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Andover, Massachusetts January 12th, 2011 –  Is your state one of the dozens nationwide that is running a massive budget deficit on a yearly basis? The worst offenders and those in the most financial trouble include California, New York, and Illinois. So what is the solution that one of these states, Illinois, came up with? You guessed it, raising your taxes!

Illinois announced yesterday that they would increase their personal income tax and corporate tax rates as a way to reduce their current 13 billion dollar budget deficit. The tax increases will raise about 7 billion dollars in the coming fiscal year, which still leaves a rather large hole for the incoming democratic governor to fill. The likely outcome of this 6 billion dollar gap is a widespread reduction in state services, a reduction in state worker’s compensation, and an increase in fees associated with everything from licensing to car registrations.

The Illinois plan raises the personal income tax from 3% to 5% for the next four years and raises the corporate income tax rate from 4.8% to 7% for the next four years as well. Realistically, any “temporary” tax increase that has been enacted in the US over the past century has ended up being permanent. So what does this mean for Illinois residents and potentially you? Well, Illinois residents are headed for a rough four years. Their income tax rate is increasing 66%, perhaps the largest ever percentage tax increase in American history. This will most likely lead to lower consumption which will hurt the thousands of businesses state wide that depend on consumer spending. The corporate tax rate, while still lower than many of its neighbors, will make it more likely that current Illinois businesses move out of state and those looking to move into the state to reconsider. All in all, this plan is necessary but without massive spending cuts to compliment it, it will only lead to pain for the average citizen and a much bleaker economic outlook for the state as a whole. Residents nationwide should be ready for similar measures in their states. For the upcoming fiscal year states nationwide face a collective 41 billion dollar budget gap, the largest in history. So, even if your state isn’t in debt to the tune of 13 billion, any budget deficit means spending cuts and or tax hikes are being planned. Prepare now so you will not feel the pinch when it happens.

Readers, tax hikes or spending cuts? Which would you prefer? Can you have one without the other?

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Andover, Massachusetts January 11th, 2011 –  Have you made your New Years resolutions yet? Have you had success in the past when making a New Years resolution? Well, if you have been following my blog at all over the past year, I hope you made some New Years resolutions that involve your finances. If not, check out the list below and eliminate some of your poor financial habits once and for all.

1. Ignoring Your Cash Flow. Cash flow is one of the most important metrics that you should be keeping track of on a monthly basis. Knowing how much money is flowing in and how much is flowing out is just the first step. Once you know the numbers, figure out where it is going, the more you know about your cash flow, the more you can do to improve your financial situation.
2. Making Impulse Purchases. This is a common topic that many personal finance blogs discuss. Basically it comes down to you having the inner strength to not purchase items on a whim. If it’s a larger purchase, sleep on it to make sure you need it. For smaller items such as day to day snacks etc., I recommend not evening carrying cash around or entering stores where you know money can be spent very easily and quickly.
3. Using Credit Cards for Purchases You Can’t Afford. This should be the number one rule for everyone entering 2011. Credit Cards have allowed the majority of Americans to live a lifestyle that they otherwise could not afford. Make sure that in 2011 you use credit cards for their convenience and rewards programs, not to live a life that you know you can’t afford.
4. Forgetting an Emergency Fund. These have picked up in popularity over the past 2 years as many people who never planned for a loss of income were faced with long term unemployment. Make sure that in 2011 you set aside at least a few months worth of living expenses in a liquid savings account so that just in case an emergency pops up (job loss, accidents, health problems), you will be prepared and wont have to worry about the financial consequences of whatever emergency you face.
5. Procrastinating Saving for Retirement. This is the number one thing everyone can do in 2011 to improve their retirement years. The sooner you start the better and there is no such thing as too late to start. Put away as much as you can afford each year if you are nearing retirement. If you are just starting out, anywhere from 10-20% of your gross income is a great way to start preparing for retirement.
6. Turning Down Employer Contributions to your 401(k). This is basically turning away free money. Not only does this encourage you to save, but if your employer matches it, you are doubling your investment up to a certain percentage limit. Always invest at least enough to take advantage of the employer match on your retirement account.

Readers, is personal finance an area you will be focusing on in 2011? What sort of information are you looking for to help your finances this year?

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Andover, Massachusetts January 7th, 2011 – The much anticipated December Jobs report came out today, and the news is more of the same, cautious optimism. The economy added 103,000 jobs in December, not counting seasonal jobs, which lowered the unemployment rate to 9.4%, the lowest level in 19 months. The Labor department also further revised its figures for the past 2 months as more data has come in. The October numbers were revised upward by over 30,000 and the November numbers increased by 42,000. This means that for the past three months, the economy has averaged an increase of about 128,000.

So where is the bad news? Well, economist had expected a larger gain in jobs, closer to 150,000. They also attribute the drop in the unemployment rate mainly to people who stopped looking for work, not the increase in hiring. Basically this is because the economy needs to add about 125,000 jobs per month just to keep pace with the population growth. On the flip side, the all important private sector accounted for all of the gains in December, great news for the New Year. The private sector added 113,000 jobs while the government eliminated another 10,000 jobs, the 5th straight month that the number of people employed by the government has dropped. All in all, we can expect 2011 to be much better than 2010, but we are still years away from returning to our pre recession levels of employment.

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Andover, Massachusetts January 5th, 2011 –  With the use of credit cards becoming less appealing by the day, many business owners are turning to cash as a way to attract new customers. Since any credit card transaction costs the store owner a certain percentage of the sale price, businesses have an incentive to increase the number of cash only transactions that take place each day. As such, many companies in a variety of industries are offering discounts when consumers put away their credit cards and pay for the good or service in cash. Check out some of the most common in the following list…

1. Gas. The popularity of a cash discount at gas stations has really boomed over the past 3 years. I remember when I first started driving about a decade ago that cash discounts were non existent here in the Northeast. Since the recession however, I have seen multiple independently owned stations turn towards a cash discount business model. Typically consumers can expect to save between 3 and 5 cents per gallon, which ads up to savings of around a dollar per fill up. While this may not seem like much, every little penny helps!
2. Property Taxes. Most local governments still do not accept credit cards as a form of payment for city taxes and fees so the discount here is a little different than the previous example. Here the discount is based on when you make the payment. For example, a county in Florida gives you a 4% discount for paying your taxes 4 months early, which then goes down to 3% for 3 months early and so on. This could be some significant savings, especially if you know you can not get a better rate of return during those 4 months with some other investment.
3. Gym Memberships. Many gyms nationwide including larger chains offer a discounted price if you pay for a year long membership up front. While this is a great idea if you are a gym rat, it could mean wasted money if by month 6 you have stopped going to the gym.
4. Cars. This is a strategy that has been true for a long time now. If you can walk onto a dealer lot with enough cash to pay in full that day, the salesman will probably be more than willing to discount the price by a few percent. If not, maybe you can have him include some oil changes or free tire rotations as part of the final price.
5. Insurance. This applies primarily to car insurance but could be true for home insurance as well. Typically the insurance provider will provide you a set of different quotes, all based on how often you want to make payments throughout the year. One payment would have the lowest final price, followed by quarterly, and then monthly. Do the math, it could be a sizeable chunk of change ($200+) that you could be using to pay down some of your outstanding debts.

Readers, have you seen a rise in Cash only prices in your neighborhood? If so, do you take advantage of them or do you continue to rely on the convenience of credit cards?

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Andover Massachusetts, January 4^th, 2011 – A lot of press coverage has recently been given to the rise in personal bankruptcies that has occurred in the US over the past 2 years. Well, data that was released over the past few days proves that this is in fact happening. In 2010, over 1.5 million Americans filed for bankruptcy, an increase of 9% from 2009. Keep in mind that the personal bankruptcy laws changed dramatically in 2005, so any data collected before that point can not really be used to gauge how prevalent bankruptcies are now compared to then.

Before 2005, it was much easier for consumers to file for bankruptcy and clear their debts with little to no sacrifice on their part. Sure, their credit rating would plummet and many assets would be seized, but the rebound period was extremely short and the ability to file for bankruptcy again within a short time frame was still there. Congress acted due to these problems with the system, and the new personal bankruptcy process is much more stringent and does not allow for more than two filings within a 7-10 year period. This has made bankruptcies a lot less appealing to consumers and forces them to really consider all the ramifications that go along with the process.

So what does this all mean for 2011? Well, most experts predict another record setting year for bankruptcy filings. The continued real estate market weaknesses as well as the ongoing long term unemployed problem means more and more people are running out of options in regards to their finances. In fact, I even expect to see an up tick in the number of seniors filing for bankruptcy as they were decimated by the stock market collapse and did not have enough secondary savings to support their retirement lifestyle.

Readers, is bankruptcy your last option? Remember, we here at PFS work to make sure you don’t have to file for bankruptcy. The consequences will not only be felt in your wallet. Bankruptcy filings are a public record, and many job opportunities will not be available to those who have a bankruptcy filing on their credit report.

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Andover, Massachusetts January 1st, 2011 –  Do credit card companies have any business on a college campus? When should college students learn how to use credit cards safely and to their benefit? This debate has become more relevant as recent federal regulations have outlawed most credit card advertising on campuses. Gone are the days when major corporations were able to offer gifts as a reward for signing up for their first credit card. Is this beneficial for students? Or are we setting them up to enter the real world after graduation with no idea on how to use a credit card?

While students learn many of the basic and advanced skills that are necessary to succeed in the real world they generally fail when it comes to learning about Personal Finance. This is why the average student graduates with over $3,000 of credit card debt as well as a boat load of student loans. Why would a student take on even more personal debt when they know they will be owing tens of thousands of dollars upon graduation? Basically, it’s because credit cards are very easy to use and the consequences of them are generally not discussed, either by adults around them or the creditors themselves. For many adults in America today credit card debt is a fact of life so many don’t even think about warning their kids of the dangers. So what we end up with are inexperienced adults who are thousands of dollars in debt before they turn 30.

I believe colleges are taking the easy way out by banning these credit card companies from college campuses. All it is doing is avoiding the problem, not fixing it. If they allowed the companies on campus AND enrolled every incoming freshman in a personal finance class, students would benefit from the convenience and safety of a credit card and know how to use it correctly. Through my personal experience I know how tempting credit cards can be in college. Due to this, I have been visiting local high schools for the past year to teach kids about credit cards and how to use them. I hope that this minor role will help at least some of these bright young students avoid the common mistakes that are now hurting millions of young adults in this country.

Readers, what do you think the role of credit card companies should be on a college campus? Are we doing our youth a disservice by banning them?

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Andover, Massachusetts December 29th, 2010 – Unemployment applications reached a new 2 year low last week and dropped below the all important 400,000 mark. For the week ending December 26th, 388,000 Americans filed for unemployment insurance, a drop of 34,000 from the previous week. This is the lowest it has been since the summer of 2008, before Lehman Brothers collapsed and the economy really took a turn for the worse. This was a much larger than expected drop and was certainly helped by seasonal hiring that usually spikes around Christmas time. These numbers are great but need to be looked at in combination with other figures released today. Weekly claims figures are extremely volatile so the 4 week average is commonly used to reduce this volatility. This figure dropped to 414,000, also the lowest it has been since the summer of 2008. As we end the year, this is great news but it is vital that these gains are not taken away once seasonal workers are let go. The next month will be critical to see if the job market really turned the corner or if this drop was entirely due to seasonal workers taking advantage of the temporary openings that open each Christmas season. Stay tuned for the December Employment report which is due to be released during the first week of January. It will provide a clearer picture of the job market and according to experts should show an increase in hiring and a drop in the national unemployment rate.

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Andover, Massachusetts December 29th, 2010 – If you are one of the millions of Americans that still regularly uses the Postal Service to keep in touch with people and to pay bills, there is some relief coming your way in the New Year.

Over the past decade the USPS has raised their postage rates on a more frequent basis as their budget woes continue and mail volume continues to decline due to the increasing popularity of Email. As a result of these increases, consumers have been left in the cold when their stamps suddenly were not worth enough to pay for postage. In response to this dilemma and continued consumer outrage at all the stamps they bought that now are useless, the USPS will begin introducing new stamps in 2011 that will be “Forever Stamps”.  Not only that, but all future stamps will also be “Forever Stamps” which means that any stamp you buy starting in 2011 will be capable of sending a letter no matter when you use it.

“Forever Stamps” were first introduced in 2008 and have been extremely popular, raising over 12 billion dollars in revenue since their debut. With this new program the post office hopes to simplify the cost structure and make sending mail a more consumer friendly experience once again.

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Andover, Massachusetts December 28th, 2010 –  As the year comes to an end, it is important that you get your financial house in order so you can begin 2011 with sole focus on strengthening your financial situation. As such, we at Preferred Financial Services want to present the following list of steps you should take a look at before 2010 comes to an end. Some are just minor steps to take while others could prove to be a huge factor in your long term financial success. These lessons are particularly important as we all try to recover in 2011 from what has been a brutal 2 year stretch.

1. Run your credit report. This is a simple step that doesn’t take more than 20 minutes to do with an internet connection. By running your report once a year from the free federal website www.annualcreditreport.com, consumers can not only take a look at all their current open accounts but also see if there is any fraud occurring. If so, make sure you stop it ASAP and contact your creditors to prevent any further theft.
2. Pay off holiday debts before New Year’s Eve. Any debt that you bring into the New Year will continue to become more expensive as interest rates continue to go up for consumers with less than perfect credit scores. By paying off your bills before the New Year, they will remain off your credit report which will allow you to start the 2011 with the best credit score possible.
3. Don’t close recently opened store cards. This is one of the unknown rules of the credit score. By closing newly opened accounts in the near future, you are lowering the amount of available credit you have which lowers your credit score in the short term. If you know that you will be needing some form of a loan anytime in the next 6 months, keep the cards open and just pay off the balances as quickly as possible.
4. Protect your Identity. The first few month of a New Year are the most common time for your identity to be stolen. Think about it, all your tax bills, W2’s, yearly statements from your banks are mailed to your house and almost all of them include your name, address and Social security number. This makes them ripe for theft and in the right hands can lead to extremely expensive fraud. Make sure you dispose of all forms correctly that are not needed to prevent any unnecessary thefts.

Readers, are you ready for the New Year? Do you have any resolutions for your financial future? What steps are you taking to make sure 2011 is a better year for you and your family than 2010 was?

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stephan Personal Finance

Andover, Massachusetts December 23rd, 2010 – As 2010 comes to a close and we look forward to a better 2011 a couple of bits of news came out today that could affect your financial health in the New Year. Unemployment claims, gas prices, and factory orders all were reported on today and should not be ignored.

Gas prices continue to rise as demand picks up, the dollar remains weak, and prices for crude oil continue to rise. Average gasoline prices exceeded $3 this week for the first time since late 2008. This important barrier has been breached after a 4% rise over the past month. Prices are 16% higher than they were a year ago and with the onset of winter many experts are predicting these prices to continue to rise. The highest price outside of Hawaii was found in California at $3.27 a gallon and the lowest price was found in Colorado at $2.75.

Unemployment claims continued a long term downward trend as they dropped another 3,000 last week to 420,000. The rate has been stuck between 400,000 and 500,000 for over a year now but for the past three months has been trending down. Economists know that this rate needs to get below 400,000 to have an effect on the national unemployment rate. Let’s hope we can reach that as early as possible in 2011.

The last report that was released this morning reviews the nation’s factory output in November. Orders for long lasting manufactured goods rose not counting airplanes rose 2.4% last month. This is the largest increase since March and ignores airplanes as the transportation sector which includes autos as well is extremely volatile on a month to month basis. This increase in orders gives hope to many who expect hiring to go up as well as factories try to meet the demand of the rebounding middle class.

Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.

For more information, please visit www.pfsdebtrelief.com or follow us on our blog at www.pfsdebtrelief.com/blog/ .

Contact:

Stephan Tavernini

Marketing Coordinator

Certified IAPDA Debt Arbitrator

Preferred Financial Services

stavernini@pfs1.net

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