During times of economic uncertainty, fixed annuities gain popularity. In fact, during the first quarter of 2009, the sale of fixed annuities increase 74%, according to a research association called LIMRA. Fixed annuities give people tax-deferred growth at fixed rates that are typically higher than certificate of deposits now. They also give the owners the ability to turn their fixed annuity into guaranteed income for life. Sounds too good to be true, right? A fixed annuity has a number of advantages – but it may cause you to miss opportunities that would result in earning more money.

Fixed annuities are often called “deferred annuity”. These are different from immediate annuities, in which you give a lump sum of money to an insurer and then begin receiving payments from the immediate annuity within a year’s time. Fixed, or deferred annuities operate more like a certificate of deposit in that you deposit your money under a teaser interest rate that can readjust annually based on the current economic and market conditions, but with a guaranteed minimum rate. People like this because they know their interest rate will not go below this guaranteed minimum rate, and that it could readjust for a higher rate in some cases.

Fixed annuities do not have a set time period that you must leave your money alone, however, you would pay a 7% surrender fee if you withdraw your money before five or seven years in most cases. This makes fixed annuities extremely difficult to back out of – which means if you find a higher interest rate somewhere else, you can’t just pull out your money and re-invest to benefit from the interest rates. Some fixed annuities are more flexible in that they allow you to withdraw up to 10% of the balance once per year without paying a fee.

As many experts predict, we will soon be entering an inflationary period. So locking in your money in a 4% fixed annuity could be financially devastating for you in terms of what you could have gained with other investments.

Where as money saved in a certificate of deposit is subject to taxable income, the money in fixed annuities will grow tax-deferred. Unfortunately, if you withdraw the money before you are 59 you will pay a 10% tax penalty, just as if it was a standard retirement fund. When you withdraw cash from a fixed annuity, you’ll also pay ordinary income tax on the interest you’ve earned.

Most annuities give you the option to “annuitize”, which is to turn the balance of your annuity into lifetime payments sometime after the first year. Many people with annuities choose not to do this though, because they use the annuity to grow their money tax-deferred.

If your goal is to find a safe growth for your money, you might consider putting your money in short or intermediate-term corporate and municipal bonds instead of annuities. They still offer interest rates that are higher than current CD rates, and have fewer restrictions than what fixed annuities offer. If the idea of the guaranteed income for life has tempted you toward a fixed annuity, you might want to look at immediate annuities which gives you pay outs within a year – the payment amounts will be greater than if you annuitize a deferred annuity later.

With interest rates on savings products decreasing and monthly fees and penalty charges increasing at many banks around the country, it’s no wonder people are in search of something better. Short of stashing your cash under your mattress or burying it in the backyard, what can you do to get better interest rates on your savings and lower fees on your transactions?

Credit unions may be the answer you’re looking for. While it’s true that credit union membership was only open to a small percentage of the general population in years gone by, almost anyone can qualify for membership to a credit union these days. There are credit unions available to people based on where they live, where they work, or even because of associations they belong to. If all else fails, you can join an association simply to gain access to a credit union – people do it all the time!

What’s the big deal about credit unions and why should you go through the trouble of trying to qualify for a member? There are a number of advantages to using credit unions as compared to traditional banks, including:

Credit Unions are Non Profit

Because a credit union is a not-for-profit organization, they’re not constantly looking for new ways to increase their business profits! Seems like a simple revelation, but the fact is – banks add fees and lower interest rates to boost their own bottom line – most of which ends up in the pockets of banking executives in the form of higher salaries and big bonuses. In a credit union, if the institution makes more than necessary to sustain it’s business operations, the account holders get the extra funds in the form of dividends, because:

Account Holders Become Owners of Credit Unions

When you have an account with a credit union, you are a partial owner of the institution. This not only gives you the potential to earn dividends, but means the union is always acting in the best interest of it’s members rather than the executives.

Better Interest Rates and Lower Fees

When you get a credit card through a bank, chances are you’ll have an annual fee and high interest rates. A credit union issued credit card rarely has annual fees and the interest rates you’re charged are much lower in comparison. Additionally, if you make a payment late on your credit union card, you probably won’t be faced with an instant interest rate hike like you most likely will through a bank-issued card, since they look for any reason to raise your rates to get more money out of you to boost their profits.

Checking accounts through banks have been increasing fees left and right. The average overdraft fee for checking accounts at banks is up to a staggering $39 per item! Make one little mistake and suddenly you’re entire next week’s paycheck is eaten in fees. With a credit union, you’re more likely to get charged around $20 for the mistake.

ATM fees are much lower, if not non-existent with many credit unions, as well. Some will even refund ATM fees paid throughout the month, up to a certain maximum limit.

Want to find out if you qualify for credit union members? Visit JoinACU.org.

Every year, families every where participate in what is known as “spring cleaning”. We clean out closets and drawers of clutter that built up throughout the winter months. We exchange curtains, bedspreads and get into corners and ceilings for the detailed cleaning that is often neglected on a daily basis because we’re just too busy to do it all!

What most of us don’t do on any sort of regular schedule is a clean-up of our finances. Your financial situation could use a regular tune-up and organization just like your home. Organizing your finances will help you save money. Here are some tips for organizing your finances:

Get it All Together: take some time to find all of your financial statements for all bank accounts, credit cards, investments, health insurance, life insurance, and any legal documents you have. If you don’t already have a good filing system, now is a good time to file your important documents in a fireproof box, in an orderly fashion. While you’re filing, you should take the time to find any other documents you save, like social security cards, birth certificates, marriage and/or divorce certificate, property and vehicle papers, etc.

Determine Your Net Worth: go through each of your statements and determine what your net worth is. Your net worth shows you how much you own (your assets) and how much you owe (your liabilities). If you owe more than you own, you have a negative net worth and you should take a look at methods for improving this financial situation as soon as possible.

Look at Your Cash Flow: are you spending money like water? Look at your bank statements to see how often you swipe your debit card for unnecessary expenses, or how often you take cash withdrawals for the ATM. Look at how much money you’re saving and/or investing versus how much is being spent frivolously and look at areas to improve your cash flow.

Create Financial Goals: most people have short term financial goals for paying off credit card debts and small loans, or saving for a car down payment, or preparing for a family vacation. Most people also set long term financial goals, like saving for a down payment on a home or to buy a home with cash; or saving for their retirement. Figure out what your financial goals are, organize them by length of time you plan to achieve each goal, and write them down so that you can prioritize and work towards achieving them.

Set Up a Financial Plan: sometimes referred to as the dreaded “B” word (budget), a financial plan is the only way you will actually reach the financial goals you’ve set. You need to decide how to allocate your income to meet your goals. As you start planning how to divide up your money, you may find you need to make adjustments to your goals, or go back to the cash flow planning process and find ways to reduce your expenses to free up more of your income for reaching your financial goals.

As you are organizing your finances, this is also a good time to get a copy of your credit report and order your credit score to see how you are doing. It’s how lenders see your financial situation. If there are errors on your report, take steps to fix them as a lower credit score or financial problems on a credit report will limit or prevent your access to credit.

Whether you are a homeowner, landlord or renter quality appliances will increase the comfort of your life and increase the value of your home. Regardless of the state of the economy, the vast majority of the population will need at least a good quality refrigerator and stove. Other common appliances that we have come to rely on to increase the convenience and comfort of our lives include dishwashers, microwaves, washers and dryers. These major appliances can be bought new or used and the price can range from relatively inexpensive to top of the line quality and price. With everyone looking for ways to save money, experts may advice against making large purchases at this time, however if you in the market for appliances, you would be wise to invest in the best quality you can afford. Here are a few tips to find the best deals that will meet your needs and fit in your budget.

• Consider your situation. People who are building, buying, selling or renting a home will each have different things to consider. Furnishing a kitchen and laundry room alone can easily cost thousands of dollars if you are investing in high end appliances, therefore you want to consider the value and comfort you are adding to the property. While you don’t want to go in debt outfitting your home with appliances you cannot afford you should do your homework and determine how much you can reasonable spend before you begin shopping.
• Are the appliances energy efficient? Not only are energy efficient appliances friendly to the environment, they can reduce your utility bills in the long run. Whenever possible look for Energy Star appliances to ensure you are doing your part to reduce environmental impacts while saving money in your household budget.
• Shop smart to get the most bang for your buck. If you are not in immediate need of a replacement appliance, consider looking for new appliances in the fall. Retailers generally discount the current models in an attempt to move them before the next year’s model rolls out. Inquire about other available deals, such as a discount for buying more than one appliance or rebates and promotions that may be available.
• Think twice before purchasing an extended warranty. According to Consumer Reports, these warranties are rarely worth the cost since most appliance don’t break within the warranty time frame and many repairs or problems are not even covered.
• Will the appliance fit? This seems like a no-brainer but you want to make sure you are buying an appliance that will work in your space. Measure and know what size appliance you need.

Unless you are are able to make it through your entire life living in spaces that are already furnished, you will likely find yourself buying appliances at least once in your adult life. The tips outlined above can help you get the most value for your money.

When you invest in a bond, you are essentially entering into a financial relationship with an institution that is loaning it money in exchange for locking in an interest rate. The borrower is either a business that is issuing the bond in order to acquire capital to build up their business, or its a governmental agency that is doing so in order to fund a public project.
Bonds are more predictable than stocks but it depends on the different types of bonds as to how risky they may be. Consumers can determine the amount of risk by looking closely at the interest rate. If it appears certain that you will be able to get back the bond’s principal by the date it matures, then you can consider it low-risk bond. These types of bonds include Treasury bonds and corporate bonds that are issued by large,  public companies. Bonds that are higher risk include mortgage-backed securities and junk-bonds Junk bonds are bond s that are rated below investment grade at the time of purchase. These can be enticing because of their higher yields. But they carry a much higher risk of default and therefore are not considered a good deal for anyone looking for a safe investment.
If you are looking to invest in a bond, it is best you know all of your options. Here is a brief overview of the kinds of bonds that are available:

I Bonds
I bonds are savings bonds which are backed by the US government. The difference between I Bonds and the regular treasury bond is in the interest gained. The rate earned on I Bonds is a combination of two rates: the fixed interest rate set when the investor bought the bond and a semi-annual variable rate tied to the current inflation rate. The maximum you can purchase for an I bond is $5,000 per calendar year. The interest will stop accruing 30 years after it is issued. If this bond is cashed and used to pay education expenses, it is completely tax-exempt. Earnings from I-Bonds are exempt from state and local taxes. Federal taxes can be deferred until the bond is redeemed or reaches the date of maturity.  If you redeem a bond within the first five years of purchase, there will be penalties. If the bond is cashed after the first five years, there are no penalties, .

TIPS (Treasury Inflation-Protected Securities)
To protect investments against inflation you can purchase inflation indexed $1,000 bonds known as TIPS. Tips are guaranteed to beat inflation because the principal is adjusted every six months according to the consumer price index. The term on TIPS is from five to 30 years. Interest is paid out  every six months until maturity. During the time you have the bond, the principal amount increases if inflation occurs. However, the interest rate on these bonds is set when purchased and will never change.

Government Backed Securities
Government-backed securities are available in the form of Treasury bills, also known as T-Bills,  notes and bonds. T-bills are short-term US government securities with maturity of a year or less and can be purchased through a broker, a bank, or directly from the government. At the date of maturity, the buyer of the T-bill receives the entire amount stated on the bond certificate. The amount difference between the face amount and the amount the bondholder paid for the certificate is considered the interest gained, which is also known as the ‘discount yield’. This interest is exempt from your state and local income taxes, but not exempt from federal income taxes. Treasury notes have longer terms than T-bills and a fixed interest rate. Notes are issued for 2, 3, 5,  or 10-year periods. Owners of Notes and bonds receive interest payments every six months and must be reported as interest income on federal tax returns.

Series EE
Series EE savings bonds are issued at a deep discount from face value . They pay no annual interest since the interest accumulates within the bond itself. When the bond matures, interest is paid out and it is exempt from state and local taxes but federally taxed . The Series EE is exempt from federal income tax if cashed and used for college tuition.

Corporate bonds
Corporate bonds are long-term interest bearing debt issued by a corporation. Corporations issue bonds as a way to increase company funds to finance major projects.  The terms on these bonds range from 10, 15, 20 years and longer and pay the highest interest rate of all the bonds, due to increased risk of default. If a company ends up in financial trouble, the corporate bondholders are paid first with short-term creditor’s payments to follow if available. .

Municipal Bonds
Municipal bonds called “munis” are issued by local governments. These bonds are long-term. and are tax free and tax-exempt . They are used by local governments to fund public projects. Their interest income is not subject to federal income taxes and if you live in the municipal bonds’ issuing state, its interest income is exempt from state and local taxes. Capital gains on these bonds are taxable.

Essentially, when it comes to budgeting, there is never one solution that will fit all and there is also pretty much a =guarantee that no will get it right on the first try. To successfully create a budget you can live with and stick to, it will take some effort, some persistence, and a whole lot of try, try agains.

When it comes to budgeting, too many times people give up because they just can’t get it to work. If you are one of those people, don’t give up entirely. Instead, try practicing the three R’s of personal finance budgeting.

REVIEW

The only way to develop a personal budget successfully is to keep at it. Once you have concocted a budgeting plan based on your income and outgoing expenses you’ve tracked, it is now the time to sit back for a few weeks and see how it goes. Take notes about what is working and what isn’t. Write down other ideas that come to you for fixing what doesn’t work within your budget. There is no point to continue using a process that is not effective and just wastes your time.

REVISIONS

When you have had time to see the ins and outs of the budget you created, now is the time to make your revisions. Incorporate what is working in with your new ideas and get rid of what is not working. Since you now have some experience in the working of your budget, you can better see how to manage your income more effectively and create a budget that works more smoothly.

REDO

When you finish putting your new ideas on paper and working through the numbers, now is the time to redo your budgeting methods. Start following your weekly process again, just like you did in the beginning, taking notes and jotting down ideas for the next revision. Change things that aren’t working and try again.

There is no easy way out of budgeting. While software and cool spreadsheets may seem to be a solution to your budgeting concerns, there is still much-needed participation on your part to make the budget successful. Your time and effort that is put into your budget planning, control of spending, and the revision of your budget is what will bring the results. Remember also that budgeting is an individual process and what works for one person will not necessarily work for you. Keep trying until your find something that works. Remember also to stick with it for the long haul. There is no point in putting your efforts into a successful budget you do not plan to stick with for the long haul.

Adjustable life insurance is sometimes referred to as “universal life” insurance. It’s a permanent life insurance, meaning that some of the premium you pay is invested. The investments help you grow value. Adjustable life insurance features:

Death Benefit – when you purchase an adjustable life insurance policy, you select a beneficiary to receive the death benefit when you die. The death benefit should not cause the beneficiary to owe federal income taxes on the amount of the benefit, and the benefit is free from probate costs and is protected from creditors in the event of a bankruptcy. When planning an estate, many people select adjustable life insurance because of these important features for the beneficiary. No one wants to leave behind money that causes the beneficiary to pay exorbant taxes or lose it if they’re filing bankruptcy!

Flexible Premiums – with adjustable life insurance, you pay the initial premium and then after awhile, if the amount of your premiums that is being invested is growing, you can use that value to pay your future premiums. Eventually, an adjustable life insurance policy could pay for itself.

Cash Value - as the invested premiums accumulate value, it’s held in what is called an accumulation fund. From this fund, the owner of the adjustable life insurance policy can withdraw the cash value, and the amount taken as a withdrawal is deducted from the policy’s cash value. In some cases, you pay it back like a loan, and in other cases you just reduce the value of the policy. A great benefit of an adjustable life insurance policy that has built up cash value is that it can be used as an asset when you are applying for a loan, mortgage, or other type of financing. You can use it as collateral to secure financing in some cases.

If you’ve had life changes after obtaining your adjustable life insurance policy – such as having had children for example, you might decide to get a policy rider. A policy rider is a modification to your existing life insurance policy that gives you additional coverage not previously included. You might add the children to the life insurance policy, or obtain a double indemnity rider to pay twice the amount of the policy if you should die accidentally. You can get a waiver of premium rider, which allows you to stop paying life insurance premiums if you are disabled for a certain period of time before you reach 60 or 65 years old – but the policy remains active.

A policy rider will typically increase the amount you are paying for life insurance, but you should determine whether the extra cost is worth the additional benefits provided by the rider.

I know what you are thinking, who in their right mind throws money away? Well the truth is most of us waste money each and every day in places we don’t even realize. While it may not seem like a lot of money at the time, we have had many reminders recently why it is important to make every cent count. There are many ways we commonly waste money and we will look at just a few of them here today. If you recognize any of these habits or behaviors you would be well advised to try to make changes to eliminate these habits.

• Up in smoke. Smokers are the last people who need to be reminded that the cost of this habit is not only expensive financially but potentially deadly. That being said, if you are a pack a day smoker (let’s say $5 per pack which is low in some areas) you are spending $1825 per year to support your habit. Imagine what you could do with that money, not to mention the health benefits of quitting.
• Betting on a big payoff. There are undoubtedly different levels of gamblers. Some people are content to buy a few scratch off tickets or enter the pool at work when the lottery reaches millions. That type of gambling generally will not make or break your budget. If however, you find yourself hitting the casino or betting on the horses in the hopes of making all your financial problems disappear you are likely only exacerbating the situation.
• Unnecessary upgrades. We live in a society where just about everything can be upgraded for just a “little” more money. If you don’t pay attention to what you are buying you may find yourself upgrading yourself out of money that could be better invested in other places. You can go big with anything from fast food meals to building a home. The point is this, think twice before you mindlessly say yes to upgrades that you may not need.
• Not taking advantage of employee retirement plans. If your employer offers a retirement plan that they are willing to match, you must find a way to take advantage of this benefit. Do not be deterred if you are unable to max out your contributions. Any effort you make to put money aside for your retirement, especially when your employer matches the contribution is a step in the right direction. To not participate is one of the biggest ways to waste “free” money.
• Impulse sale purchases. We all love a good sale, however you only really save money if you buy something that you would have otherwise purchased at full price. It is really very simple, if you find yourself buying something because it is a good deal you may in fact be saving money off of the regular price, however if you wouldn’t have purchased the item in the first place you are simply throwing your money away.

It may not seem like a big deal to have any of these habits (or a dozen more not listed), however in the long run the little bit of money you waste here and there can easily add up to thousands of dollars a year. Just as you can silently lose money, you could silently be growing money if you took those same dollars and invested them in your future.

Cash strapped consumers will face increasing difficulty securing credit in the current lending industry. The current economy simple does not support the “free for all” type of lending that has become common over the past few years. While that will probably prevent many borrowers from loaning money they cannot afford to repay, it certainly does not help people who may be facing a financial hardship who find themselves in need of funds to see themselves through tough times. These consumers may find relief through peer-to-peer lending programs. It is important whenever you are loaning or borrowing money to fully understand the terms and conditions of the loan to ensure the action you are taking will improve your financial situation. The following information addresses common questions about peer-to-peer lending.

What is Peer-To-Peer Lending?

Peer-to-peer (p2p) lending is a relatively new method of lending and borrowing money online. Traditionally people who needed cash would either have to go to a bank or use a credit card to fund their purchases. With p2p lending you have the option of getting a loan from a private lender. The theory is that borrowers will be able to get a loan for a much lower interest rate than a traditional loan, while lenders can earn more interest off of the loan then they would had they invested the money traditionally.

How Does It Work?

Although each company has it’s own process, the concept is basically the same throughout the industry. In most cases you (borrower) would fill out a loan application online which lenders then have the opportunity to view or bid on to fund your loan. Your interest rate will depend on a number of factors such as the loan amount and your credit history. Once your loan has been accepted the funds are transferred into your bank account. Payments are also automatically drafted from your bank account each month. As in investor you have the option to bid on or approve loans based on the applicants information. Depending on which company you work with, you may provide funding for all or part of a loan.

Is It A Good Option?

Whenever money exchanges hands in the form of a loan, there is an inherent risk of default. If you are working with a reputable lending company the risk for an invester is no more than a bank would take when issuing a loan. For borrowers who qualify there are definitely benefits that are not available when taking out a traditional loan. The interest rates are lower and the process itself is relatively pain free versus a traditional bank loan.

The p2p lending industry could provide a much needed source of funding in a time when banks are hesitant to loan money. As a social lending network, lenders have the added bonus of knowing they are helping a person in need, while getting a decent return on their investment. If you are in the market for a loan or looking for a socially conscious way to grow your money, p2p lending might be the answer.

If you are considering purchasing life insurance, your biggest decision is whether or not to get a term life policy or a whole life policy. While there are many varieties of life insurance policies – knowing whether you want a term or whole life policy is your first and most important decision to make.

Term Life Insurance Policies

Term life insurance offers a death benefit if you should pass away within a pre-determined number of years. Because it is limited to a specific time period, term life insurance policies are among the least expensive forms of life insurance. At first, you may wonder why anyone would spend money on a temporary life insurance policy – but it’s suitable for younger people who have families at home but maybe don’t have a lot of cash to buy a more expensive policy; or for individuals who have just purchased a home and worry about leaving the burden of the home expense to their spouse if they should die before the mortgage is paid for. Term life insurance policies offer no cash value.

Whole Life Insurance Policies

A whole life insurance policy offers both a death benefit and cash value to the policy holder. The monthly premiums for whole life policies are higher than a term life policy, but it is considered an asset – which means you can borrow against the policy in an emergency. If you do borrow money against your whole life insurance policy, your death benefit is reduced by the amount you borrow if you should die before it is repaid; or if you cash in some of the policy’s equity, the value of the whole life policy is reduced proportionately before the remainder is distributed to your beneficiaries.

Whole life policies do not work like savings accounts, in that you can borrow as much as you pay toward your premiums. Part of your premium accumulates into an asset over time, while part of it is used to pay for the death benefit. For most policy holders, their will not be a significant amount of money earned for the first three to five years you have your policy. In the case of children however, whole life policies purchased for a child who is young can be a significant amount of money when the child becomes an adult.

When the asset has been built in your whole life insurance policy, you can choose to use it as collateral for a loan – any time you need to secure a loan or financing, you can often use your whole life asset as collateral. If you don’t want to secure other financing using your asset as collateral, you may have the option of withdrawing the equity as a loan. Loans taken from your whole life policy must be repaid like any other loan, although you will often get a very good interest rate because the loan is secured against a solid asset.