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Six top money tips for parents-to-be

Here are six things to think about when planning for your new arrival.

Having a baby can be one of the most daunting experiences of person's life, with money concerns being one of the biggest worries for most parents-to-be.

As most new mothers are being forced to cut maternity leave short due to the financial strain of a new arrival and a decreased salary from a parent staying at home, here are a few things to consider to financially plan for your new arrival.

Top things to consider when financially planning for a baby

1. Work out what your essential weekly expenses will be when the baby is born e.g. nappies, baby food and how you will afford them.

2. Rising costs: calculate how much more you think household bills such as heating and groceries will rise by with an extra person in the house.

3. How much can you comfortably save every month to deal with any unexpected surprises?

4. Reduction in income: Yours or your partner's income will fall especially if one is on maternity leave. Assess how much your income will fall by and how you will juggle your finances around this.

5. If you plan to pay for childcare arrangements, start looking into how much you will have to pay per week and what percentage of your salary you will need to put by to cover these costs.

6. Be realistic. Of course you want your baby to have the best of everything, but many new parents find that they wind up buying lots of things they don't actually use in the end.

See if friends and family have baby items they're no longer using or hit eBay to bag a bargain - you'll be amazed at how much this can save you.



Source: Your Money / http://www.yourmoney.com/your-money/news/2257533/top-tips-to-financially-plan-for-a-baby

Money Talks to Have With Your Spouse

When you say “yes” to tying the knot, you’re doing more than joining hearts and lives, you’re also joining finances. Gulp. For better or worse, if you don’t communicate openly about money matters, your marriage can end up in hot water.

Estate planning attorney Ann Margaret Carrozza suggests that the key to avoiding these issues is to work as a team. "When you're in a partnership it's so important to set goals together, and gain knowledge to create financial security going forward. This way you have common goals and there's never any confusion about how to invest financially."

Whether you’re married or about to walk down the aisle, Carrozza says these are five money conversations you should have with your spouse:

1. Create your personal financial blueprint: Few newlyweds are fortunate enough to have significant assets to invest and plan for. But with a relatively blank financial slate, two people can chart their vision; make concrete goals, and together gain knowledge to create financial security going forward.

Initiate the discussion by throwing an acquaintance or neighbor under the proverbial bus: "Mark and Pam sure have beautiful cars/clothes/jewelry etc. Kind of makes me think that they will be forced to work forever to keep up with the interest payments alone!" Newlyweds should seek to educate themselves on financial matters by attending area adult education courses (preferably free ones) and reading financial books (borrowed from the library). Saving and investing that first $10,000 will provide a calm far greater than any 10-day cruise ever could.

2. Before the stork arrives, create a will: A will is needed to name a guardian of your minor child. It is often this difficult decision that causes people to put off creating a will. Without a will, the court will have the final say as to who raises your child in the event of your death.

Initiate the discussion by asking your spouse for their opinion on choosing a guardian. Try not to react negatively if you disagree with his response: "Your mother? That is a lovely thought - she certainly did a fine job with you (psst…go for bonus points). Do you think though, that it might not be an imposition on her because of her health issues, etc." If you hit an impasse, you can punt by naming co-guardians.

3. How should we grow our savings?: Ideally, this endeavor becomes a hobby for you as well as a goal-oriented pursuit. Investigate the retirement planning options that your employer may offer. Don’t have that option? Sit with a knowledgeable financial professional who will discuss various investment class options with you.

Initiate the discussion by saying something like, “We work hard for our money and I’d like to brainstorm with you and a financial advisor as to how we can make the most of it.”

4. Long term care planning: A slower than expected economic recovery coupled with increased life expectancies and ever-increasing costs of medical care has made relying on government funded long term care resources unrealistic.

Initiate the discussion by encouraging your spouse to sit down with a long term care insurance professional. What you are looking for here is a maximum daily benefit that coincides with the cost of care in your area. Don't be seduced by the 5 percent inflation protection, because the actual cost of care increases approximately 12 percent per year.

5. Insure your estate planning: You've done your will, powers of attorney, and health care advance directives, but how can you be sure that your surviving spouse won't remarry and potentially lose those assets in a subsequent divorce?

Initiate this conversation by pointing to a real life example, if possible: "Isn't it tragic that Marvin (widower friend) disinherited his adult children in favor of his home care companion? Yes, dear, I know that you would never do this, but what if either one of us developed a dementia-related illness down the road? All bets are off at that point.  Let's at least sit down with an attorney and see what the options are (i.e. post-nuptial agreement or trust) before we make any decisions.” 

Read more: http://www.foxbusiness.com/personal-finance/2013/03/21/money-talks-to-have-with-your-spouse/#ixzz2OqKd9rcP

Cyprus Leaders Under Pressure to Avoid Debt Default

Cypriot leaders scrambled Thursday to raise $7.5 billion to avoid a debt default for the island nation, but the European Central Bank warned it would cut off emergency funding Monday if the country cannot resolve its financial crisis.

In Moscow, Cypriot finance officials continued negotiations with Russian leaders over possible new funding.  Meanwhile, in Nicosia, the Cypriot capital, officials discussed restructuring the country's debt-ridden banks and raising money from domestic sources, such as pension funds and the subsidiaries of foreign banks operating on the island.

Several lawmakers said they have abandoned the idea of taxing bank deposits, the controversial measure that was part of the $13 billion Cyprus rescue plan agreed to by the country's international lenders.  After depositors angrily protested the proposed tax, the Cypriot parliament overwhelmingly rejected it this week.

But with that action, Cypriot leaders were faced with finding other ways to secure the emergency funding from the International Monetary Fund, Europe's central bank and the island's neighbors in 17-nation euro currency bloc.

One leader of the country's ruling Democratic Party, Averof Neophytou, said he thinks a solution will be reached.

"We are working very hard. There is only one target, to save our economy and our country," Neophytou said. "I believe that the political parties will show the necessary responsibility for the survival of the Cypriot economy."

Cypriot banks are closed until Tuesday to prevent panicked investors from withdrawing large sums. But anxious depositors lined up outside automated teller machines to take out limited amounts.

If it eventually secures a bailout, Cyprus is planning on using much of the money to refund its beleaguered banks that have been weighed down with losses on Greek government bonds that were reduced in value to help resolve the Athens debt crisis. 

Source: Voice of America / www.VOANews.com/content/cypriot-leaders-continue-debt-negotiations/1625742.html

Lending bill seen thwarting S.A.

HOUSTON — On the heels of a new campaign finance report demonstrating the political muscle of the payday loan industry in the Texas Legislature, consumer advocates expressed collective dismay that an effort to compromise with the industry has produced a tepid reform bill.

The compromise proposal, sponsored by Sen. John Carona, R-Dallas, drew criticism Tuesday from San Antonio City Council member Diego Bernal because it would pre-empt stronger restrictions in the ordinance adopted by the council last year.

“The spirit of our effort was to create a safety net,” Bernal testified. “I'm not sure that what has been proposed will keep (consumers) out of the cycle of debt.”

Instead, Bernal argued, the proposal would “significantly weaken” the ordinance that went into effect in San Antonio on Jan. 1.

The ordinance limits debt to 20 percent of a borrower's income. The Carona proposal allows loans of up to 40 percent of a person's gross monthly income and more loan extensions than ordinances passed in San Antonio, Dallas, Austin and El Paso.

Carona said the industry should be regulated at the state level because mobile phone applications soon will allow payday lenders to circumvent local ordinances by steering borrowers to store fronts outside municipal jurisdiction.

While Carona acknowledged his legislation disappointed consumer activists, he said he hoped to “strike a balance” in order to win passage and avoid a gubernatorial veto in a Capitol where the payday loan industry has enormous influence.

Deborah Reyes, director of government affairs for payday lender Advance America, defended the compromise.

She noted the bill would for the first time limit loans based on a borrower's income and require lenders to accept partial payments to reduce a loan's principle.

But the compromise reached with industry groups may have cost Carona his House sponsor. Rep. Mike Villarreal, D-San Antonio, said he does not believe “the version presented in the Senate committee today provides adequate protection for consumers.”

He left open the possibility that further negotiations would produce a stronger version.

A coalition of consumer organizations, church groups and charities is seeking reform of an industry they say preys on low-income Texans by locking them into a “cycle of debt” by charging sky-high interest rates and fees to “roll-over” loans that a borrower can't pay off.

Many Texans are “pushed into almost indentured servitude” because they are trapped in an-open-ended contract they cannot escape, testified Rhonda Sepulveda of Catholic Charities of the Archdiocese of Galveston-Houston.

A study issued Monday by Texans for Public Justice found the payday loan industry donated nearly $2.3 million to the campaign treasuries of Texas lawmakers and statewide public officials during the 2012 election cycle.

House Speaker Joe Straus led the pack with $360,000 in donations to his account and his Texas House Leadership Fund.

Lt. Gov. David Dewhurst received $200,000 from the industry while Gov. Rick Perry received more than $100,000, according to the TPJ report.

“Such huge political paydays constrain what if anything will be done to protect the neediest of Texans,” the report concluded.

“This is purely a special interest issue,” Bernal said. “There are no pockets of constituents anywhere who are pro-payday lenders. It is about an industry's ability to buy influence.”


Read more: My San Antonio /  http://www.mysanantonio.com/news/local_news/article/Lending-bill-seen-thwarting-S-A-4368331.php#ixzz2OH3N6AmP

With payday loans in decline, MoneyTree seeks OK for new high-interest loans

In 2009, Washington’s Legislature passed tough reforms on the state’s fast-growing payday lending industry. The law -- the first of its kind in the nation -- restricted the number of payday loans that each borrower was able to take out during one year to eight.

Supporters said the law was needed to put the brakes on predatory lending practices that were trapping poor people in as many as 50 high-interest payday loans at the same time.

Since then, the state’s payday lending industry has declined dramatically, going from making $1.4 billion in payday loans in 2007 to $327 million in 2012.

The rapid decline of the payday lending industry is certainly not lost on Dennis Bassford, founder and CEO of Seattle-based MoneyTree Inc., a major player in the state’s payday-lending industry.

Bassford has come back to the state Legislature this year seeking approval of a new type of short-term loan — one that’s not tied to paychecks and would carry limits for borrowers — that has skeptics worried about high interest rates and fees. Critics see the move as a step back, toward potentially abusive loans, but Bassford says a new loan product would allow MoneyTree to respond to demand from customers eager for an alternative to payday loans.

My article in this week’s print edition of the Puget Sound Business Journal (subscription required) focuses on Bassford’s political efforts.

Bassford also said the current state law rations credit and is driving business to unscrupulous payday lenders who have set up shop on the internet.

“I believe it’s driven consumers more and more to unlicensed online internet lenders who are operating from all over the world in an unregulated and potentially illegal fashion,” Bassford told me.

It’s unclear what has been the biggest factor behind the decline of payday borrowing in Washington. Certainly the reforms have played a big role.

The state Department of Financial Institutions acknowledges that out-of-state lenders are a large source of complaints. Of the 286 complaints the agency received about payday lending in 2011, 145 were about online lenders. In October, the agency fined a South Dakota-based operation $669,300 for making online loans with interest rates as high as 1,825 percent.

Deb Bortner, DFI’s director of consumer services, said unregulated online lenders will continue to be a problem, despite crackdowns.

“This is kind of like Whac-A-Mole,” she said. “You shut one down and another one pops up.”

    Greg Lamm covers banking & finance and law for the Puget Sound Business Journal.



Source: BizJournals / http://www.bizjournals.com/seattle/blog/2013/03/with-payday-lending-in-decline.html?page=all

Going Beyond Interest Rates

WASHINGTON -- Another legislative deadline for federal financial aid is looming in this town of perpetual crisis: the interest rate on subsidized student loans will double July 1, from 3.4 percent to 6.8 percent, if there is no Congressional action.

Last year, when loan rates were scheduled to double, President Obama seized on the issue in his re-election campaign, and Democrats and Republicans in Congress quickly agreed that the interest rate for subsidized loans (a need-based program under which the government pays the loan interest while students are enrolled in college) needed to be kept down. Student activists jumped into the argument, and Congress found a one-year fix to keep interest rates low at a cost of $6 billion.

This year, the situation seems different. A hearing Wednesday indicated that members of Congress from both parties are interested in thinking bigger when looking at the federal student loan programs -- either in a bill to avoid the interest rate hike for subsidized loans, or when the Higher Education Act is (eventually) renewed. The House Committee on Education and the Workforce hearing was billed as a broader look at changing the federal student loan programs, and few members of Congress chose to focus on the July 1 interest rate deadline in a wide-ranging discussion that lasted two hours.

The hearing was also the first concrete example of the influence the Bill & Melinda Gates Foundation’s project on redesigning financial aid (see related article) might have on Capitol Hill: Three of the four experts were from organizations that received grants to reimagine a financial aid system geared to college completion, and most of the proposals under discussion were recently put forward as part of that project.

Two of those proposals from witnesses at the hearing focused on setting the interest rates for student loans based on market rates. One recommendation, to set the interest rate at the 10-year Treasury borrowing rate plus 3 percent, was from Jason Delisle, director of the Federal Education Budget Project at the New America Foundation and originally included in the think tank’s report for the Gates project. Justin Draeger, president of the National Association of Student Financial Aid Administrators, also called for a “long-term, market-based solution” basing the rate from year to year on the cost of capital, servicing and loan counseling, and financial risk.

Unlike earlier hearings on direct lending, which often led to Republicans calling the program a government takeover and Democrats characterizing it as a boon for students, this one featured relatively few overt clashes between the parties, and few attacks on student aid.

Instead, the parties focused on different issues within the loan program -- Republicans were more concerned about interest rates and accounting, while Democrats wanted more protections for borrowers. (The exception was Scott DesJarlais, a Tennessee Republican, who suggested that loans were making students lazy and disinclined to work, and suggested shifting some Pell Grant money to federal work-study. “You’re poor in college, and that’s actually part of the fun of it,” DesJardins said, pointing out that he graduated from medical school in 1991 with more than $100,000 worth of loan debt.)

House Republicans in particular seemed to favor a switch toward an interest rate that can vary with market conditions. But the hearing’s focus quickly expanded, including the possibility of a switch to “fair value” accounting, which alters how the government accounts for risk in lending and makes student loans look less profitable for the federal government than they appear under current accounting rules. (Democrats pushed back against the proposal, as well as, in some cases, the premise that student loans should be profitable for the government at all.)

Senate Democrats, including Rep. George Miller, the committee’s ranking member, suggested they would favor additional loan counseling requirements. Draeger argued that colleges should be able to limit borrowing for students, perhaps those in specific majors and programs. On the Senate side, Senator Tom Harkin, chairman of the Appropriations Committee, introduced a bill Wednesday that would add new loan counseling requirements.

Groups that pushed to keep the interest rate at 3.4 percent didn’t like the focus of the hearing Wednesday, arguing that subsidized interest rates should stay low -- meaning the issue could still heat up between now and July 1.

“Last summer, Democrats and Republicans came together to prevent student loan interest rates from doubling, and this year, students can no more afford to have those rates double,” said Jen Mishory, deputy director of Young Invincibles, in a statement Wednesday, adding that the organization “is looking forward to working with all stakeholders to make sure this doesn’t happen, and that Congress takes long-term action to create a more effective and more affordable student loan system.”

Read more: http://www.insidehighered.com/news/2013/03/14/house-holds-hearing-student-loan-interest-rates#ixzz2NiEDS0LO
Inside Higher Ed