Preferred Financial Services

Andover, Massachusetts January 31st, 2011 – Is your entire retirement plan relying on your 401k to fund it? If so, you might be in for a shock when it comes time to retire. While a fully funded ($16,500/year) 401k with a company match is probably enough to cover your retirement needs, the fact of the matter is that only a tiny minority of workers are able to do this. Even if you are in this tiny minority, placing all your eggs in one basket is generally not considered a wise move by retirement planners. So what are your options besides a 401k?

If you are currently contributing to a 401k, continue to do so and work towards maxing out this contribution as you near your retirement date. Always contribute enough to at least get the full matching contribution from your employer if it is offered. Beyond this simple step, there are many other things that you should take into account when planning your retirement funding. Post tax money invested in a Roth IRA is a great tool to add some diversity to your portfolio by allowing you to withdraw your savings tax free after the age of 59 ½. Social security can also be considered another option for most Americans who are already near retirement age (less than 10 years). For us younger generations, social security should not be used when planning your retirement, but if it is still around any amount you get from that will just be a bonus. Beyond this, having a strong, diversified portfolio of investments is critical to accumulate the amount of wealth you will need in retirement. Before you make any decisions in regards to funding your retirement, figure out when you want to retire and how much you will need. These two critical numbers will allow you to devise a funding plan for all your retirement dreams.

Readers, how are you planning for retirement?

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Andover, Massachusetts January 21st, 2011 –  Much has been made about the decline in the American consumer over the past two years. The foundation of our economy, the American consumer, has been battered by unemployment, low wage growth, and limited access to credit. The result has been a much slower recovery than was expected with many saying the days of the consumer accounting for 70% of our GDP are over. However, a closer look at the numbers indicates that the consumer is in fact not dead yet, and may just be waiting for the job market to improve before going on a spending binge again. Check out the 6 reasons why the American consumer is not dead below….

1. Household Net Worth has proven resilient. Although consumer debt rose for much of the past decade and housing prices collapsed starting in early 2008, the average household’s net worth has not taken a tumble as many thought it would. It increase from 47 to 66 trillion dollars between 2003 and 2007 due to the housing spike, and then tumbled back down to 49 trillion dollars by early 2009 as the stock market took a pounding and housing prices continued to fall. But since then, the nation’s household net worth has rebounded quite nicely reaching 55 trillion dollars by the end of 2010. This means Americans today have a net worth that is 18% higher than it was in 2003.
2. Both household debt service ratio (DSR) and financial obligations ratio (FOR) have declined significantly. Both of these take a look at how stretched consumers are due to various fixed and variable monthly payments they have. The DSR is an estimate of debt payments compared to disposable net income. It is currently at 12.13%, which is well below its peak of 13.96 in 2007 and even below its rate in 1987 when it reached 12.38. This means that Americans now spend less on fixed debt each month compared to their income than they have in at least 23 years. The FOR ratio includes auto, rental, tax, and insurance figures to the calculation. This ratio has dropped from a high of 18.66 in 2007 to 17.02 last quarter, which is lower than it was in 1987. What can we take from both of this? Americans are returning to a more normal financial house by lowering their debt payments and avoiding a credit enhanced lifestyle that was so popular just 3 years ago.
3. Despite the Great Recession and mass layoffs, aggregate personal income has increased from 11.9 trillion dollars in 2007 to a 12.5 trillion dollar seasonally adjusted rate in the middle of 2010. This increased income along with a higher savings rate will allow consumers to reduce debt AND increase spending in the future.
4. Consumer spending continues to be strong in the face of adversity. Personal consumption has increased for all three quarters of 2010 so far and in fact was higher than the previous record high during the 2^nd quarter. This record high spending comes despite a much higher savings rate, once again proving that Americans are both spending and saving more in the post recession recovery.
5. Retail sales have shown steady improvement for almost all of 2010. Back to school, Halloween, Thanksgiving, and Christmas time shopping numbers have all exceeded expectations which has allowed many consumer product companies to expect higher sales numbers in 2011. Auto sales are also increasing and are still below the level needed just to replace scraped cars.
6. Consumer spending remains restricted due to tight credit conditions. This has been a familiar complaint not only from consumers but business owners as well. The nation’s banks are sitting on a huge pile of cash just waiting for conditions to improve. At some point in the near future, these banks will have to start lending money to new clients again or they will miss out on the growth opportunities that will present themselves over the next 1-3 years.

Readers, do you agree? Will the US consumer rebound in 2011 and be the engine that powers our recovery?

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Andover, Massachusetts January 17th, 2011 –  Are you getting fed up with new fees being charged by your bank? Is the customer service not what it used to be? Well, before you switch banks make sure you are ready for the process which can be extremely time intensive and frustrating. Remember, you are the customer, so if you are fed up, don’t feel bad, do the research, pick a new bank, and make the move. But whatever you do, don’t rush the process as small things can fall through the cracks and cause huge headaches down the line.

The following is a list of the basic steps that should be followed during your move….

1. Do not close your old account as soon as your open your new account!
2. Make sure you know of all the direct deposit and auto drafts that are currently active with your old account.
3. Keep the old account funded for at least three months in case you forgot about certain drafts or deposits that could cause you to be charged fees and penalties.
4. Create links between the two accounts so you can easily transfer funds between the accounts when necessary for the first three months.
5. Once the new account is created, sign up for direct deposits and auto withdrawals from this new account.
6. Once you know that activity at your old account has ended (most likely within the 3 month window), transfer the rest of your money to the new account.
7. The last step should always be to close the old account!!

Readers, have you had experience with opening a new account? Did you close your old one or do you continue to have two? Was it a pain free or a painful experience?

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Personal Finance

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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Personal Finance

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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Personal Finance

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 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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Personal Finance

Andover, Massachusetts December 20th, 2010 –  As Americans nationwide continue to look for work, I would like to review some basic tips for those planning to attend a job fair in search of that elusive job offer. If you haven’t been to one in a few years, times have certainly changed. No longer will you get a chance to have an in-depth one on one conversation with the attendees, first impressions are more crucial than ever. In fact, the argument can be made that what you do before the fair is now more important than your actual time at the fair!

The preparation and resources available to you before the fair are now paramount to your success in landing a job. Before you even arrive at the job fair site, there are a few things that you need to do to assure yourself at least a fighting chance of success. First, find out who will be at the fair, which companies, what they do, and what they are looking for. Second, prepare yourself. Make sure you look professional, healthy, and well rested. If you come across as someone who doesn’t want to be there, your chances of being successful will drop dramatically. Third, update and revise your resume. If there are gaps in it due to unemployment, make sure you are ready to answer any questions about it such as what you did during your time of unemployment. And lastly, practice your one on one interview skills. You should have the chance to ask a few questions at every booth, so make sure they are the right ones that will leave a lasting impression on the company’s representative. They will be meeting hundreds if not thousands of people during the fair, so asking a question that will differentiate yourself from your competition is critical.

Once you arrive at the fair, don’t mingle with friends or stay on the sidelines. Treat the fair as a job, you are there to achieve your goal of earning an initial interview, so seize the moment and remain positive. Ask brief but thought provoking questions, don’t bring personal issues into the conversation and remain professional. Make sure you leave your resume and a business card with each recruiter and don’t forget to follow up with a thank you note once you exit the fair.

Readers, do you have any other tips for the unemployed? Have you attended a job fair recently? What were your impressions?

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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Andover, Massachusetts December 14th, 2010 –  As the debate rages on in Washington about how to reform our Social Security system, millions of Americans are planning for a retirement that does not include Social Security at all. While some sort of benefit should be around even for those still in their younger years, the concept of being ready for retirement independently of government help is a good one. If you can set yourself up for a retirement without Social Security, any benefit you get will just be a bonus for you and your spouse. As such, the following is a list of things you need to be aware of as they are sure fire ways of ruining your retirement plans and dreams. What should be the best years of your life could very easily turn into the worst if you are not prepared for it.

1. Not Running the Numbers. This is the easiest thing any worker in the USA could do to prepare for retirement. Running the numbers and figuring out what you need for your retirement is the basis for all future financial decisions. If you have no idea what your end goal is, how will you know what you need to contribute on a monthly or yearly basis?
2. Having Only One Plan. It is inevitable that life will throw you a curve ball at some point before retirement. Are you ready for it? What if you can’t work until you are 65? Do you have a backup plan in case that happens? Millions didn’t have a backup plan in case the stock market collapsed just before their retirement, which is why millions of Americans are still working today instead of enjoying their hard earned retirement years.
3. Passing Up Opportunities to Save. The way the retirement system is set up at the moment, any worker who is not maximizing his or her yearly retirement contribution to tax-advantaged accounts will be punished for decades to come. You can not make up for lost time or missed contributions once you are near retirement, so start as early and with as large a contribution as you can, trust me, it will pay off once you reach 65!
4. Depending on Home Equity. This should be something that everyone has noticed over the past 3 years. Millions of Americans took their home equity for granted and expected it to continue rising until they retired and sold their home. However, this wasn’t the case and never has been. Home values don’t defy the market; they have ups and downs just like every other investment. Don’t rely on your home to pay for your retirement, plan accordingly and have a wide variety of income sources to fund your retirement!
5. Ignoring the Non-Financial Issues. While the financial hurdles associated with retirement might be at the core of your planning, there are other issues that you should not lose track of when planning for retirement. Staying in good shape, eating healthy, and keeping a core social circle of close friends and family have been shown to greatly increase not only your time in retirement but also the enjoyment that you get out of those years.  What good is a huge retirement account if you cant enjoy the money with the people you love?

Readers, have you begun planning for retirement? What are you doing to make sure you are ready no matter what curveballs life throws your way?

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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Personal Finance

Andover, Massachusetts December 6th, 2010 –  Winter has arrived and with it the seasonal bump in your heating bill. Unless you live in the few areas of the USA where seasonal changes don’t occur, you should be expecting quite a large increase in your monthly energy bill. In the Northeast and upper Midwest this jump can be over 50%! While you can’t eliminate the increase entirely, there are many things that you can do as a homeowner or renter to lower your monthly heating bill and thus allow you to use those savings to further pay down your existing household debt. The following is a list of items, some expensive and some free that I suggest all of you consider the next time you look at your heating bill.

1. Invest in Insulation and Efficiency. While this is not the cheapest option it is the most effective option. The more effective your heater is and the better your insulation is in your home, the less you will need to spend to keep a constant comfortable temperature in your home. Investing in energy saving heaters might not be in the budget this year, but consider saving up for something like this. New windows that greatly decrease the amount of warm air that escapes in the winter is another expensive but worthwhile investment. Remember, not only does it lower your heating bill, it also increases your homes value if you can promote your home as being energy efficient and low cost.
2. Bundle Up. The easiest way to lower your costs is to make sure you are dressed warmly even when in the house. If you can stay comfortable when the home is heated to 62 because you are wearing layers versus 75 with no layers then you will be able to save a lot of money. Keep in mind that until recently most families didn’t heat their home to the point of being able to wear shorts in the winter.
3. Use Heating Zones. By using different zones throughout your house, you will be able to keep the rooms where you spend most of your time in warm while the unoccupied ones will be allowed to cool off. Typically, this system works best in newer homes with programmable thermostats. In a house like this, you could set your bedroom temperature to only be warm before you go to bed and before you wake up. During the rest of the day you are not in the room so there is no need to heat it. You can even set it so that your house does not warm up at all during the day while you are at work and then heats up just before you get home each day from your job. It’s a fairly simple, quick, and cost effective way of keeping your home heated and comfortable for all residents.

Readers, have you used any of these strategies to lower your heating bills? If not, are there any other tips you have used that have worked?

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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Personal Finance