Investing in your future

More than ever though, people learned a valuable lesson about good savings goals and safeguarding their financial futures. People who put off their investment plans due to current bills realized that they needed to change their habits. If you are one of the millions of people who found their savings insufficient to last throughout the recession, then you need to start your investment plan. Experts say that with as little as $100 any consumer can start a new financial life.

The reasons people fail at investing

Though investing is crucial to building wealth as quickly as possible, there are some culprits that thwart even the most vigilant investor’s plan. First of all, market timing is one of the hardest things to overcome. Experts will tell you that there is a right time to invest, but can they really predict the future? They can try, but studies have shown that even the best investor who has watched the market vigilantly for years is only 70% accurate with predictions. The reason is because the market tends to make its biggest fluctuations due to unexpected events.

Second, there is the age old advice to “buy high and sell low.” The problem with this advice is that it inevitably sets investors on an egg hunt for the hottest stocks or mutual funds. Seasoned investors may be able to weather the storm and come out on top, but novice investors inevitably get tripped up with the choices. In addition, the stress of searching out that one big stock can be too much for new investors to manage and cause them to throw in the towel on trading too early.

Finally, the biggest problem with investing is a failure to diversity. The key to maximizing returns is to diversify and without a good investment plan that takes into account all the types of products available, one blow and your money could take a huge it. That hit may be so large the account never truly recovers from it and you are left with drastically smaller account totals than hoped for. The best formula for building a portfolio is to take 25% of each of the following:

• US Stocks, or those on the S&P 500 Index
• Foreign stocks, or those on the MSCI EAFE
• Real estate, or the National Association of Real Estate Investment Trusts (NAREIT) Equity Index
• Gold, oil and other commodities, or those represented by S&P Goldman Sachs Commodity Index

Investing with $100

Money now that the recession is over comes in much smaller amounts, but that isn’t necessarily bad news. Starting with $100 from a tax refund is enough to get any new investor on the road to saving. The easiest thing to do with the additional money is to open up an IRA with any big broker and then commit to investing an additional $50 to $100 a month into the account. The biggest caution when it comes to starting with a small amount of money is to find an account that offers transactions costs that are as minimal as possible. ShareBuilder.com and Zecco.com are two online brokerages that keep trades down to $4 and $4.50, respectively. To minimize trading costs, all consumers should rotate their initial purchases among the following: Rydex S&P Equal Weight, Vanguard FTSE, Vanguard Total Bond Market, Vanguard REIT Index and PowerShares Deutsche Bank Commodity. For those who are starting with just $100, it is more beneficial to trade four times a year at $300, rather than monthly.

Being financially ready

If you are looking to invest but only have a small starting amount, rest assured that it will still grow steadily. Of course everyone should watch their money now more carefully than ever, but a good investing plan is a tool that will solidify your financial future. It isn’t hard and primarily requires determination and focus but in today’s volatile market, it is a necessity to be financially prepared for anything.

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Divorce can seriously complicate finances like unsecured loans, savings and investments. If divorce is in your imminent future there are some things to begin thinking through. First of all, set some post-divorce financial goals. You want to stay focused on where you want your retirement savings to be, how much money needs to be in a college fund, and how you are going to reduce your debt. Second, make sure you review all your paperwork regarding shared accounts. This can include savings accounts, credit cards, loan documents, unpaid tax bills, and estate planning strategies. Finally, research your state’s QDRO, or Qualified Domestic Relations Order. This is a document that will prevent your spouse from making retirement account withdrawals while the divorce is in progress. Remember that if at all possible, it is highly advantageous to settle disagreements amicably and avoid paying thousands of dollars in lawyer’s fees.

The first order of business when facing a divorce

The first order of business should be protecting your financial situation. You’ll need a trusted lawyer who is well-versed in divorce and settling assets. It is crucial to hire a lawyer who knows the laws that affect divorce proceedings and the impact they have on your finances.

Dividing assets

Normally assets accumulated throughout the marriage are up for splitting. The exception to this rule however, is inheritances individually gifted. When assets are split, the court will consider each spouse’s earning ability, how much each contributed to the overall household assets and the length of the marriage. There are states that have exceptions though. In community property states like Arizona, California, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all assets are divided equally between spouses.

Debt and the divorce

One of the biggest issues to address in a divorce is debt. Divorce does not eliminate debt. In fact if you are in a community property state, debt is split down the middle just like assets were. The caution in these states is that half the debt from one spouse, is shared by the other. Unsecured Loans, credit cards or retail credit can all plague the spouse who never created them. If you are in a non-community state then debt belongs solely to the spouse who incurred it.

The issue of debt is also relevant if married couples had joint accounts. These are important to address immediately because your spouse could continue to rack up debt and then leave you with it. All accounts that are shared should be frozen. Notify creditors of the situation and most will stop all charges to the account. Almost every major credit lender has a procedure to handle divorces.

Retirement assets settled

Money that is kept in a 401(k) account or pension plan can be divided up in a divorce. The amount included in the division is made up of funds accumulated from the time the marriage began to the time when the marriage ended. To claim a portion of your spouse’s 401(k) you need to have a court ordered QDRO and submit it to your spouse’s plan sponsor before the distribution period is finished. Some couples also opt to leave retirement funds untouched throughout a divorce. Particularly if the amounts for each spouse are close in value, this can be a viable option in handling the situation.

Estate planning

Finally, although unsecured loans, credit and savings are important, so is your future. Be sure to review your will and other documents to ensure that money is going to a new beneficiary. Those getting a divorce are cautioned to not wait to address the issue of estate planning. Review and amend an estate plan while carrying out the divorce proceedings. Though it is a difficult time for anyone when he or she is going through a divorce, securing their future is important. Taking pains to handle money wisely can protect assets and your future.

Installment loans are still popular, but surveys are showing that Americans are getting better at managing their credit. TransUnion made a prediction recently that credit card delinquencies should continue to fall throughout 2010, but at a much slower rate. Their studies showed that people want to pay off credit and realize how important a good credit rating is, but the unemployment rate is going to hamper their efforts. Still, TransUnion is estimating that the delinquencies on MasterCards and Visas should both drop to 1.04% by the end of the year.

How the numbers are calculated

TransUnion uses a calculation to predict how people will handle their future credit and it involves former payment habits of customers. The common belief is that the past three months’ payment habits are indicative of how a borrower will deal with credit in the future. For example, the chances of a consumer catching up on payments after just missed deadline is 86%, however if they miss two payment deadlines, that percentage drops to 62%. After three missed payment dates, the percentage is under 20%.

Numbers like this give analysts the ability to project what the future of lending will hold. Though TransUnion is making predictions that numbers of non-delinquent payments are on the rise, that rise is said to be just a fraction of how sharply it declined in past months. Full recovery is still a long way off.

Where the lending industry is headed

Director of consulting and strategy at TransUnion, Ezra Becker said that “delinquencies lag behind other statistics, like the jobless rate. Until more people are back at work, there will not be any dramatic improvements in payments being made on time.” The number of new unemployment claims has been lower in recent months than the year-long norm and that’s good news for economists. They are studying the economy looking for nascent signs of relief. They are also trying to forecast the future by combining research on mortgage, car and installment loans. Combining all forms of lending is enabling them to formulate what to expect in coming months.

One of the most closely watched states is Arizona. In the recession, Arizona was one of the hardest-hit and its turnaround is much anticipated. It is the only state where industry analysts are predicting credit card delinquencies will still rise throughout the beginning of 2010. Becker added, “Credit card reforms that take effect in February will have a material impact on the credit card industry next year.” He believes that lenders will be tight-fisted still, but will come up with new lending options for those without premiere credit histories. “The industry will adapt to new rules and a customer base with new credit requirements. Lenders will be forced to be more innovative in the products that they offer and how they manage their customers,” he added.

Consumers need to be smart

Though there are fresh products coming to the market, it’s important for consumers to be as vigilant as ever regarding their credit. New reforms are slated to aid people with all types of credit, but that does not mean that the lending process will be any simpler. For anyone needing credit, mortgage loans, car loans, or installment loans, it will be very important to have relatively good credit. Becker added, “People with very low credit scores may have to wait longer for the door of credit to open for them, but they still need to be fixing their credit now.”