MAKING CENTS: Will Fed’s move benefit you?

When Federal Reserve Chairman Ben Bernanke last week announced that the Fed will buy up to $40 billion per month in mortgaged back securities, markets rallied across the board. Speculating on the Fed’s moves is not a sound rational for investing in equity markets, but it may help you on the debt side of your balance sheet.



The moves also came with the Fed sending signals that it will intervene to keep interest rates low through 2015. In the past, moves like this gave optimism to borrowers about the possibilities of lowering their borrowing costs. But their dreams were shattered by underwriting standards that made it very difficult for many borrowers to qualify for a lower rate. While underwriting standards are still quite strict, loans are getting approved. Here are a few steps that you may take to dress yourself up for this rigorous process.


Know your credit score. Unfortunately, that little score, known as your FICO score is where it all starts. Lenders like to see a credit score above 700.

Get a copy of your credit report, and then take the steps that you can to improve that score. Clear up discrepancies, close out credit cards that you never use, and pay down your higher interest loans.

Begin pulling together all of your back up documentation.

You’ll need copies of tax returns, w-2’s or 1099’s, bank statements, investment statements, financial statements and tax returns of any businesses or entities that you own. Last year, we witnessed a client who had over $2.5 million in liquid assets, with a high FICO score get turned down for a mortgage on a vacation home because his business had losses for the last two years. The negative equity on the corporate balance sheet was enough for the lender to question the sustainability of the income he was taking from his closely held business, so he wrote a check for the vacation home.

Be prepared to discuss any loan guarantees. Your guaranty of a loan for a business or a child may make it more difficult to qualify. Attempt to get your guaranty released for that loan or it may become the impediment this time.

Start a discussion with a lender.

It is tempting to simply dial around and rate shop, but that may cause more harm than good. Shopping for rates by the phone is like trying to buy a car by the phone. Each time you make a loan application, your credit report is affected negatively. You may be better off working closely with one lender who can understand your situation and tell you what it will take to qualify you for the loan. Of course, be aware of the market rates and make sure that your new loan is competitive with what is being advertised by others.

And the last point is to determine if debt is right for you at all. If you have all of your savings in certificates of deposit, earning 1% or less, then even a 3% interest rate on a mortgage is expensive.

John P. Napolitano is CEO of U.S. Wealth Managementin Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth
Securities offered through LPL Financial, Member FINRA/SIPC.

Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

MAKING CENTS: Paper or electronic? Tips for financial record-keeping

Paper or electronic? It all started in the supermarket. Paper or plastic? Now it has come to the financial services sector; paper or electronic?

How do you like to receive your financial information? You can choose the old-fashioned way with statements, confirmations and any other news about your accounts and allow them to arrive in the mail box. Or would you prefer to save a tree, and ask that mail about your accounts be suppressed with everything coming to you in the form of an email that directs you to a secure electronic portal where your information resides? I am not the most computer literate person in the world, but my preference is to eliminate mail and paper, and go paperless for this information.

A top concern of many is Internet security. Clients want to know how safe their information is in cyberspace. I’m not sure that anyone can answer that for sure, but understand that between government standards and the financial services firm integrity on the line, most major financial firms take Internet security very seriously.

Another issue for many is the difficult task of remembering too many passwords. This is especially true for the do-it-yourselfer with accounts all over the place. In this day of regularly changing passwords, this task is only getting more difficult. To alleviate this pain, consider storing all of your passwords in a protected place not accessible to anyone but you.

Frequently not considered is the possible danger of receiving paper information through the mail. The U.S. Mail in particular is quite secure and reliable, but once the information gets to your mail box, it is under your control and the vulnerability of the information contained in the envelope increases. While not prevalent, there are thieves out there whose primary targets are mailboxes. Their mission is to intercept as much confidential information about you as possible to either steal your identity or use your credit cards.

If you migrate to, or already are an electronic financial user, make sure that your Internet connection is secure and that your anti-virus protection is strong and current.

John P. Napolitano is CEO of U.S. Wealth Managementin Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth
Securities offered through LPL Financial, Member FINRA/SIPC.

Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

MAKING CENTS: Financial tips for the college send-off

Are you sending kids off to college this fall? Whether this is your first trip with the car packed up or your child’s last year packing and taking herself off to college, consider these discussions and tips for helping them thrive in college.

 

Talk to them about income and expense budgets. Some kids are paying their own way and others have parents footing the bill for living and out-of-pocket expenses during the school year.

In either case, create a budget. It doesn’t have to be detailed expenditure by expenditure, but a general budget alerting junior just how much they can spend every week, month and semester is good training for real life. Create general categories such as entertainment, travel, school supplies and ask your child to monitor it under your supervision.

This is a far better alternative than learning during the winter break that your child has spent an entire year’s worth of money in one semester. Some of today’s over-leveraged economic problems in the U.S. may be because no one had the sense to drive this concept home into the minds of their children earlier in life.

Pay attention to health insurance. Make sure that your coverage will get your child access to the type of care that may be needed beyond what the school offers. This is more significant for children who travel abroad or those who require regular medical care. Travel abroad can be especially problematic with respect to health insurance, so learn about your options early.

The same may be true for the car that your child uses at school. Let the insurance company know that the car will be garaged at the school. It may also be a good time to talk to your child about granting permission to their friends regarding use of the car. We all want to be the good neighbor, and help a friend in need, but it may be a better policy to discourage allowing any college buddies from using the car.

For students living on campus, you should check to see that all of the in-dorm valuables are covered. This may be a simple call to your agent or a separate policy that you buy from the school or your insurance agent. For children living off campus, there is a good possibility that there is no coverage automatically. It could be as simple as notifying your insurance company or as complicated as adding a special rental policy or endorsement for the off campus housing.

John P. Napolitano is CEO of U.S. Wealth Managementin Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth
Securities offered through LPL Financial, Member FINRA/SIPC.

Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

MAKING CENTS: There’s more to risk than losing money

When most people think about financial risk, losing money is what they think about. Memories of the real estate investment or stock investment that didn’t work out as hoped may still be stuck in your mind.

But risk is much broader than just losing money, and the more money you have, the more likely it is that these risks are a part of your life.

Let’s start with your home. Is your home a magnet for the kid’s friends? Do you have a pool, motorcycles, bicycles, trampolines, dogs. … You get it. The toys that people with money have are known as an attractive nuisance. They are certainly attractive, but their inherent danger makes them a nuisance, and a potential liability.

Dogs, of course, have nothing to do with money unless your dog goes and bites someone. And if you are not properly covered for this peril, it can cost you a pretty penny to defend yourself against even a frivolous lawsuit. Make sure your umbrella liability insurance is adequate and that it will provide you protection for all of the risks that you can identify in your life.

What about a second home? Many with wealth own a second home in the mountains, near the water or in the desert. They all pose additional risks that you may not be prepared for. If the home is ever rented, even casually to friends and family, be sure that your insurance agent is aware of the rentals. If you add a boat, Jet Ski or other water or recreational toys, the risk multiplies as you may be responsible for any problems that arise from use of the toys.

Another reality of real estate is it needs to be maintained, and that means there will be painters, landscapers and all sorts of contractors floating around the property from time to time. Some of these contractors are well insured, and some are not. If you lean towards looking for the best pricing on your home repairs or maintenance, make sure that you are working with someone who can show you their certificate of insurance. I’d also check to see that all subcontractors that they involve have proper coverage including workman’s compensation for their helpers.

And the last issue that can raise your risk profile seems really unfair because it may arise from your benevolent involvement with charitable or community organizations. Unfortunately, even when you are donating valuable time toward a not-for-profit organization, you are exposed to liability.

John P. Napolitano is CEO of U.S. Wealth Managementin Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth
Securities offered through LPL Financial, Member FINRA/SIPC.

Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.