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Friday, April 2, 2010

After Maria's Training,

Congratulation DEAR!
You Got it!
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10 Money Tips for 2010

As you move back into the daily routines of a new year and new decade,

here's a checklist of 10 things you should do to make better use

of your money.

We've already become savvier consumers and cut back on spending.

So, if there's a dominant consumer theme in 2010,

it will be to look for lots of small savings, particularly in charges and fees

that are often hidden. Transparency should be your friend.

Know what you spend. Do you really know where your money goes?

Spending patterns often can get hard-wired into our behavior.

Vendors like it that way because it's easier for them when you just fork over

the money every month without thinking about it. But you should be thinking

about how your money is spent and, in particular, where you can spend less of it.

Make a budget. When you actually know how much money you spend,

it is much easier to make a budget. Budgets are an essential discipline if you

are serious about being a master of your money.
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Stick to your budget. Every month, review the prior month's spending and compare
it to your budget. After a couple of months, this will cease being torture and can
become an effective planning and support tool.

Have some money fun. If budgeting is all drudgery, you will wind up in a money
prison and that's a bad place to be. So, set aside money to have some good times.
Building in such rewards can provide the incentive to stick with your budget.

Check credit card and banking fees. Look carefully for new fees and interest charges.
Banks must implement new pro-consumer laws and are looking for ways to recoup
expected revenue reductions in late fees, overdraft payments,
and higher interest charges. Spend some time reading the new disclosure
statements on your cards and accounts.

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Review insurance terms and rates. In many households, insurance is a large
percentage of spending. As we, and our possessions, get older,
our insurance needs might change. Is the deductible on your auto's collision
coverage still the right call as your vehicle's value declines?
Is your home insurance providing you more protection than you need given
declining property values? Do you still need as much life insurance or is it time
to use those premium dollars for another purpose? Even if your insurance
coverage is perfectly aligned with your needs,
you should shop for better rates at least once a year.
The carrier that provided you the best deal 10 years ago may no longer
be the best choice.


Review retirement accounts. Most likely, your retirement account is invested
in mutual funds. Over time, winners and losers will throw your portfolio
out of balance. Consider selling some winners and buying sectors that haven't
done so well. This should be at least an annual exercise. As you get older,
think about preparing your holdings for the time when you will be withdrawing funds.
That means moving from growth into income funds and thinking about
taxes on withdrawals.

Look at investment fees. Here's a bet most people shouldn't take.
I bet you that you don't even know how much you pay in investment
fees each year. I also bet you that finding out will be no easy matter.
Fees for mutual funds and retirement accounts usually are missing in
action on your monthly performance reports. You will need to go to
prospectuses to find out what you're paying.
Even then it may be hard to translate the documents' jargon into
clear language. Congress and the U.S. Securities & Exchange Commission
are considering improved disclosure rules, but then, aren't they always?
stock photo : US Currency One Hundred Dollar Bills arranged in a mess to weigh on an antique scale , isolated on white background.

Consider a Roth IRA conversion. Income limits are being waived on conversions
retirement accounts into Roth IRAs in 2010. Regardless of your income,
you will be able to move funds to Roths this year.
Traditional retirement accounts are funded with pre-tax dollars,
permit investment gains to build up without being taxed,
and then tax withdrawals as ordinary income. Roth IRAs are funded with post-tax
dollars, permit investment gains to build up without being taxed,
and have no tax on withdrawals. Further, annual withdrawals from traditional
funds are required once account holders turn 70 12.
Roth IRAs have no age requirement for withdrawals. Roths are particularly
attractive as ways of passing on wealth to your heirs.
That's because you can transfer a Roth when you die and your heirs avoid
all taxes (although they will be subject to the same age-based annual
withdrawal rules as regular retirement accounts).
The big downside of conversions is that you must pay income taxes on any
pre-tax funds moved into Roths and on account earnings.
But with the reduced values of many retirement accounts,
this may be a relatively good time to absorb such a tax hit.
And there are special rules for 2010 conversions that will give you the option
to delay tax payments for a year and let you spread them over two taxable years.
Most major investment websites have conversion guides.

Review your estate plans. What a mess! Congress failed to address sunset
provisions of a 2001 estate law, and thus allowed estate taxes to lapse in 2010.
The lapse also involves a costly and administratively burdensome change in the
valuation of inherited assets, triggering capital gains taxes for people who inherit
more than $1.3 million (a spouse can get another $1.7 million without being taxed).
Gift taxes are also reduced to 35 percent from 45 percent.
Congressional leaders have vowed to enact a retroactive fix to this situation early
in the new year. But who knows what will happen, or when? In the meantime,
even people without great wealth should review their wills and consider
whether any changes are needed.
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Love Maria!



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