Friday, August 26, 2005

HELOC's eat up Home Equity

Initially intended to smooth over unexpected expenses and provide a safety cushion in the event of emergency repairs home equity loans are now used to cover everything from discretionary purchases like telivisions and hot tubs to significant expenses Kitchen renovations and College Education.

Most HELOC borrowers assume the value of their home will go up and one day they can just sell their home and the loan will be paid off. However, with the increasing risk of a Real Estate Bubble and saturation of the housing market this assumption could put your equity in danger.












Let's say you bought your house for $175,000 but it was recently appraised for $275,000. If you were able to sell for anything close to the appraised value and you'll reap a tidy profit. Now throw a $75,000 HELOC balance into the equation. As you can see, the selling prices in your area need only sag a bit and you can be unable to net enough on the sale of your home to pay off both the mortgage and HELOC balances.

Put a Lock on your HELOC...Pay Early-Pay Often

Home Equity Lines of Credit provide easy access to cheap money, but they are a credit treadmill designed to entice you with low monthly payments, your HELOC can become a perpetual debt that never gets paid off unless you pay down the principle.












The fact that you can make small monthly payments on a rather large debt makes it easy to justify a new kitchen or hot tub but use your HELOC wisely.

With most HELOC's carrying an interest free period of 10 years, it is easy to tap into it along the way and make no real impact on the principle you have borrowed.












Unless you have been paying down the principle along the way, at the end of your interest free period,you may be facing a large spike in your monthly payments to cover the principle.

Alternatively, you do like many others and roll your HELOC into a new one and continue on this endless cycle of debt.

To avoid this, always be mindful you the principle you have borrowed and pay MORE than the monthly payment.

Tuesday, August 23, 2005

Baby Needs no debt not a Government Funded Savings account

A very interesting initiative to promote savings is coming out of the White House.

Starting every child out with an initial deposit may sound like a good idea, and it is one that should be explored a little closer.

While setting up every baby with a savings account could foster savings growth, the reality is low interest rates minus inflation will not create a great return or growth of capital. In addition, the cost of money needs to be understood.

These free accounts being funded by the Government are being seeded with money that the Government Borrows (carrying an interest cost), thereby reducing the returns that are generated.

While saving since birth is a great idea and add up to a significant amount over time (use our annuity calculator to calculate your money growth over 65 years)
this can only be accomplished when the money used in the account is not bearing an interest charge.

Imagine borrowing money from on Credit Card to invest for your retirement. This is much the same way a Government funded savings plan would work.














What if every baby had a bank account?
New experiment aims to teach thrift, ensure college education

By AMY GOLDSTEIN
The Washington Post
August 21. 2005 8:00AM

T
hree weeks shy of his first day of kindergarten, Austin Sambrano is the only person in his family who has a savings account.

Living with his parents and older brother in a trailer park near Pontiac, Mich., he is part of an experiment called the SEED Initiative that is opening investment accounts for children, in an effort to ensure them a college education - and teach their families the habit of putting aside money for the future.

The $800 deposited in his name places the rambunctious, blond 5-year-old at the leading edge of a new wave of thought about how to create wealth, curb poverty and improve the abysmal savings rate among Americans, particularly those who are poor. The idea is to give newborns or young children a miniature version of what affluent families have long provided their offspring: a trust fund. To induce parents to save, families get their deposits matched if they add to the fund.

In today's economy, a savings account "is as fundamental as land was back in the 18th and 19th century," said Ray Boshara, of the New America Foundation, a think tank that advocates children's accounts.

Involving several hundred children in a dozen communities around the country, SEED (Saving for Education, Entrepreneurship, and Downpayment) - a four-year experiment being conducted by local social service agencies, studied by researchers and paid for by several nonprofit foundations - is a modest version of the ultimate goal.
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Legislation has been introduced in Congress that calls for the government to open a KIDS Account of at least $500 for every baby born in the United States. And President Bush's first Treasury secretary, Paul O'Neill, has been giving speeches around the country, promoting an even bolder plan he has devised for children's accounts that he says would guarantee every American at least $1 million by age 65, eventually eliminating the need for Social Security.

Fostering savings from childhood is, in a sense, a spillover from the debate over whether to establish private investment accounts in Social Security, the nation's fragile retirement system. But unlike the partisan rancor that runs through the Social Security debate, children's accounts are gaining proponents across the ideological spectrum. Conservative Republicans see them as a form of the market-oriented "ownership society" that Bush touts. Liberal Democrats view them as an extension of the Great Society of the 1960s that created government programs to lift people from poverty.

"It's a simple kind of merging of the stereotypes of the parties," said Democratic Rep. Harold Ford Jr. of Tennessee, sponsor of a bill that would create KIDS Accounts. "You give to people; you put some responsibility on people to save, as well."

Despite bipartisan cheerleading, such accounts have skeptics on the right, who are disdainful of a new government handout, and on the left, who fear the expense would drain money from other social needs. So far, White House officials are unenthusiastic, saying that any available money should be used to prop up Social Security.

Still, proponents say that investing in children is a breakthrough in thinking about how to reverse a worrisome deterioration of savings habits. Since the early 1990s, the typical American's savings rate has plunged from $7.70 per $100 earned to $1.80, according to federal figures. Between 9 and 20 percent of U.S. households have no bank account, studies show, and the proportion is higher among African-Americans, Hispanics and the poor.

"I don't find the current political process doing justice to the fundamental question: What meaning should be given to creating financial independence? The president puts his head down and keeps saying the same thing over and over again,"said O'Neill. He said his plan, which he says would cost $144 billion, would create "a fundamentally different society than any one on Earth."

The idea for children's accounts has been germinating for years. In Britain, the government has begun mailing vouchers worth almost $450 to the parents of all 700,000 children born there each year.

In the United States, meanwhile, states and foundations are pursuing different experiments. In Kentucky, the Democratic state treasurer and Republican secretary of state have created the Cradle to College Commission, which is working with banks, colleges, businesses and foundations to design a test program of accounts for children. They hope eventually to propose legislation to expand it statewide.

And St. Louis-based Jim Casey Youth Opportunities Initiative began three years ago to offer "opportunity passports" as part of its work with a teen-agers graduating out of foster care. The program, in 12 communities around the country, provides $1,000 in matching funds for money these young people save for college, an apartment security deposit or a car. So far, slightly more than one-third of the 1,000 eligible participants are saving money.

The SEED Initiative is the most intensive effort so far in the United States. Investing in children of different ages and family incomes, it provides an initial deposit, then matches family contributions for four years - up to $1,200 in Michigan.

Organizers at some of its sites say they are discovering that giving away money can be harder than they imagined. In one SEED location, around Helena, Ark., Angela Duran, president of the Southern Good Faith Fund, said she and her co-workers had expected when they began looking for 75 families for SEED two summers ago that they would enroll them quickly through federally funded Head Start preschool centers for low-income children and a similar state preschool program. Instead, they have just finished setting up accounts - and only after opening them to other families in the area.

SEED organizers in Michigan found that one impediment was requiring parents to pay $25 up front to get an account.

But some parents say that they are learning new habits. "This program here gives me a chance to save. I know it's there. I can't mess with it," said Almedia Jones, of Lexa, Ark., who opened an account in May and made a $20 deposit in June and July. She took her daughter, Brianna, 5, to a SEED class where the children decorated two cans, labeled "savings" and "withdrawal," with butterfly stickers. Brianna began to put her allowance into a can.

One day, Jones took Brianna shopping for a present for another daughter, Brittney, who had just had surgery. Brianna spotted a pretty purse and turned to her older sister. "If you buy me this purse," Brianna said, "when I turn 18, you know I will have money in the bank, and if I go to college, I'll have even more money, and I'll pay you back."

------ End of article

By AMY GOLDSTEIN

The Washington Post

Save Hundreds of Dollars on Software and Avoid the Risk of Piracy

A recent article in the Globe and Mail underscores the high cost of software piracy.

Rather than take the risk of Pirated Software, consider using and Open Source Alternative such as OpenOffice which provides a competitive alternative to the major office productivity software.

From the Globe And Mail:


By PAUL LIMA

Thursday, August 18, 2005 Updated at 9:02 AM EDT

Special to The Globe and Mail

The computer reseller could tell I was hesitating, and he knew my hesitation was based on price.

"Listen," he said conspiratorially, "you won't need to buy any software once you see what's on the hard drive." He was offering to load my hard drive with business software, saving me a lot of money.

Illegally loading personal computer hard drives with software is a common global phenomenon, as is selling pirated copies of software at discount prices.

As one used-computer reseller said, "When a customer lays down $500 for a used computer, he does not want to hear, 'Oh, by the way, that will be another $250 for Windows and $400 for Office.'" As a result, his staff loads "just about anything" customers want.

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"We preinstall, same as the big manufacturers. It's a grey area," said the reseller, who wished to remain anonymous.

It's not grey for everyone, though. It's theft, says Jacquie Famulak, manager of legal affairs with Markham, Ont.-based Apple Canada Inc. and president of the Canadian Alliance Against Software Theft (CAAST), a group of software developers that have banded together to fight piracy.

In Canada, 36 per cent of all business and consumer software currently in use is pirated, according to a study that market-watcher International Data Corp. (IDC) conducted for CAAST's U.S. counterpart, the Business Software Alliance. This compares with 20 per cent in the United States, where strict laws, vigorous enforcement and hefty fines of up to $150,000 (U.S.) help protect intellectual property, Ms. Famulak said.

Although changing, Canada's copyright laws "are more lax" than those in the United States: the maximum penalty in Canada for copyright infringement is $20,000, but she says that amount has never been levied.

Not all piracy is premeditated -- some companies accidentally overstep software licence boundaries. They may add employees and roll out applications across networks without checking how many licences they have. Or employees may download applications or upgrades from the Internet without thinking about licences.

CAAST, which has prosecuted companies that have accidentally overstepped the bounds of software licences, is now pushing businesses to set up software inventory systems to help them remain compliant with licences. It says software theft cost the Canadian economy $1.1-billion last year, and global losses due to software theft are estimated to have exceeded $48-billion. Small businesses and consumers are the main culprits, Ms. Famulak said.

Not everyone agrees that the problem is this large. CAAST inflates the figures, according to several small business owners interviewed for this story who did not want to be named. Much of the pirated software would not be purchased in the first place if users had to pay, one unrepentant thief pointed out.

Many small business owners particularly dislike agreements that force them to purchase a software licence for each person in the company who may use an application, no matter how seldom.

Others said the software industry charges too much for applications, while making it too easy to illegally copy software to other machines. While most software manufacturers use some form of anti-piracy protection, it tends to be weak -- it may prevent casual piracy, but not commercial theft. Manufacturers are generally hesitant to increase protection, as it inconveniences customers who have legitimate reasons to re-install applications.

Allan Coganovitch, president of Toronto-based computer reseller and software developer Proven Solutions Inc., says he would "never" load pirated software to a computer. To minimize piracy of applications he develops, he locks software to the hardware on which it is installed. If a registered user wants to copy the software to a new computer, he has to call Proven Solutions for authorization.

While some users consider this a time-consuming pain, Mr. Coganovitch sees it as a way to protect his intellectual property from casual or accidental copying. However, he admitted a professional hacker could probably break his codes.

While business may believe they are saving money by using pirated software, it could cost them more in the long run in terms of down-time and support costs, Ms. Famulak said. These businesses may be putting themselves "at risk," she says, because customer support is not available for pirated applications and the business owner must pay to fix any technical problem.

For example, Microsoft now requires that all customers coming to its website for upgrades and security patches submit their computers to an electronic frisking.

The company scans machines for a variety of information, including product keys, software authorization codes and operating-system details. If it finds indications of pirated software, Microsoft won't allow updates and security patches to be downloaded, leaving the machine vulnerable to things such as the Rbot and Zotob worms that made headlines this week when they hit unpatched business computers running Windows 2000. Microsoft offered a security patch covering the vulnerability exploited by the worms a week ago.

In addition, pirated software that is downloaded from the Internet or obtained on an illegal CD-ROM may contain viruses or spyware.

"I know we all pay more for software because of piracy," said Roger Noble, president of Toronto-based Choice Corp., a company that helps people buy and sell franchises. Mr. Noble's business does not have IT staff and says the software support he gets when he pays for applications is worth the investment. "It's almost like insurance."

Some resellers avoid piracy while still catering to customers on a tight budget by installing "shareware" and "trialware," software that developers offer for free, or that people can test drive at no charge and then pay a small price to keep if they like it.

The Open Source development community offers hundreds of such programs for Linux, Windows and Macs.

Derek Keoughan, president of Finnegan Software Inc. in Brampton, Ont., only loads software that customers purchase. Upon request, he'll add shareware and trialware programs, such as the FireFox Web browser, WinZIP and AdAware.

Thursday, August 18, 2005

How to save 20% on your next used car

Used car present a great opportunity to save money on your next vehicle.
Even cars that are not even one year old depreciate significantly but, more important is the variability in prices between geographic regions.












If you are willing to travel a little further afield, it may be possible to save a huge amount of money on a late model used car.

A recent search for a used SUV for a friend of mine uncovered a savings of 20% simply by looking outside of our immediate area.












For the sake of a half day's drive and maybe a hotel room, he will save $6,000.00 on a 2005 trailblazer from a dealer that is outside the local area.

Wednesday, August 17, 2005

Tax Savings through tax cost averaging

When it comes to income tax, most people view it as a once a year dreaded task.

For most people, it may be worthwhile to look at income tax with a longer horizon and look for ways to reduce the amount of taxes you pay over the long haul to maximize your deductions, and structure your income sources so that you pay the lowest amount of tax possible not just this year but, in future years too.

It may be worth your while to sit down with a qualified tax advisor and develop a tax savings strategy that will lower your tax burden and increase your aftertax income.














Consider the impact of reducing your income tax by 20% per year for the next 10 or 20 years if you are like most people who simply fill in the forms without seeking out available deductions, or fail to look at the tax implications of your investments then chances are, you are paying too much tax and could be saving simply by paying closer attention to your income sources and identifying opportunities for deductions.

Remember, not all income sources are taxed equally, so look closely at how you can generate parts of your income from lower tax bracket sources.

Monday, August 15, 2005

InsureYour Debt

As the amount of consumer debt has risen in recent years, one important thing to consider is what would happen to your loved ones in the event of an untimely death?

If you are like most consumers, your debt load has been increasing. This creates an added burden for your estate, making an unforseen death even more troubling for your loved ones.













If you have not taken the time recently to review your insurance coverage, there is no better time than the present. Ensuring that you have adequate life insurance coverage could mean the difference between you providing for your family, or your family being saddled with unforseen expenses and hardship.

Tuesday, August 09, 2005

$25.00 Credit to Canadians Who bought MP3 Players

Canadians take note, if you bought an MP3 player in 2004, a recent Supreme Court Decision clears the way for a refund of $25.00 on an anti piracy levy that was collected when you bought your device.

Check with your Manufacturer for more information.











Thursday, August 04, 2005

Loan Traps with 280%. per year interest

Often times the people who need money the most end up paying extremely high interest resulting in a deep downward spiral.

On of the most vicious loan traps are














In a title loan, you give the title to your car and a copy of your keys to a lender as security for a loan. If you don't repay the loan, or if you fall behind in your payments, the lender simply takes your car, sells it, and pockets the money that's owed.

The fee for a title loan can be more than 20 percent a month. So a $1,000 title loan can cost more than $200 a month in interest fees. If it takes you a year to repay, that $1,000 loan will cost you more than $3,800. A title loan is not the way to get back on your feet if you're having financial problems. It's a trap that's likely to pull you deeper into debt.

Tuesday, August 02, 2005

Push your credit card limit and Pay thrrought the Nose

There may be an occasion when you run your credit card purchases over your approved limit.

Keep in mind that your Credit card company will apply an "Over Limit" fee. Depending on your card and the amount you are over, this fee can be a significant penalty, especially if you pay off the monthly balance.













Assuming you are assessed an "Over Limit" penalty of $15.00 (check the terms of your card) because you exceeded your monthly limit (lets say you went $100.00 over) and paid off the monthly balance.

While this one time fee appears to be costing you 15% for the extra $100.00 if you look at the cost of this money a little closer, on an annual basis, the true cost of this fee represents an annual interest rate that is closer to 180% making it some of the most expensive money you will ever borrow.













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