This is what I call a realistic Financial Plan for the Average Guy for 2011.

First of all, most of what you read in the “financial” columns, if you wish to read them, is not for the average person. Maybe you consider yourself the average person, but as you read them you’re probably saying, “who are they talking about?”.

At one time, we were all in the “average guys” category. But were we? The average guy at the time and even now, as  portrayed by the “esteemed financial columnists”, not only had a house, but a mostly funded 401(k), enough insurance, as well as significant cash left over.

Back when everything was going great, when  we needed cash we went to the “Giant ATM in the Sky”- in other words, we refinanced our home. Now we can’t refinance our home because we owe more that the house is worth and our debt to income is too high! As a matter of fact, some people are now having to pay PMI insurance where they never had to before.

But what do we do now, when we find out we don’t have all those things? We use our “Financial Plan for 2011”:

1. 1. Pay your mortgage and the household bills you need to give your family it’s basic elements, first. The way most people get into trouble with their mortgage is by paying all the other bills and leaving their mortgage till last; “I can catch up later”.
2. Once you miss your first mortgage payment, you are at the pleasure of your Lender.
3. From the first day past the due day, they are adding late charges. If you get into the second month of arrears, your Lender may may call in the legal department. From that day forward, you are sunk. You can literally never catch up.
4. In order to “catch up”, you must pay your current payment, plus all arrears, plus legal fees and late payments. Your $1200, one month late, can turn into $3000-3600 real fast.

Fannie Mae is getting tough on people. The days of people having the opportunity to stay in their home and delay foreclosures are OVER. Fannie Mae and Freddie Mac are forcing servicing agents to foreclose on the homeowner.

Homeowners need to have a plan in place now. You cannot wait to see what is going to happen. The banks are no longer waiting and dragging their feet. We’re seeing foreclosure like never before.

Several clients had gotten a trial plan and had made all their payments on time and were foreclosed on 21 days after the conclusion of the trial plan. Don’t let this happen to your client.

This news is not all bad. It will push homeowners to get off the fence and do something about their situation. It may the start of a recovery and people that want to save their home will be forced to work on it or get out.

From George:

If you’re in foreclosure, getting close to foreclosure or even have a Sheriff’s Sale date set, get off the fence and get moving NOW. Don’t wait until you have a sale date or it may be too late.

Get your Loan Modification done now!! There are loan modification specialists who will start your loan modification with no upfront fees, which means  absolutely no fees unless and until the lender approves you for a modification.

• Part D cost sharing for full-benefit dual eligible beneficiaries receiving home and community-based care services will become equal to the cost for those who receive institutional care.
• Medicare payments will be reduced to hospitals by specified percentages to account for excess (preventable) hospital readmissions.
• Rebates for Medicare Advantage plans will be reduced but high-quality Medical Advantage plans will receive bonuses.
• Collection and reporting of data on race, ethnicity, sex, primary language, disability status and for underserved rural and frontier populations will be required.

2014

• US citizens and legal residents will be mandated to have qualifying health coverage (phase-in tax penalty for those without coverage).
• Employers with 50 or more employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be assessed a fee pf $2,000 per full-time employees, excluding the first 30 employees.

George

From Brad Lee, Focal Point Financial

The financial reform bill recently signed into law is an attempt to address some of the problems that contributed to the 2008 financial crisis. The legislation, officially known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, is considered the most wide-ranging overhaul of the U.S. financial system since the aftermath of the Great Depression. Because the problems it addresses are complex, the legislation itself is complex; much of the real impact will be felt only after regulations are developed to implement the law’s provisions. Also, some provisions, such as those dealing with lending practices, will have a direct impact on individuals and investors; others will primarily affect the ways in which Wall Street functions. This is only a brief summary of some key provisions; consult your financial professional to see how these changes may affect you.

Credit and lending practices are revised

The Act requires originators of residential mortgages to disclose any conflicts of interest and compare costs and benefits of mortgages offered to a potential borrower. Lenders also will be required to verify whether, based on income, credit history, and other data, a borrower has a reasonable ability to repay a loan plus its associated taxes, insurance, and other costs. This could mean that self-employed people and others whose income is undocumented or irregular will need better documentation to qualify for a loan.

Lenders will no longer be able to give loan officers financial incentives that induce them to steer customers to a mortgage with a higher interest rate simply to increase their own commission. Their ability to impose prepayment penalties when a borrower repays a loan early also will be more limited, and a holder of a hybrid adjustable rate mortgage must receive notice of any change in the interest rate six months in advance.

Lenders are prohibited from refinancing an existing mortgage unless the new mortgage offers a net benefit to the borrower, and they may not coerce or induce an appraiser to make a faulty appraisal of a property’s value. Loan applicants must receive a copy of the appraisal on the property no later than three days prior to the closing.

High-cost mortgages are subject to special regulations. Any balloon payments on high-cost mortgages cannot be more than twice as large as the average of earlier payments, and a borrower must receive qualified counseling on the advisability of a high-cost mortgage before credit can be extended.

Homeowners who are unable to make mortgage payments as a result of losing their jobs or because of a medical condition may now qualify for up to $50,000 in assistance loaned through HUD’s existing Emergency Mortgage Assistance Fund.

Increased protection of bank deposits becomes permanent

During the financial crisis, the Federal Deposit Insurance Corp. (FDIC) temporarily increased from $100,000 to $250,000 the amount it will insure on deposit accounts in FDIC-insured banks. The $250,000 limit is now permanent. That means that a couple who each had separate deposit accounts as well as a single joint account could qualify for up to $750,000 worth of protection on those accounts.

Greater transparency and accountability for investments and related services

Institutional investors’ inability to determine the amount of global financial exposure to derivatives–investments based on the value of other investments–contributed to the panic at the height of the financial crisis. Over-the-counter derivatives must now be traded on a public exchange, and trades must be cleared through a registered clearinghouse. Nonstandard derivatives can still be traded privately, but must be reported to a central authority in order to increase regulators’ ability to monitor the overall level of activity.

Hedge funds and private-equity advisors will be required to register with the Securities and Exchange Commission (SEC) and disclose to the commission information such as investment positions and the amount of leverage involved. Also, the $1 million minimum net worth required to be an accredited investor eligible to invest in such funds will no longer include a principal residence, and that $1 million threshold will be reviewed every four years.

Credit rating firms, which were criticized for being too lax in their evaluations of securities based on subprime mortgages, will be subject to oversight by the SEC, which can fine those that issue too many faulty ratings over time. Also, investors will now have the right to sue an agency for issuing ratings it knew or should have known were flawed.

Shareholders of public companies will have the right to a nonbinding vote on compensation for the company’s executives. Also, protections for people reporting securities law violations have been enhanced. Whistle-blowers with information that leads to monetary sanctions of more than $1 million will be eligible for 10 percent to 30 percent of the funds collected from the offender; if an employer retaliates, a whistle-blower can sue without waiting until administrative remedies have been exhausted.

An Investor Advocate office will be established within the SEC to help individual investors resolve significant problems and to promote investor interests.

Risky banking practices are addressed

Banks will be required to hold additional capital to cover potential losses, and some securities are no longer acceptable as vehicles for capital reserves held by large banks. Banks also will be required to retain at least 5 percent of a loan on their books if the loan is sold and/or repackaged with other loans and securitized. (However, some relatively low-risk mortgages, such as fully documented loans with a fixed interest rate, are exempted.)

Banks also will be more limited in their ability to engage in proprietary trading in their own accounts, which could represent a conflict of interest with their responsibility to their clients. They also will have to set up separate operations to handle their most risky derivative trades, such as swaps. A bank will not be permitted to invest more than 3 percent of its core capital in hedge funds and private equity, but it may still organize and offer them as long as certain conditions are met.

A Consumer Financial Protection Bureau overseen by the Federal Reserve will be created to regulate consumer financial products and services.

Systemic risk will be monitored, and liquidation of large banks will be overseen

A new Financial Stability Oversight Council is charged with assessing and managing risks that could threaten the entire U.S. financial system. Also, the FDIC will manage the liquidation of a bank whose failure the Treasury Secretary determines would disrupt the stability of the nation’s financial system. That will include firing corporate management responsible for the failure and prohibiting any payments to shareholders until all other claims are paid. The FDIC may borrow from an Orderly Liquidation Fund to pay for a liquidation, but those costs must be replenished not from taxpayer funds but from claims on the bank and, if necessary, assessments on large financial institutions. The Act does not permit the Federal Reserve or the FDIC to lend to or provide a guarantee for individual or insolvent companies or banks, but both may lend funds to provide liquidity.

Any period of unemployment is fraught with stress – both personal and financial. While landing that formerly-elusive new job can be a relief, it is only the first step on the road to recovery from unemployment. This transition time is akin to breaking the surface after being underwater for several minutes. It’s a relief to be breathing again and feel the sun on your face, but it’s no time to relax. You must start swimming right away to get back to a healthy financial shore.

Here are four steps that may help to make sure your recent unemployment doesn’t cast a long shadow across your future financial health.

Continue to live lean. More likely than not, you weren’t buying $4 coffees while unemployed. Five star restaurants were out too. Hamburger may have replaced steak. You may want to continue to follow that pattern. We tend to grow into our incomes, our budgets bloating along with our salaries. Fighting that urge will help with the rest of the steps to unemployment recovery.

Protect yourself ASAP. The longer your unemployment lasts the more important basic survival becomes. Someone who is unemployed may let life insurance, disability insurance or health insurance policies lapse as they try to keep current on the mortgage, pay utilities and put groceries in the pantry. Sometime during the first few days of your employment you should enroll in whatever benefits you need that your company offers. If the new firm does not offer the coverage you need, make an appointment with an insurance professional and use part of your first paycheck to protect you and your family. Remember, the income from your new job won’t benefit anyone if a catastrophic illness, disability or death suddenly takes it away.

Develop a plan to pay down your debts. When you have a job, debts are a nuisance. When you don’t have a job, they may become a threat to your future financial well-being. While it’s normal to hope that you never have to go through unemployment again, you must start preparing for the possibility.

If you are behind on your mortgage, call your lender to let them know of your new job and to work with them on a plan to catch up on your payments. If they are unwilling to work with you, consider using a Federal resource such as those offered by the U.S. Housing and Urban Development Administration.

While there are fewer similar programs for car loans, calling your lender and trying to develop a plan for a loan you’re behind on should be your first step.

All too often during unemployment, credit cards may be used to get by when cash is low. While your interest rates may have been low when you initially signed up for the card, new legislation has caused a spike in credit card rates.¹ Rates of 20% – 30% are not uncommon as banks react to new rules. Paying down these balances should also be a primary goal.

Remember to start paying yourself. Whether you call it a rainy day fund, a nest egg or emergency cash, slowly, paycheck by paycheck, begin paying yourself a fraction of your salary. Some experts will argue that a family should keep six months to one year’s worth of expenses in the bank for unexpected events such as a blown car engine, the roof caving in, or another round of unemployment.¹ For many families, that may feel like an insurmountable sum. But as the old joke goes “How do you eat an elephant?” The answer: “One bite at a time”. Paying yourself has to be done paycheck-to-paycheck, little by little.

Brad

If you shop on the internet at all, you’re probably searching for stores that offer you discounts, coupons, etc. Though discounts and coupons and discounts are good, they’re not cash.

If you’re like I was, you probably search for the type of product you want and then go to each site that looks interesting. The trouble with strategy is that you may or may not find the exact product you’re looking for. Then there’s the problem of security and trust. Can I trust this site or store to process my payment and actually deliver the product?

Worse yet, are they going to plunder my credit card account, my bank account or steal my identity?

One of the best ways to get a higher comfort level is to go to the site of one of well-known retailers, Like Macy’s, Target, Home Depot. That’s probably one of the best strategies. Of course do they offer discounts or coupons all the time? You know the answer to that one is “no”. You might as well drive down to the store and pick it up in person!

There’s a better way to shop and not get only discounts, coupons, etc., but to get actual cash as well.

That’s the type of “cash back” shopping I’m talking about. The websites are called “cash back shopping sites”, and offer you all the things I mentioned. They’re often referred to as cash back shopping portals or gateways.

Here’s the bird’s eye view of how you use them:

· Join for free and login

· Search for the store or item you want from within the portal

· Check on the percentage of cash back you get

· Check on the coupons or specials offered

· When you click on the store’s website, you’re taken to the exact website you would have gone to outside of the portal

· Shop

· Check out

When you’re done you’re have gotten not only any discounts, coupons, specials, etc, you would have gotten on the website outside of the portal, but you’ve also gotten some cash back!!

Cool, huh? That’s saving money.

provided by Bradford G Lee, RIS

64% of Americans have no financial strategy at all. That’s right – no plan whatsoever to build wealth or keep it. That finding comes from the 2009 National Consumer Survey on Personal Finance conducted by the Certified Financial Planner Board of Standards, Inc. (The survey collected data from 1,700+ U.S. residents.)¹

Only 17% of us have a written financial plan that is updated regularly. So congratulate yourself if you are in that group. The CFP Board found that just 17% of the 36% polled who did have a written financial plan had reviewed it in light of changing times. Notably, 48% said they had benefited from having a written plan.^1,2

Just 38% of the 36% having written financial plans retain a financial advisor. The really troubling part: 37% of those with written plans are doing their financial planning on their own. Another 12% of respondents with written plans have consulted a friend or family member who isn’t a financial services professional for advice.¹

Why don’t more people have a financial plan? After all, Americans of all incomes and savings levels certainly are free to set financial goals. In the survey, the reasons varied. Some cited the expense of engaging a financial advisor; some said they get along just fine without a financial plan, and others felt their finances weren’t complicated enough to warrant one. Others were hazy about financial services industry qualifications – 40% of respondents had no idea that there were professional credentials or designations for financial advisors.

Syndicated financial columnist Humberto Cruz recently noted that when he told some fellow vacationers in Orlando that he wrote about financial planning, they all asked him if he gave stock tips. He had to explain that he was simply a journalist, not a financial planner.^3,4

Defined goals lead to definite plans. If you set financial objectives and plan for them, you vault ahead of most Americans – at least according to the CFP Board’s findings. A written financial plan does not imply or guarantee wealth, of course; nor does it ensure that you will reach your goals. Yet that financial plan does give you an understanding of the distance between your current financial situation (where you are) and where you want to be. Too many Americans, it seems, have little comprehension of their financial situation or their financial potential.

How much planning have you done? Retiring without a financial plan is an enormous risk; retiring with a financial plan that hasn’t been reviewed in several years is also chancy. A relationship with a financial advisor can help to bring you up to date about what you need to do, and provide you with more clarity and confidence when it comes to the financial future.

Brad

Bradford G. Lee, RIS

Focal Point Financial Services

Hi Dad,

I know you’re interested in people saving money, so I thought I’d tell you about my Rainbow shopping trip today.  I attached a picture of everything I bought, with a list at the bottom.  Today is double coupon day at Rainbow.  You can double 5 coupons up to $1/ea with a purchase of $25 or more.

The full price for all those groceries without sale prices or coupons is $141.26. This is how I used to shop — very little regard for sales or coupons.

Factor in the sale price and the cost would be $101.00 — a savings of $40.26. This  also resulted in a $10 coupon good on my next order along with a free milk coupon good on the next order.

My price was $42.85 — a savings of $98.41 from full price and $58.15 from sale price.  I did it by matching items on sale with coupons and splitting it into 4 different transactions allowing me to double 20 coupons.  With the exception of the bananas, crackers, and muffin cup liners, everything I bought was on sale or had some sort of deal attached to it.  I also used the $10 coupon and free milk coupon right away, which was possible since I had 4 transactions.

I’ve spent the last 6 weeks building up our pantry and freezer which allows me to shop this way — just the sales.  I plan our menu one month at a time based on what we already have.  But, I do adjust it, if necessary,  based on what I may have bought.  For example, the cabbage will need to be eaten this week.  So, I’ll change one of our meals to incorporate it in.  But, I’ll only use what ingredients I have on hand, so no quick trips to the grocery store.

Here’s a picture of all my groceries:

Here’s the stuff I ended up getting for free:

• 4 cans of Campbell soup
• 1 gallon of whole milk
• 3 frozen Healthy Choice meals
• 2 packages of Yoplait Delights
• Welch’s grape jelly
• 1 lb of green split peas

Here’s the complete list of what I bought:

• 2 gallons whole milk
• 4 Tombstone frozen pizzas
• 2 Pop tarts (12ct)
• 2 Cheerios
• 1 Lucky Charms
• 1 Reese’s Puffs
• 1 Cocoa Puffs
• 1 Cinnamon Toast Crunch
• 1 muffin cup liner
• 8 Yoplait yogurt
• 3 Yoplait Whips
• 2 Yoplait Delights (4ct)
• Welch’s grape jelly
• 3 Land O Lakes Butter w/Olive Oil
• 4 Campbell Soup (Cream of Broccoli; Broccoli Cheese; 2 Beef Consommés)
• Saltines
• 4 Healthy Choice Fresh Mixers
• 3 Healthy Choice frozen meals
• Dawn (19oz !!)
• 2 Speed Stick deodorant
• 2.25 lbs banana
• 2.25 lb cabbage
• 1 lb green split peas
• 10 lb bone in ham (this will be 3 meals for us: ham/cabbage/potatoes; creamed ham on toast; split pea soup)

Well, this it for my Rainbow shopping trip!

Georgette