensions, as if they needed it.

And the housing market really doesn't need lower rates. Now you have the risk of, yes, sparking another housing bubble. Because lower rates mean higher prices, and people love to chase higher prices, and they'll all want to jump into real estate because you can't get a return anywhere else. We just told my younger sister to tell us where to buy in her local market, Denver. Who knows if we'd actually pull the trigger, but does the Fed really want to encourage us to compete against local homebuyers?

Seven Important Personal Finance Guidelines

It takes time and discipline to become money smart. It doesn't happen overnight. Some people go through life never saving and living paycheck to paycheck. Learning how to be able to handle your money at an early age may not seem sexy, but it will certainly put you down the right path. But if you think you have enough time to become serious about your finances, think again. You may still feel young and invincible even when you hit your 30s, but the scary truth is that you are halfway to retirement. It is time to put the financial foolhardiness of your 20s behind you and become more frugal with your cash by mastering these top financial habits.

1. Actually Stick to a Budget

Most 20-somethings have played around with the idea of a budget, have used a budgeting app, and have even read an article or two about the importance of creating a budget. However, very few individuals actually stick to that budget, or any budget at all. Once you turn 30, it's time to ditch the wishy-washy process of budgeting and start allocating where every dollar you earn goes. This means if you only want to spend $15 a week on coffee runs, you'll have to cut yourself off after your third latte for the week.

(BTW, $15 a week -- $780 annually -- is not a good decision. I make my own coffee at home, and spend about $100 a year. That's about 50 cups a week, not 15).

The overall point of budgeting is to know where your money goes in order to make sound decisions. Keep in mind that one dollar here and one dollar there adds up over time. It's fine to spend money on shopping or fun trips, as long as these purchases fit into your budget and don't detract from your saving goals. Knowing your spending habits will help you discover where you can cut expenses and how you can save more money in a retirement fund or money market account.

Here's a complementary tip to setting up and sticking to a budget: Document all your spending. Make sure you write down where and how much you spend, and what that does to your budget. This may require you to keep your receipts and cross-check everything to your checking account. Over time, you'll end up doing away with all the frivolous, spur-of-the-moment purchases and really be able to keep yourself in line. You don't have to be this detailed the rest of your life; just until you get your behavior under control. But still keep track. 

2. Stop Spending Your Whole Paycheck

The wealthiest individuals in the world didn't get where they are today by spending their entire paycheck every month. In fact, many self-made millionaires spend their income modestly, according to Thomas J. Stanley’s book “The Millionaire Next Door.” Stanley’s book found that the majority of self-made millionaires drove used cars and lived in average-priced housing. He also found that those who drove expensive cars and wore expensive clothing were actually drowning in debt. The reality was that their pricey lifestyles could not keep up with their paychecks.

Start by living off of 90% of your income and save the other 10%. Having that money automatically deducted from your paycheck and put into a retirement savings account ensures you will not miss it. Gradually increase the amount you save while decreasing the amount from which you live. Ideally, learn to live off of 60% to 80% of your paycheck, while saving and investing the remaining 20% to 40%. 

The first line of your budget should be what you pay yourself, not the last line as I've seen in most example budgets. Pay yourself first.

3. Get Real About Your Financial Goals

What are your financial goals? Really sit down and think about them. Envision by which age and how you'd like to achieve them. Write them out and figure out how to make them a reality. You are less likely to achieve any goal if you don't write it down and create a concrete plan.

You're more likely to achieve your goals if you write them down and create a plan.

For example, if you want to vacation in Italy, then stop daydreaming about it and make a game plan. Do your research to discover how much the vacation will cost, then calculate how much money you will have to save per month. Your dream vacation can be a reality within a year or two if you take the right planning and saving steps.

The same is true for other lofty financial goals like paying off your debt or something more long-term like buying a home. You really need to be serious and have a plan if you're going to get into real estate. After all, it's one of the biggest investments you can ever make in your life and it comes at a huge cost with a lot of extra considerations. There are a lot of things you have to think about when it comes to your finances—down payment, financing and your mortgage, how much you can afford, interest payments, other expenses.

4. Educate Yourself About Your Student Loans

An undeniable reality for millennials is that many of them are confused about navigating student loan repayments. A 2016 study conducted by Citizens Bank found that half of borrowers don't fully grasp the process of how student loans work, making the path to serenity from debt seem far-fetched.

Six out of ten millennials reported underestimating monthly payments, while 45% were unsure of how much of their annual salary they've put toward their loans. Since the recession, rates have been historically low, alleviating some pressure from crushing student loan debt. Nonetheless, vigilance in keeping a watchful eye on how much interest will compound on your loans should be a top priority.

5. Figure Out Your Debt Situation
Many individuals become complacent about their debt once they hit their 30s. For those with student loans, mortgages, credit card debt, and auto loans, repaying debt has become another way of life. You may even view debt as normal. The truth is that you don't need to live your whole life paying off debt. Assess how much debt you have outside of your mortgage and create a budget that helps you avoid not only gaining any more debt, but with the goal of paying it off once and for al.

There are many methods to eliminate debt, but the snowball effect is popular for keeping individuals motivated. Write down all of your debts from smallest to greatest, regardless of the interest rate. Pay the minimum payment for all of your debts, except for the smallest one. For the smallest debt, throw as much money as you can at it each month. The goal is to get that small debt paid off within a few months and then move on to the next debt.

Paying off your debts will have a significant impact on your finances. You will have more breathing room in your budget, and you will have more money freed up for savings and financial goals.

One important point to note. Pay down your debt, but don't get yourself back in over your head. It can be very tempting to see low balances on your credit cards and think it's okay to go ahead and start spending again. That will only put you back in a rut. Control yourself and keep your credit card usage to a minimum. You may want to consider lowering your credit limits or canceling cards you may not necessarily need over time. Anything to help you keep yourself above water.

6. Establish a Strong Emergency Fund

An emergency fund is important to the health of your finances. If you don't have an emergency fund, then you are going to be more likely to dip into savings or rely on credit cards to help you pay for unplanned car repairs and health expenses.

The first step is to build your emergency fund to $1,000. This is the minimum amount your account should have. By putting $50 from each paycheck in your emergency fund, you will hit the $1,000 emergency fund goal within 10 months. After that, set incremental goals for yourself depending on your monthly expenses. Some financial advisors recommend having the equivalent of three months living expenses in the fund, while others recommend six months. Of course, how much you are able to save will depend on your financial situation.

7. Don’t Forget Retirement

Most people either enter their 30s without having a single dime contributed to their retirement, or they are making the minimum contributions. If you want that million-dollar nest egg, you have to put in the savings now. Stop waiting for a promotion or more wiggle room in your budget. In your 30s, you still have time on your side, so don’t waste it. Make sure that you take advantage of your company’s matching contribution. Many companies will match your contributions up to a certain percentage. As long as you stay with your company long enough to become vested, this is basically free money for your retirement. The earlier you start, the more you'll earn in interest!

Thursday, March 5, 2020

How to Fight Tax Identity Theft

(Reprinted from Experian.com) Scammers who misrepresent themselves as IRS officials are an ongoing and evolving threat, and one that requires a degree of savvy to avoid. The key to combating this tax scam is understanding what the IRS can and cannot do and staying alert for any communications that ring false or make unauthorized requests for money or information.

How Does Tax Identity Theft Happen?
Tax identity theft takes several forms, but the objective is the same: To harness the power of the IRS to intimidate victims into giving up their money or personal information.

Specific ways tax identity fraud can appear include:
  • Hijacked tax returns: A criminal submits a tax return using your identifying information and has your refund redirected to them. It's common to learn of this scam when you try to file your legitimate tax return, only to have the submission rejected on grounds that a return has already been filed using your Social Security number.
  • Fake tax collection efforts: An official-seeming letter, email, phone call or (more rarely) personal visit from a purported IRS official says you owe taxes and will face immediate dire consequences (arrest, forfeiture of your car, etc.) unless you act right away. Follow-up instructions could demand payment via electronic transfer, money order or even prepaid credit cards.
  • Identity intimidation: In the course of trying to bully you into making a bogus payment, scammers posing as IRS officials might ask for access to your bank account or for essential tax info such as your Social Security number or your online tax-filing PIN. In addition to stealing funds directly by using this information, thieves can use it to open bogus bank accounts and apply for loans or credit cards in your name.
Understanding IRS Methods
Social Security numbers are a frequent target of many fraudsters, and should be closely guarded under all circumstances. Their use in bogus tax returns is a regular focus of consumer warnings from the IRS—as are warnings about criminals impersonating the IRS over the phone, via email and even in person.

Criminals are continually updating their tactics, and the IRS updates its consumer alerts webpage accordingly. It's a good idea to familiarize yourself with the latest scams, as you can avoid many bogus IRS shakedowns if you understand what real IRS representatives do and don't do when they get in touch with taxpayers.

The IRS won't:
  • Contact you by phone, email or in-person visit without first sending notice via postal mail—and the agency typically makes several attempts at mail contact before using other forms of communication.
  • Suspend or cancel your Social Security number. Contrary to messages left in robocall voicemails, neither the IRS nor the Social Security Administration can do this. In addition, no legitimate phone communications or emails from any government agency will instruct you to enter your full Social Security number via phone keypad or submit it via an online form. If you receive a call purporting to be from the Social Security Administration, you can call the agency's official phone number (800-772-1213) to verify its legitimacy. Do not use your phone's "call back" option to return a message from Social Security, even if it appears to come from this phone number; scammers have been known to rig their calls to look as if they come from that number via a process known as spoofing.
  • Threaten to involve local police, the FBI, immigration enforcement or other federal law enforcement agencies in its investigations.
The IRS will:
  • Instruct you to set up a PIN code to access your account if you create a personal account for filing taxes online. That PIN is for your personal use only; IRS officials do not need it and will never ask you to divulge it.
  • Request you to direct payments to the United States Treasury if attempting to collect payments. The agency does not accept payments in the form of prepaid debit cards, gift cards or wire transfers.
  • Sometimes appear in person in connection with audit procedures. But IRS auditors never show up without sending prior notification of the audit by mail.
  • Always present two forms of identification when they appear in person: a document known as a pocket commission and a government-standard personal-identity verification (PIV) card. IRS criminal investigators will also carry badges.
How to Report Tax Identity Fraud

If you're suspicious about any potentially fraudulent communication from the IRS, the agency suggests separate courses of action—one for individuals or couples who don't owe taxes and have no reason to think they do, and another for those who owe taxes (or don't know if they do) and want to be sure their payments are going where they belong.

Taxpayers who know they don't owe any taxes should report bogus attempts at collecting money as follows:
Taxpayers who owe taxes (or think they might) should do the following:
  • View tax account information online at IRS.gov to see actual amounts owed and review payment options. If you have no tax obligation, follow the steps listed above for taxpayers who owe nothing.
  • If you confirm that you owe taxes, check to see that the amount you owe matches the amount listed on any notice you receive purporting to be from the IRS. If the numbers don't align, the correspondence is likely bogus. Even if the numbers do match, you can still call the IRS at 800-829-1040 to verify that the notice you've received about a tax obligation is legitimate.
  • If you've become a victim of tax identity theft, the IRS recommends these actions:
  • If your electronic income tax return is rejected because of a duplicate filing under your Social Security number, or if the IRS instructs you to do so for any other reason, fill out an Identity Theft Affidavit (IRS Form 14039) and submit it with a hard copy of your tax return.
Visit IdentityTheft.gov for steps you should take right away to protect yourself and your financial accounts.

If you previously contacted the IRS about identity theft and your issue hasn't been resolved, call 800-908-4490 for special assistance.

How to Prevent Tax Identity Theft
The best defense against tax identity theft is to familiarize yourself with IRS communications methods and have the confidence to double-check even the most official-seeming communications anytime you're asked to provide payment or disclose account numbers or your Social Security number.

If in doubt, use the resources listed above to verify whether or not the correspondence you've received is really from the IRS. Recognize that scams are prevalent, train yourself to look and listen for the signs of fraud, and trust your instincts. If you're suspicious about any communications, check into it—and never give out your Social Security numbers, passwords or PINs.

A free credit freeze is an additional layer of protection that can help limit the damage to your credit in case a criminal gets hold of your personal information. It prevents access to your credit report at all three national credit bureaus (Experian, TransUnion and Equifax). A security freeze must be initiated at each bureau separately. Doing so will make it impossible for criminals to apply for loans or credit in your name.

Tuesday, March 3, 2020

Selling Your Home? Know the Tax Rules

You may be wondering if there are tax deductions when selling a home. And the answer is: You bet!

Sure, you may remember 2018's new tax code—aka the Tax Cuts and Jobs Act—changed some rules for homeowners. But rest assured that if you sold your home last year (or are planning to in the future), your tax deductions when you file with the IRS can still amount to sizable savings.

1. Selling Costs

These deductions are allowed as long as they are directly tied to the sale of the home, and you lived in the home for at least two out of the five years preceding the sale. Another caveat: The home must be a principal residence and not an investment property.

Just remember that you can’t deduct these costs in the same way as, say, mortgage interest. Instead, you subtract them from the sales price of your home, which in turn positively affects your capital gains tax (more on that below).

2. Home Improvement and Repairs

If you renovated a few rooms to make your home more marketable (and so you could fetch a higher sales price), you can deduct those upgrade costs as well. This includes painting the house or repairing the roof or water heater.

But there’s a catch, and it all boils down to timing.

If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing.

3. Property Taxes

This deduction is capped at $10,000. So if you were dutifully paying your property taxes up to the point when you sold your home, you can deduct the amount you paid in property taxes this year up to $10,000.

4. Mortgage Interest

As with property taxes, you can deduct the interest on your mortgage for the portion of the year you owned your home.

Just remember that under the 2018 tax code, new homeowners (and home sellers) can deduct the interest on up to only $750,000 of mortgage debt, though homeowners who got their mortgage before Dec. 15, 2017, can continue deducting up to the original amount up to $1 million.

Note that the mortgage interest and property taxes are itemized deductions. This means that for it to work in your favor, all of your itemized deductions need to be greater than the new standard deduction, which the Tax Cuts and Jobs Act nearly doubled to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly. 

5. Capital Gains Tax for Sellers

The capital gains rule isn't technically a deduction (it's an exclusion), but you’re still going to like it.

As a reminder, capital gains are your profits from selling your home—whatever cash is left after paying off your expenses, plus any outstanding mortgage debt. And yes, these profits are taxed as income. But here's the good news: You can exclude up to $250,000 of the capital gains from the sale if you’re single, and $500,000 if married. The only big catch is you must have lived in your home at least two of the past five years.

Top Five Consumer Cyber Security FAQs

By Equifax Business, technology, environmental and economic changes are a part of life, and they are coming faster all the time. All of thes...