T-Mobile Leaves Competitors Trailing Behind

The cell phone industry in the United States and in other countries around the world has become increasingly competitive over recent years. With more and more people looking to take up smart phones and tablets, the big name network providers are battling it out for the biggest slice of the pie when it comes to customers. Rival carriers use a range of tactics to try and attract new customers and build their customer base such as creating low cost plans and offering various perks when an individual takes out a contract. However, it seems that no US network is doing it better than wireless provider T-Mobile, which recently reported impressive quarterly earnings.

According to reports, rising customer numbers have resulted in T-Mobile seeing profits soar. The company is the third largest wireless provider in the United States but appears to be running rings around its competitors with its surging profits and customer numbers. In the final quarter of last year, the company reported net earnings of $297 million – just twelve months earlier this figure stood at $101 million reflecting just how rapidly earnings have shot up for the provider. (more…)

Bank Fees As Expensive as Payday Loans

If you think the payday lending industry charges its customers high interest rates and exorbitant fees then consider overdrafts from financial institutions. Over in Great Britain, using a bank overdraft can be just as expensive as borrowing a payday loan, according to a new report from consumer group?

The consumer organization provided an example from its analysis: borrowing $100 from an overdraft on your checking account for 31 days will cost between $20 and $30, while taking out payday loans online for the same length of time will come with an average price-tag of $20 to $37. For unauthorized overdrafts it could cost $100 to borrow the same amount of money.

With this kind of information, the group is now urging the Financial Conduct Authority (FCA) to prohibit excessive charges in the consumer credit industry as well as a cap on default charges, reports the London Telegraph.

“The Government and regulators have rightly focused on the scandal of payday lending, but they must not lose sight of the urgent need to clean up the whole of the credit market. High street bank overdraft fees can be just as eye-watering as bad credit personal loans,” said Richard Lloyd, executive director of Which? (more…)

Tips to prioritize expenditure

During these difficult times, it is important to take control of your budget. While it might seem impossible to live on what might seem like a shoestring, we can prioritize our expenses and get what we need without making much sacrifice. Here are a few tips that can help you stay out of trouble and finish the month alive and well.

Write down your budget

How much money do you have right now? Include and specify your capital at the start of the month. Write down what’s on each one of your debit cards, savings accounts, wallets, pockets, piggy-bank savings, even under your mattress if you keep cash there. Never underestimate your spare change. In times like this, every pence is worthy. Make sure you know how much you have in total. It might be more or less than you imagine.

Categorize your needs

What do you need to get this month? Write it down, and divide it into categories. Include the rent or mortgage of your household, utilities such as electricity and water, communication services such as mobile plans and broadband, groceries, transportation, and anything else you can think of. (more…)

How to select the right savings plan for yourself

Whatever your walk of life or long-term goals, there are so many different savings plans to choose from. There are all kinds of accounts offering vastly lower and higher return rates, different levels of security, and customized options to ensure your expectations are met and hopefully exceeded. With varying interest rates, terms, penalties, and minimum investments, being well-informed before you begin a savings plan can make all the difference.

If you are a student, or have a child you wish to be able to afford to put through college in the future, you will find many available savings plans. One of the recent most-talked-about plans is the 529 College Plan that Congress authorized as part of the Economic Growth and Tax Relief Reconciliation Act in 2001. Now you have the option of purchasing prepaid college credits that freeze tuition at the value at the time of your purchase.

This means that as tuition inevitably increase, your cost will be the same however many years down the line it is until your student is ready to move onto campus. The other option the 529 College Plan offers is investing in a mutual fund based savings account that will earn interest without taxation as long as it is untouched. The money in this type of savings plan can only be applied to tuition, room and board, or other college related costs such as books. (more…)

5 Tips for Maximum Tax Savings

It’s March again. Which means you only have one month left to file your taxes. Banks and employers are already frantically at work tallying last year’s earnings and taxes so they can ship those W-2’s and 1099’s out the door in time. What can you do to prepare for tax season early?

Here are 5 tips you can use now, some will help you with last year’s return and some will help you get a jump-start on the current year’s tax bill.

1)Invest in your 401(k) or IRA

What? You don’t invest in your company’s 401(k), or if you’re self-employed you don’t have an IRA? That’s just flushing good money down the drain, literally. The IRS actually ‘pays’ you to save for your own retirement, in the form of tax savings on the current year’s earnings.

What’s so great about this, besides the obvious immediate tax benefit on your contributions, which for 2012 was capped at $17,000, is that you end up saving money in the long run because it is very likely that as you get closer to retirement age you will be in a lower tax bracket than you were in your peak earnings years. And if your employer matches your 401(k) contribution – that is free money. No strings attached. There is no better deal on the market right now than to ensure that you invest in your 401(k) or IRA as much as you can possibly afford to each tax year.

2) Give it away!

Charitable donations are a great way to see savings off your tax bill. But be sure you do it properly. These days you must have a receipt to claim it. A canceled check or credit card statement count, but you need to save a copy of that with your tax folder (whether kept electronically or in physical form). Additionally, most people underestimate their non-cash donations to charities.

The recommendation is to document each individual piece, rather than listing it as a bulk item (“kid’s clothes” would be bad: “5 toddler’s shirts, 6 toddlers pants” would be better). There are also great savings to be had by giving “cash gifts out of your estate” to your dependents. Doing so while you are still around to decide who gets what saves everyone tax grief – estate taxes are known to be the biggest and most depressing of all tax bills.

3) Points on refinancing your home

If you refinanced your home in the previous tax year, or are thinking about doing it in the current tax year, don’t forget that you can amortize your loans and then annually deduct a portion of the ‘points’ that were incurred as part of the closing process. Additionally, when you refinance you can deduct all of the previously unamortized points from a prior refinancing. It gets confusing – but don’t let that stop you from taking advantage of this benefit. Every dollar counts on your tax bill!

4) Education expenses

There are two different ways to take advantage of what would be considered ‘education expenses’. One is for actual educators (teachers) who can deduct up to a specific amount for any supplies they paid for out of pocket for their classrooms. If you’re a teacher, don’t forget to track these and deduct them! The second way is for your own higher education expenses. If you are continuing your education, you may be eligible for certain tax deductions (depending on your filing status and annual earnings). For example, in 2012 you could deduct up to $2,000 by using the Lifetime Learning Credit; possibly more if you are eligible to use the American Opportunity Credit or the Hope Credit.

5) Legal and tax preparation fees

Do you do your own taxes? Or do you hire someone to do them? If you do them yourself, do you purchase tax software every year to assist and guide you? Don’t forget that you can deduct these costs on your itemized tax return. Let’s hope you didn’t have any major legal fees this past tax year, but if you did, many of them are deductible as well.

Be sure you look into what you are eligible to deduct and include everything that you are entitled to.

How Much is Too Much Student Loan Debt?

There are two basic categories of families in the United States. One is where most people have not gone to college. To them, a college education is the doorway to a better life, with wealth, an interesting career, and greater social standing.

The other type of family is one in which most people have gone to college. To them a college education is an absolute necessity in life. It maintains social status, wealth, and job security.
Both of these family types will send any student possible off to college at the first possible moment, regardless of whether or not the person knows what career might interest them. Thanks to the efforts of very well-meaning social activists, some parents don’t even think they have to spend a penny to do it. After all, student loans are paid with future earnings, right?

Parents of both types, and students in general, need to adjust their thinking to fit reality. A college education does have benefits in job security and pay, but only after it has been combined with experience in a given field. With the exception of highly sought-after fields like engineering, most entry-level jobs pay about the same, degree or no degree. (more…)

When is a Reverse Mortgage a Good Option?

Surveys suggest that the vast majority of seniors would like to stay in their own homes. Yet real estate is generally a family’s biggest asset, and not tapping into it can lead to a lower standard of living for the seniors involved, perhaps forcing them to sell earlier than necessary.

The way to get money out of a property without selling it is to borrow against it. But loans generally have to be paid, and the idea is to provide people on fixed incomes with more money, not less. When there is a market, a product will appear. Borrowing part of the equity on your house, then having the interest accrue with no payments due, is the theory behind the reverse mortgage.

Let us say, for example, that an elderly couple of small means has lived in an apartment for years. When the man dies, the woman finds that the life insurance she didn’t want them to pay for 30 years ago has paid her enough money to buy a condo in Florida near many of her friends. Her current income, however, will not allow her to pay the expenses to go with the property. Is she doomed to lonely life in the cold north, at the mercy of heartless landlords?

Not at all. First, she buys the property and moves. Then she takes out a reverse mortgage against it which is enough to pay her new expenses. The installments come every year, and the bank rolls the interest into the loan until she either pays it off or sells.

Reverse mortgages can take many forms. You can take a fixed payout, an annual or monthly payment, or establish a line of credit. In all cases the future interest becomes part of the loan, and you’re not required to make any payments. You do need to be at least 62 and actually live in the property that you are taking out the reverse mortgage on.

There are some very real drawbacks to them, however. First, they are expensive to set up, and they have some odd market standards. They have all of the normal closing costs of a loan. Mortgage insurance is required, not only when you take out the loan, but on the balance each year. Plus a nice fee, hundreds or even thousands of dollars, goes to the person who was nice enough to set it up for you.

Second, it’s hard to keep track of how much is owed. Unlike a regular mortgage or your credit card, where your monthly interest is included in your monthly payment, all you see is the check you receive. It’s all too easy to find that this “monthly income” has eaten away a huge amount of your equity.

Third, other options might be better suited and cost less. Regular home equity lines of credit often have fewer fees involved and have better rates. Younger relatives might be willing to simply buy an interest in your house as an investment with the hopes that it will keep appreciating. Then the retirees can remain with no interest accruing at all.

One very nice thing about reverse mortgages is that the withdrawals are tax-free up to the price you paid on it. If you have a choice between selling stock that earns 10% and is taxable, and borrowing against equity at 5% when it’s not taxable, a reverse mortgage may be a very real choice. You also don’t have to cash in all of the equity at once. You can borrow pieces at a time, and even pay them off if things suddenly get better.

Perhaps the best time to look at a reverse mortgage is with a person that is becoming increasingly disabled. Borrowing against equity to alter the residence or bring in people to help a person stay in the home as long as possible can greatly enhance the remainder of his or her life.

What Does It Mean if a Loan is “Upside-down”?

It is said that new cars lose value as soon as you drive them off of the dealer’s lot, and for some reason it’s quite true. A new Dodge Grand Caravan can easily run you $25,000-30,000. The price dips to $20,000 just 20,000 miles later.

One might argue that this is a good reason to never buy a new car. There are many arguments for and against that statement. One that banks don’t miss, however, is that unless you put a substantial down payment when buying your car, the vehicle that the bank has a lien on cannot be sold for the full amount of the loan you took out.

The standard way of dealing with this on cars is to purchase “gap insurance”, which basically says that the insurance company will cover the difference between your loan and the value of the insured car. It probably won’t be a condition of the loan, and if it is you might want to look elsewhere for financing in case the insurance they offer is overcharged. Gap coverage is an excellent idea, however. It will avoid the unpleasant situation of paying off a loan for a car that you no longer drive. (more…)

What Loans are Canceled When I Die?

Unlike corporations, individual lives do eventually end. When they do, their assets and debts become a temporary legal entity called an estate. How long the estate lives depends very much on what type of assets it holds and how they will be distributed. If the estate owns patent, the estate could be around for a very long time indeed.

In your estate, all of your assets and debts, including the lawyer’s bill, are lumped together. The assets are sold to pay the debts. If there is money left over, it goes to your heirs, either those in your will or those chosen by law. If there are debts left over, they disappear; all of them. This is the only way known to man to permanently elude the IRS.

Of course, since this is a legal matter, there are caveats and exceptions. Some of the issues depend on state law. None of this is to be construed as legal advice. It’s just general discussion.

Any loans that are made jointly or any assets that are owned jointly confuse the issue. If you are a guarantor on your elderly uncle’s credit card and he dies, you’re going to end up paying it off. (more…)

When Does a Home Equity Loan Make Sense?

Home equity loans are so tempting. Every bank tries to sell them. If you’ve lived in your house for years, that amount can come to a very large sum. Plus, the line that “the interest may be tax deductible” is all too much.

Yet the burst of the housing bubble revealed a very dangerous aspect. If they resale value of your house drops, an all-to-real possibility these days, your house may become “underwater”, meaning that you owe more on it than it is worth. This makes refinancing impossible and moving almost so. The government will only help on two occasions: you are at least six months behind on your mortgage and foreclosure is imminent, or if you are moving and have are in a verifiable financial bind. Both will shred your credit sore.

There are a few questions you should ask yourself before you take the plunge and raid your largest nest egg.

  • Am I borrowing more than 90% of the equity, the minimum needed to sell the house without laying out cash?
  • Is this a long or short term loan?
  • How expensive are other methods of borrowing?
  • How much longer will I be in my house?
  • What are the chances of having to move?
  • Can I afford the minimum payments in an emergency?

There is no perfect formula of the above questions to tell you “No, now is not the time”. Here are some sample situations where a home equity loan makes sense:
You are going to improve the property.

Does your kitchen drive you crazy? Do you need an addition for space? Are you going to upgrade the heating system? Is your roof falling apart? Even solid landscaping can save you time and energy while increasing your enjoyment of the property.

Many home improvements actually increase the value of the house, or at least maintain it. So the risk of going underwater is somewhat less. They also increase your investment in the house for tax purposes. When you sell the house, you add the price of such investments to your buying cost, and save on the capital gains bill that the government will charge.

If you’re selling the house immediately, this is risky but sometimes necessary business. Most home improvements will almost pay for themselves on sale. For example, if you spend $10,000 replacing your deck, you can only expect the value of the house to go up $8,000 (upgrading your kitchen is the exception to the rule). Yet if you are going to have cookouts on that deck for the next 5 years, it’s worth the money. Maybe you should consider a built in grill or hot tub as well.

Paying for college.

If it is you that’s going back to school, make sure that your salary at the end will be more than the salary at the beginning before you raid the equity in your house. The starting salary in many careers can be lower than a working-class job you’ve been at for a decade, and the mortgage payments might limit your job choices and your ability to move to new opportunities.

If you son or daughter is going to college, it’s another matter. Unlike any 529 account, the interest on your mortgage is completely stable. Adding extra to your payment over time will save you interest as you go. Plus parent loans have high payments that start immediately. A home equity line of credit, or better yet a refinance, can help you take advantage of the equity in one fell swoop and spread the payments over a longer period. If you’ve made enough progress on your prepayments or it’s a good deal, it might even result in no increase in your payment at all.

Paying off High-Interest Credit Cards

This one seems obvious. Credit card costs are terrible. But if you do this, cancel the credit cards! Otherwise you’ll find yourself in the same situation all over again. Been there, done that.
Medical Expenses
Victor Hugo said in Les Miserables (the book, not the musical) that the only thing sadder than no money for food is no money for medicine. If the person being treated is you or your spouse, or you’re near retirement, make sure you have a plan for living expenses afterwards. It might be a downgrade in your standard of living, but time has no price tag.

To Invest in Higher Interest Opportunities

J.P. Morgan, a truly wise man of wall-street, said that you should never invest beyond your sleeping limit. In other words, if you can’t sleep at night, you’re investment risk is too high. If the investment isn’t particularly high-risk, however, or if your house just went up in price, using it as leverage for investment is a solid option. Just make sure that your short-term emergency fund is adjusted for the higher payments.

One reason NOT to take out a home equity loan is to have money to live on. If you’re still working, sell the house and move. If you’re retired and need more income, consider a reverse mortgage (check out the lender thoroughly). Borrowing money to live on is a good way to lose your house completely.