Manage your $$ (Archive)

Million Dollar Baby!
Gerry Schmich

I’m not talking about the Clint Eastwood movie. I’m thinking about how you can provide your new baby or grand baby with a million dollar legacy! Yep. When that baby retires at 65 or 70 they can have a nest egg of over 1.5 million bucks.

And we haven’t even debated privatizing Social Security yet.

It is so simple, so easy to build a million dollar stash that most people will choose to ignore this idea and blow it off. But for those of you who have vision and a sense of wanting to do something special for that new bundle of joy in your life just read on and take action.

All we need to do is understand one amazing principle of how money works. And practice the simple discipline of saving. Every day. Save and invest. Save and invest.

Here is the principle: compounding.

From the day the little nipper is born just put $1 in a jar....every day. When you have enough to carry to the bank go open an interest bearing account. Let the account grow until there is enough money to make a minimum investment in some mutual fund which has a ten year track record of 10% or more total return.

By the time “Nipper” is 21 the mutual fund account should have grown from between $20,000 to $25,000.

Now — pay attention!

Tell “Nipper” to keep his/her hands off this fund until age 65. No need to add more $ to it. Just let it compound at 10%. The account will grow from between 1.5 to 2.0 million dollars.

Of course you might want to help yourself out too. The truth is that you don’t have time on your side like the baby in the example. Do it anyway. Save $5 or $10 a day...every day.

To see what you can achieve with the time you have left go to www.moneychimp.com and click on calculator. Play all the games you want.

The best advice I can give any business person about money is to begin now to 1) Save and 2) Invest. Make these two actions your hobby. Spend time every day thinking of how to save more and where to invest safely. Make financial independence your goal and work toward it every day.

We are responsible for the wealth we achieve.

If you have questions about this article or would like some ideas on mutual funds just call me at 970-669-5269 or contact me through my website, www.gscoaching.com.

Gerry Schmich

Avoid Becoming A Victim Of Credit Card Fraud
by Michelle Rahm

With the holiday season rapidly approaching, it’s important to know retailers bear the primary responsibility for ensuring credit card transactions are legitimate before filling orders. In other words, if a credit card is stolen, and you fail to take the important steps to verify the legitimacy of the order, you will be left holding the bill when the cardholder challenges the purchase.

Be Diligent...VERIFY!
Don’t make the mistake of thinking obtaining an approval code ensures a transaction is legitimate. It doesn’t!  An approval code only means the credit card is active. It is your responsibility to make certain the cardholder is making the purchase rather than a thief.

If you operate a brick and mortar jewelry store, it is crucial to carefully check a photo ID, examine the credit card and note the CVV2 code on the back of the card. Carefully compare the signature on the receipt with the signature on the card. You may also take added precautions and record the customer’s billing address as well as the billing phone number. If you are suspicious of a particular person, call the cardholder’s bank directly to verify the information further. Follow your instincts, they’re usually right!

If you’re one of the many retailers with an e-commerce presence, verifying e-commerce orders takes a little more diligence. Of far more importance to whether a credit card transaction is approved or declined, is the AVS response code given for that transaction. If you are not receiving an AVS code for each credit card transaction made on your site, call your payment gateway to get this crucial information.

AVS stands for Address Verification Service. This code will tell you whether or not the address given in the order actually matches that of the cardholder. On my real-time processing system, the AVS code is comprised of three numbers. The first corresponds to the numbers in the street address. The second corresponds to the zip code. And the third is an overall verification of both. For example, an AVS code of YYY means: "yes" the address matches, "yes" the zip code matches and "yes," both the address and zip code match the cardholder's. But an AVS response code of NYZ means "no" the address does not match, "yes" the zip code matches and only the "zip" code matches.

There are about ten different letters used for AVS response codes, and it's important for you to know all of them and what each means. For a list of the most common AVS response code letters and their meanings, visit http://www.jewelryimpressions.com/fraud.html

If a transaction is approved with an AVS response code of YYY, AND if the order is to be shipped to that same address in the cardholder's name, then you likely have a legitimate order. For larger orders, you may still want to verify the telephone number and call the cardholder directly to verify the purchase.

If you receive an AVS code that is unacceptable to you and you'd like to do further checking, contact Visa/MasterCard, Discover or American Express directly. Visit http://www.jewelryimpressions.com/fraud.html for a listing of their numbers.

You can get full name, address and phone number verification directly from Discover and American Express. However, when calling Visa/MasterCard, mention that you are calling for a cardholder's issuing bank phone number. You will need to give your merchant number and the credit card number in question. They will then give you the number of the issuing bank for the credit card in question. Call the issuing bank stating you are a merchant requesting a “name, address and phone number verification.”

Calling the issuing bank of a cardholder has many advantages over simply calling Visa/MasterCard for address verification. The issuing bank can verify not only the address and zip code of a cardholder, but also the cardholder's name and phone number. You can even inquire if an address mismatch is due to a P.O. Box listing rather than a physical street address. The issuing bank will also have the most current information available. If a cardholder has recently moved, the new address information may not yet be updated with Visa/MasterCard.

Make an informed decision about shipping the order after verifying the information. Be sure to take detailed notes when you call the issuing bank for verification so you'll have the information if you need to defend yourself against a chargeback later.

Be Observant! YYY can still mean "No, No, No!"
Don't be fooled by YYY response codes. Some crooks have access to the cardholder's address information. Be observant and recognize red flags. Be suspicious of sizeable purchases being shipped to alternate addresses, especially if express shipping is requested. Pay attention to whether or not the e-mail address given is valid. If the e-mail address is a person's name, check to see if it matches the cardholder's name. These, among other things, are red flags to look for.

If an order is to be shipped to a different address, then the cardholder’s phone is the most crucial piece of information you can get. Follow the verification steps above by calling the issuing bank. If the phone number on the order matches, simply place a courtesy call to the customer to make absolutely certain it is the cardholder making the purchase. Cardholders welcome the added precaution.

If the phone number on the order does not match what the bank has on record, send the customer an email asking for the correct billing phone number. In the meantime, try to find the cardholder’s phone number by visiting www.whitepages.com. Verify each number with the bank to make certain it is the real cardholder’s number before calling. Keep detailed notes to refer to later. Again, follow your gut instinct. If something just doesn’t feel right about the order, void it and don’t ship the merchandise.

While there’s no guarantee you will be chargeback free this holiday season, taking the extra precautions to carefully verify all credit card transactions will help minimize your risk of be coming a victim of credit card fraud.

Michelle Rahm founded her Internet business in 1997, which now includes JewelryImpressions.com and EngravingShop.com. As a recognized expert in e-commerce and online fraud prevention, Rahm has spoken to a number of groups, written articles and been an interview subject for a number of leading trade, Internet and media outlets.

Suffering from Financial Paralysis
by Lisa Lynn

A new phenomenon called financial paralysis is affecting a growing number of American investors and may leave many unprepared for their retirement. According to a November 2003 report from American Express Financial Advisors called “The Personal Economy Index”, more than 50 percent of those polled feel stalled when it comes to managing their finances. Another one third stated they had no financial plan at all. Other surveys such as Allstate’s “Retirement Reality Check” found that 80 percent of Americans are not saving enough for their retirement.
Another report from Guardian Life Insurance in November 2004, illustrates a bleak future for baby boomers as well. According to their report, 60 million baby boomers’ feel “paralyzed” about their retirement plans. The report goes on to explain that baby boomers don’t know how much to save, are not saving enough and don’t understand some basic financial planning principles, so instead they are choosing to not do anything.

How Much Do You Need To Save
Financial experts estimate that most of us will need about 60 to 80 percent of our annual pre-retirement income to live on each year after we retire. For those nearing retirement, roughly 57 percent of this will come from Social Security, according to American Express Financial Advisors. The rest will need to come from other investments and savings. However, according to the Guardian report (noted above) only 27 percent of baby boomers polled said they were able to save 20 percent of their income and 17 percent said they were unable to save anything. Furthermore, according to American Express’ Personal Economy Survey, only 50 percent of consumers feel they will they be able to retire when they want to, 60 percent don’t even have a 401(k) and only 27 percent have an Individual Retirement Account (IRA).
Luckily, there is help available to release you from financial paralysis. Consider following some of the tips outlined below.

Have a Plan
According to American Express’ Personal Economy Index, only 10 percent of Americans have a formal written financial plan. Whether you have a written plan that you may not have looked at in a long time or if you are starting from scratch, begin taking action by calculating how much you will need in retirement and figuring out how much you will need to save on a regular basis to reach that goal.

Start Investing Early
Start saving as early as possible. The sooner you begin saving for retirement the better. If you start by saving $100 per month at age 30 you would build a nest egg of $216,000 at age 65, assuming an 8 percent annual return. If you delay and begin saving at age 40 instead, that nest egg would accumulate $125,000 less, or a total of only $91,000. No matter how late you are getting started do not let age paralyze you. If you are in your 50’s or 60’s and have not saved enough or anything at all, there is still time to make a difference. Remember that doing something, even in small amounts or later than you wanted, is always better then doing nothing at all.

Invest in 401(k)’s & Other Savings Plans
Almost eighteen percent of American workers eligible to participate in a 401(k) plan choose not to do so and many do not contribute the maximum eligible amount according to the Profit Sharing/401k Council of America’s Annual Survey of Profit Sharing and 401(k) Plans (2003). Taking full advantage of the tax benefits and possible employer matches in a 401(k) plan is key to a successful retirement plan. If your employer does not offer you a 401(k) plan or similar savings option, take matters into your own hands and consider opening your own Individual Retirement Account (IRA). This will allow you to save for your retirement and still reap the tax benefits.

Monitor Your Progress
Whether you are 34 or 64 and a half, your retirement plan is not something that you put on autopilot and forget about until you are ready to retire. You need to review your plan at least once a year, so you can reassess your investing strategies, rebalance your investments if needed and make necessary adjustments.

Seek Help
The most important step in avoiding financial paralysis is to not be deterred if you feel you are behind in reaching your goals. Instead, take action by seeking the help of a qualified financial planner who can help you stay on track with a comprehensive financial plan.

This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.
Lisa Lynn is a Financial Advisor with American Express Financial Advisors Inc. She can be reached at 303-721-6055 or 970-223-4400 or e-mail at lisa.m.lynn@aexp.com.
 

February 2005

The Middle-Class Squeeze
by Lisa Lynn

There has been much political debate recently regarding the “middle-class squeeze,” a result of soaring medical costs, rising energy prices, and increasing college tuitions on middle-class families when compounded with lower wages and family incomes, increasing unemployment and debt. Politics aside, it is worth examining the issue as it pertains to your personal finances and considering some helpful tips for saving and budgeting.

During the past four years, average wages actually outpaced inflation despite the economic downturn, and today, American wages are two percentage points higher than they were in 2000. However, due to the 1 million net job losses since 2001 and decreased hours put in by workers, overall family incomes have declined. According to the U.S. Census Bureau, the average household earned $43,588 last year, a 3.4 percent decrease from 2000. That equates to an average household decline of about $1,500 each year.
Simultaneously, Americans have piled on more household debt, roughly $9.7 trillion in the past four years (approximately a 38 percent increase), according to the Federal Reserve. This increase in debt is mostly from new mortgages driven by record low interest rates and record-high mortgage refinancing. Furthermore, Americans are also carrying a total of $683 billion in credit card debt, according to a recent MSN Money report.
In addition, medical costs for individuals have also been soaring. According to Hewitt Associates Inc., employees’ shares of annual medical costs increased from 25 percent in 2001 to 32 percent today, and employers are also covering fewer employees (down 4 percent from 2000). As a result there are now 5 million more Americans uninsured today then in 2000.

Furthermore, college tuitions continue to skyrocket. The national average for public university, tuition, including room, board and fees, comes to $11,354, up 10.5 percent from 2003 or an additional $824 per year. Tuition at private universities rose 6 percent and now would cost a family an average of $27,516 a year, according to a report published by the College Board.

When you mix the decreased family incomes with increased debt loads and rising medical costs, energy costs and college tuitions, many families end up with a net worth that is lower. According to Zandi’s analysis of the Federal Reserve Board data, the median household’s net worth is down from $89,300 in 2000 to $84,400 today.

It’s no wonder that many Americans are feeling squeezed by these current economic conditions. Here are some tips to help you save and budget:

• Stash cash for emergencies: An emergency savings fund should consist of roughly three-to-six months worth of your monthly expenses. This stash is vital in case of a job loss or medical emergency and can help keep you from loading up credit card debt for unbudgeted expenses, such as car or home repairs. Keep emergency reserves in a separate, liquid account, such as a money market or savings account, for easy withdrawals.
   
• Open a Health Savings Accounts: With individuals’ rising medical costs, consumers can now use a Health Savings Account (HSA) for tax-free contributions to pay for medical expenses not covered in health plans. To open an HSA you must have a health plan with an annual deductible of $1,000 or more for individual coverage and $2,000 or more for family coverage. You can withdraw from this account tax-free for routine doctor visits, lab tests, eyeglasses, dental care and some cosmetic surgeries.
   
• Plan for college: Although the rates for college tuitions are skyrocketing, there are many options available to help foot the bill. First, you may consider investing in a 529 Plan. Similar to a 401(k), your investments will grow tax-free until it is time to withdraw the funds. If your child will be attending college in the next few years, you should start researching the many grant, financial aid and scholarship opportunities available. There are also federal tax deductions you can claim for tuition expenses.
   
• Drive Less: The average American spends approximately $2 a gallon for gas, totaling almost $1,300 per year to fill their tanks, according to the latest Bureau of Labor Statistics survey. By driving just one less day per week, you will save on your gas bill and wear and tear on your car, lowering your repair and maintenance expenses. Try carpooling, taking public transportation or working from home. The money you save can be allocated for your emergency savings account, college savings account or HSA.
   
• Budget for the holidays: Start your holiday budget at the beginning of the year, not the end. Tally up your expenses from this recent holiday season, including gifts, travel, entertaining and decorations, and divide that number by 12. The number you get will be the amount of money you should start putting away each month, so next year you can avoid accumulating end-of-year credit card debt.

For more savings and budgeting ideas, consider working with a qualified financial advisor, who can help you develop a comprehensive financial plan specifically addressing your personal needs and challenges.

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This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.

Lisa Lynn is a Financial Advisor with American Express Financial Advisors Inc. She can be reached at 970-223-4400 or 303-721-6055 or e-mail at lisa.m.lynn@aexp.com.