Tax deductions: Enjoy them while you can

By Andrea Coombs

Two-thirds of U.S. taxpayers claim the standard deduction, but if ever there was a time to make the most of valuable tax deductions and credits, it might be now, before it’s too late.

Given the general tenor in Washington these days, there’s no telling which tax breaks will survive and which will disappear.

Already some tax perks are gone. Remember Schedule L? On that now-defunct form, taxpayers could claim above-the-line deductions (that is, no itemizing necessary) for certain disaster losses, sales taxes paid for the purchase of a new car, and a limited amount of property taxes. Those benefits are not available on your 2011 return.

And the tax credit for homeowners who make energy-efficient improvements? That’s worth just $500 in 2011, down from $1,500 in previous years — and it’s a lifetime total so if you claimed it before, there’s a good chance you’ve wrung that tax break dry.

And the outlook for other tax breaks is far from certain. The so-called tax extenders — a group of tax breaks that Congress generally renews each year — expired at the end of 2011. That includes, among other things, a provision for older Americans to make a tax-free IRA distribution to a charity, a deduction for college tuition and a deduction for state and local sales taxes.

It’s not the first time the tax extenders have expired. In the past, lawmakers renewed them and other tax breaks retroactively. But, while lawmakers eventually may extend some or all of these perks, it’s no sure thing in the current political climate.

And that means a lot of tax uncertainty ahead.

Paying for college costs? The American opportunity credit is worth up to $2,500 (and up to $1,000 of that is refundable) for certain higher-education expenses, but under current law it’s not available after 2012. In 2013, that credit goes back to being the Hope credit, worth up to $1,500, nonrefundable.

And consider the tax credit for adopting a child. It’s a refundable credit worth more than $13,000 in 2010 and 2011. In 2012, the credit is down to $12,650 and nonrefundable. In 2013, it’s slated to disappear (a much smaller credit will remain available for adoptions of special-needs children).

Of course, the Bush-era income-tax rates, set to expire at the end of 2012, would affect the broadest swath of taxpayers. If lawmakers don’t act, the top income-tax rate rises to 39.6% from 35% now, the other tax brackets inch higher and the lowest tax rate becomes 15%, from 10% now.

Will Congress bring back any of these tax breaks? That’s tough to say in the current climate of gridlock and lawmakers’ focus on deficit reduction.

So, what’s a taxpayer to do? Planning ahead for your 2012 tax return is no easy task, though some planners say pulling income into this year may make sense, particularly for high-income taxpayers, in case higher tax rates do kick in next year.

High-income taxpayers also face a limit on itemized deductions that’s slated to kick in again next year — that would suggest maximizing deductions as much as possible this year.

At this point in time, of course, it’s near-impossible to change your 2011 tax situation, though you do have until April 17 to make a 2011 IRA contribution.

But one big decision taxpayers still must make — and many may be getting it wrong is whether or not to itemize.

Just one-third of tax returns claimed itemized deductions in 2009. Certainly, taking the standard deduction — worth $5,800 for single filers on 2011 returns, up from $5,700 a year earlier (double that if you’re married-filing-jointly) — is a good call for many taxpayers. And it’s much easier than tracking receipts and calculating your tax breaks. But at least one study found that many people who take the standard deduction are overpaying taxes.

As many as 2.2 million tax returns claimed the standard deduction when itemizing would have reduced their tax bill, according to a 2002 report, based on 1998 data, by the U.S. Government Accountability Office, the investigative arm of Congress. Taxpayers overpaid by an estimated $945 million, with about 24% of those taxpayers overpaying by more than $500 each and 76% overpaying by $500 or less.

Meanwhile, other data show that taxpayers are claiming hefty sums, and likely reducing their tax bills substantially. For instance, for people with adjusted gross income of $50,000 to $100,000, the average deduction claimed for interest paid is $10,133; for taxes paid, $6,247; and for charitable contributions, $2,775, according to CCH Inc., based on 2009 data. (The figures are the average for the taxpayers in that income group who claim the deduction.)

Among taxpayers with adjusted gross income of $250,000 or more, the average deduction claimed for interest is $25,527; for taxes paid, $48,317; and for charitable contributions, $18,488.

Next time you start up your tax software or get out your tax forms, make sure you run the numbers to see whether itemizing makes sense for you.

How Much It Costs To Become President

During presidential election seasons, we start hearing a lot of big money figures thrown around but have you ever asked yourself, how much money do you have to spend to become president? If you're planning to make a run for the White House, you'll want to start saving your money now.

President Obama
Let's start with the current president. According to the Center for Responsive Politics, the total amount of money spent by the Obama campaign in 2008 came in at $730 million, far outspending Republican nominee John McCain who spent a mere $333 million. Obama became the first major party candidate to reject public campaign funding which allowed him to not fall under some campaign finance laws that may have limited his fundraising efforts. How much more was spent in 2008, than previous years? The Obama Campaign raised nearly twice as much money as the Bush campaign in 2004 which, at the time, was the most expensive campaign in history.

This year, once the Obama campaign gets in to full swing, he may spend $1 billion in his attempt to be reelected. However, campaign organizers dispute that fact saying that much of his 2008 expenditures came during the primary season during the tough fight with Hillary Rodham Clinton.

The Iowa Caucus
Gaining your party's nomination isn't a cheap endeavor either. According to the Bloomberg Government Barometer, in the recent Iowa Caucus Mitt Romney spent approximately $2.3 million on TV advertising in Iowa, which comes out to around $75.44 for each of the 30,015 votes he received and Rick Santorum's supporters spent only $303,570 for his TV ads or $10.12 for each of his 30,007 votes. The person who spent the most and got the least may be Rick Perry who spent $2.8 million on advertising or $218.65 for each of his 12,604 votes, according to figures posted by Campaign Media Analysis. The total amount of advertising dollars spent in Iowa came out to an estimated $7 million for all candidates.

Super PACs
Political Action Committees may spend more on candidates than the actual campaign. Restore our Future, a Super PAC in support of Mitt Romney spent $2.8 million, nearly twice as much on TV ads than the Romney Campaign, which spent $1.5 million. These were mostly ads geared at discrediting Newt Gingrich.

Statistics seem to indicate that it worked. Gingrich was in the top spot with 26% of the projected vote but once the caucus took place, he held a distant 13%. PACs are in the perfect position to help their candidates according to insiders. Since they aren't accountable to anybody and aren't officially part of the official campaign, they can spend large sums of money doing the campaign dirty work allowing the candidate to say that they aren't responsible for the actions of their supporters. This year is sure to see large budgets, not only in the campaigns themselves but also in these political action committees.

The Bottom Line
Along with healthcare, another recession-proof expenditure appears to be the financing of presidential candidates. By the time the final vote is cast on election night, billions of dollars will have been spent campaigning for your vote. The race is on.

Read more: http://financialedge.investopedia.com/financial-edge/0112/How-Much-It-Costs-To-Become-President.aspx#ixzz1kUuDd1ei

Top 7 Most Common Financial Mistakes

It is indeed a material world. When it comes to spending, the U.S. is a culture of consumption. The result: rising levels of consumer debt and declining household savings rates. But in 2008, this culture was hit hard by economic reality. According to the Federal Reserve, U.S. household debt grew steadily from the time the Fed started tracking it in 1952. It declined for the first time in the third quarter of 2008. As a result of the credit crisis and ensuing economic recession, savings rates also rebounded. For those who had been living beyond their means for years, it suddenly got a lot harder to make ends meet. And, although the government tends to encourage spending during economic downturn and statistics may lead us to think that overspending is normal, it is often a risky choice. Here we'll take a look at seven of the most common financial mistakes that often lead people to major economic hardship. Even if you're already facing financial difficulties, steering clear of these mistakes could be the key to survival.

Mistake No. 1: Excessive/Frivolous Spending
Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you're enduring financial hardship, avoiding this mistake really matters - after all, if you're only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

Mistake No. 2: Never-Ending Payments
Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio and video games, cell phones and pagers can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning your from financial hardship.

Mistake No. 3: Living on Borrowed Money
Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don't be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you'll spend more than you earn.

Mistake No. 4: Buying a New Car
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years, and lose money on every trade.

Sometimes a person has no choice but to take out a loan to buy a car, but how much does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. Unless you tow a boat or trailer, or need an SUV to earn a living, is an eight-cylinder engine worth the extra cost of taking out a large loan? If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive. You might need one, but if you're buying more car than you need, you're burning through money that could have been saved or used to pay off debt.

Mistake No. 5: Buying Too Much House
When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

Mistake No. 6: Treating Your Home Equity Like a Piggy Bank
Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you'll end up paying way more for your home than it's worth, which virtually ensures that you won't come out on top when you decide to sell.

Mistake No. 7: Living Paycheck to Paycheck
In 2007, the U.S. household savings rate fell below 1%, but other countries had considerably higher rates of personal savings. For example, the Netherlands, Italy, Norway, Germany and France personal savings rates average 10% or more according, to the OECD Factbook 2005. Clearly it is possible to enjoy a high standard of living without financing it with debt. Countries in Asia boast savings rates of as much as 30%!

The cumulative result of overspending puts people into a precarious position - one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you'll have very few options. Everyone has a choice in how they live, so it's just a matter of making savings a priority.

Making a Payment Vs. Affording A Purchase
To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn't the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

Read more: http://www.investopedia.com/articles/pf/05/041405.asp#ixzz1kUsxdue6

How to Talk to Your Parents About Their Money

By Christine Benz, Morningstar

Many adult children are taking a greater role in their aging parents' financial lives, a natural outgrowth of increased longevity as well as rising rates of dementia and Alzheimer's disease in the senior population. Yet getting involved in their parents' financial affairs isn't always easy or natural for children, and some miss the signs that their parents need a helping hand to help them navigate their money matters. Here are some tips from Wall Street Journal reporter Jeff Opdyke from his latest book, Protecting Your Parents' Money: The Essential Guide to Helping Mom and Dad Navigate the Finances of Retirement

(1) Pay attention to what's going on with your parents or grandparents. A few years ago, I was at my grandmother's house (she essentially raised me, so I see her as my mom) and I noticed she had a copy of Rolling Stone magazine on her coffee table. Now, my grandmother is in her 90s and would not know the Jonas Brothers from the Doobie Brothers, so there's no way she'd have purposefully subscribed to Rolling Stone. Clearly, she'd been sold the subscription by a telemarketer. But the event prompted me to talk to her about her finances and ask her how I might help her in the future avoid these kinds of unnecessary costs (she lives on a fixed income, so I know wasted expenses can be detrimental in the event she needs a nursing home or some form of assisted living). I reminded her that I'm here to help her deal with the finances of aging. She called me months later to help her and my aunt understand the pros and cons of a reverse mortgage and ultimately to guide them through the process.

So, pay attention with your eyes. And pay attention with your gut. You know when things don't feel right. Go with those feelings and begin to look and listen for signs of financial duress/stress in your parent's life.

(2) Adult children are often scared to talk to a parent for one of two reasons: One, they're uncomfortable contemplating their parent's mortality and, thus, want to avoid discussing it; or two, they think Mom/Dad has no interest in talking about such a personal topic.

Whatever the case, the reality is that one day this problem is going to simply drop into your lap, either because your parent died or becomes somehow incapacitated. And suddenly you or someone in your family is going to be forced to deal with all the stuff that must be dealt with, such as bills, account statements, insurance policies, retirement accounts, pensions, and what to do with the house or the car. There are so many end-of-life issues that have to be wrapped up or managed, and it's far better to go into that eventuality with some level of preparation and knowledge, instead of having to face it blind.

The only way to get that knowledge is to realize that the only person who can help you is your mom or dad. You'd be surprised how many parents actually want to have this conversation but are too scared to approach you because they think you don't want to talk. They want someone whom they can trust but don't want to feel they're imposing on you. So buck up and dive in. It's the best way to begin dealing with an issue that you're going to be forced to deal with at some point anyway.

(3) When it comes to retirement communities, what can your parent afford? Retirement communities can be very--very--expensive. At the high end are continuing-care retirement communities (so-called CCRCs) that are designed like small neighborhoods or high-end condominium complexes. Mom/Dad move in long before they need any kind of care, and as they progress through retirement, they move into an assisted-living center that's part of the community and then into a nursing home, also part of the community, if needed. It's a great transitional design because the elderly really dislike leaving the comfort of what they know as normal. But CCRCs are pricey because they're part real estate investment, part assisted-living/nursing home. They start at $100,000 or more to buy a unit, and then cost a few thousand dollars a month in fees. So they are only for parents who can afford the cost, or for families who will pay those costs for Mom/Dad (you recoup all or more of the cost when you sell the unit after a parent dies or moves into the nursing home permanently).

At the other end of the spectrum is nursing home care paid for by Medicaid. That's for who are effectively indigent retirees who do not have the assets necessary to pay for a nursing home on their own.

In the middle is a wide range of housing options ranging from private-pay nursing homes to communal homes. What's right for your parent boils down to a few questions:

1. What can Mom/Dad (of the family) afford?

2. Where does Mom/Dad want to go, based on what is affordable?

Once you and your parent have decided on what's affordable, you need to do your homework to find the best option. That's largely a word-of-mouth campaign. You can check all the various state agencies that keep track of local elder-care facilities, and you can find those by checking with your local area Agency on Aging. But the real test is how the people you know rate the places you're investigating. Ask around. Everyone who has dealt with this with their own parents has a story to tell. Talk to co-workers and friends. They or their circles of friends, family, and acquaintances will steer you in the right direction based upon their personal experiences and recommendations.

The biggest question is affordability. Does your parent--or do you or other family members--have the financial wherewithal to pay for a private nursing home? They can run $50,000 a year or more, depending on what part of the country you live in and the amenities that are included or which Mom/Dad need. If you or your parent cannot afford the costs, then you have to look to Medicaid facilities.

Beyond costs, the biggest question is safety. Does the nursing home you're considering have a good track record, or is it marred by violations? One of the biggest worries that adult children have when it comes to nursing homes is the nagging concern that Mom/Dad are not being treated well. That leads to feelings of guilt and depression, which, in turn, makes it harder on you to deal with your parent's aging process. To allay those concerns, do your homework to find the best nursing home that your parent can afford or is eligible for under Medicaid.

Most states regulate nursing homes, and you can contact the local state agency that keeps those documents and request copies of the various violations. Again, you should contact the local area Agency on Aging (they're in every community) and ask which agency in your state keeps tabs on nursing homes, or ask if they have any local rankings or ratings for area nursing homes.

(4) The best approach is the most honest and straightforward approach. So just come out and ask. "Mom, Dad, you're reaching an age where you might need to have someone step in and act in your best interest in an emergency, and I would like to be there for you in that event. I know there are private documents and accounts you might not want to share with me, and I know you might have bequeaths in your will that you don't want me to know about. But you're going to need an advocate one day who can take control when you don't have the ability any more. So I'd like to make a time to talk to you about all that I might need to know to serve that roll for you when it becomes necessary."

Straightforward and honest. You might not find Mom/Dad give you the keys to the kingdom immediately, but you have begun the process. And you will find in most cases that a parent will open up at some point and let you in. That's how you begin to broach the topic. Once you're in the door, you will have free reign to ask about wills and any other estate-planning documents.

Financial Advice for Those With Small Nest Eggs

By Ron Leiber, NY Times

When Merrill Lynch recently discouraged its thundering herd of brokers from taking on new clients with under $250,000 in assets available for investing, it wasn’t a big surprise.

Brokerage firms have been making these sorts of moves for years, and Merrill is notorious for a leaked memo in the late 1990s that discouraged “charity work” for clients with less than $100,000 in assets — “poor people,” as the memo put it.

That patrician view is probably a minority one: if the people who run Merrill Lynch felt that way, they wouldn’t be doing what they’re doing now, which is trying like mad to figure out a way to service those smaller accounts profitably.

But Merrill’s decision to tell its brokers that they might not get paid if they persisted in working with such people reflects one of the sorriest truths of the financial services industry: Nobody has figured out a way to consistently give large numbers of people reasonably priced financial advice across all areas of their life and to do so in an ethical manner.

The case of Merrill — and its effective opposite, a start-up called LearnVest — is instructive in part because it reflects how the world of managing money has changed since Merrill Lynch first started hanging shingles on Main Streets all over the United States.

Charles E. Merrill & Company opened for business nearly 100 years ago, and the company (along with Merrill’s current owner Bank of America, interestingly enough), resolved to serve Main Street, not Wall Street. Charlie Merrill put it this way, according to the 1994 book by my colleague Joe Nocera, "A Piece of the Action." In it, he quotes Mr. Merrill as writing the following: “A new guild has sprung up in the (investment) banking profession which does not despise the modest sums of the thrifty.”

Many brokerage firms have backed away from that sort of stance in recent years. An old saw in the industry notes that the little old lady with the diminishing balance who hounds you when her dividend checks arrive late takes up five times as much time as a 50-year-old millionaire.

Besides, you make more money serving richer people. So the big firms (and thousands of smaller operations and individuals) fight hard over the 1 percent and then siphon off a small cut of their assets each year through fees and other revenue mechanisms.

Everyone else ends up at Charles Schwab or Fidelity and pays roughly $1,500 to $3,000 if they want a full financial plan with advice on insurance and mortgages and other things beyond investments.

Nowadays, a thrifty Merrill customer with modest sums is told to use a service called Merrill Edge. And Merrill is taking its best shot at attracting and keeping them (and eventually) upgrading them to a real broker), given that it believes that there are 28 million households with $50,000 to $250,000 in assets.

The people who service them are called Financial Solutions Advisors. There are more than 500 of them in bank branches and the company will hire 500 more in 2012. There are currently about 800 F.S.A.’s working in call centers as well.

5 Money Habits Guaranteed To Wreck Your Retirement

It’s no secret that most of us have bad habits when it comes to money management.

Having a steady income from full-time employment tends to offer up some forgiveness for these transgressions.

But bad money habits can follow us into retirement, long after the steady flow of money dries up to a dribble, and cause us to run out of money long before we run out of years.

Here are five bad financial habits you should break now in order to keep them from breaking you during your golden years.

Not contributing to a retirement plan. Procrastination is the biggest reason that many seniors don’t have enough savings to cover their total cost of living during retirement. Although we have all been warned to save now, most of us can find plenty of reasons to put off saving until it becomes more financially feasible. Stop procrastinating now and start saving.

Thinking you will work longer. Many of us would like to think that we will retire early in life, but those who haven’t saved won’t be able to. Some people will try to work longer to make up for not saving as much as they should have earlier on. But delaying retirement might not work if you are forced into early retirement or sidelined by an illness or injury. Save now for retirement so that you can be prepared no matter when you end up retiring.

Depending on an inheritance. Whether you have a rich old uncle or not, you shouldn’t count on getting an inheritance that will fund your golden years. There is no guarantee that a wealthy relative will bequeath you enough money to live on for the rest of your life. And your relatives could end up spending the money themselves if they live longer than expected. It’s better to fund your own retirement than to count on a clause in a will.

Skimping on long-term care plans. You need a plan for taking care of yourself when you are no longer able to do it on your own. This means buying insurance that will cover the cost of long-term care. By buying an insurance policy now, you can help to ensure that your long-term care costs will be paid for long before you ever need to use them, saving you and your family a lot of grief in the future.

Taking Social Security too soon. You can start drawing Social Security benefits as early as 62. But for every year you forgo drawing Social Security benefits you will get a 7 to 8 percent raise in your monthly payments. So, by waiting until 65 or even 70 to start drawing Social Security, you can significantly increase your monthly income in retirement, and these payments will be adjusted for inflation each year.

Read more: http://money.usnews.com/money/blogs/On-Retirement/2012/01/13/5-bad-habits-to-break-before-retirement#ixzz1jkUSzEEv

Innovative Ways To Get Your Finances In Order In 2012

If you have let your finances fall into disarray and have been putting off the task of cleaning them up, then there is no better time than January to begin getting your financial house in order. Here are five things that you can do this coming year to get back on track financially and make the most of your money.

Make a Budget - There are many programs and resources that can help you do this effectively, such as www.mint.com, Quicken and Microsoft Money. Websites and computer programs can usually provide more realistic and effective budgets than written ones due to being better able to factor in non-periodic payments and one-time expenses, while also providing reminders for upcoming expenses and warnings if you are exceeding your budget. Many of these programs also allow you to link all of your other accounts, such as retirement and banking, to this program, so that they can provide a continual moving snapshot of your entire financial picture on a daily basis.

Adjust Your Tax Withholding - If you received an income tax refund of more than $1,000 last year and your income and expenses are likely to be materially the same this year, then it's probably time to fill out a new W-4 form with a higher number of allowances than you listed before. If your refund was for several thousand dollars, then you should probably increase this number by at least two or three for both federal and state withholding. It does not make sense to loan hundreds or thousands of dollars each month to the tax collectors at 0% interest.

Dump Your Losers - This may be the time to finally get rid of the stock that you bought five years ago at 45 cents a share that is now trading for a penny a share. None of the company's new products have caused the stock to rise to $10 a share like they promised it would, so you might as well cut your losses and liquidate this holding. Then you can declare a capital loss on the sale and either net it against any taxable investment gains or else deduct $3,000 worth of your loss each year until it is fully written off.

Refinance Your Home - Interest rates are at historic lows. If you haven't gotten around to refinancing your house and plan to continue living in it for a while longer, then this is the time to have your house appraised and get your paperwork together. Although refinancing can be a bureaucratic hassle in some respects, it can save you a bundle over time and allow you to contribute the difference to your retirement savings, or pay down other debt.

Protect Yourself - Lastly, you should create an emergency savings fund and get your estate plan in order, if you haven't done so already, to ensure that you and your family are always protected.

The Bottom Line - Whether you're looking to save a little more for retirement or just trying to get back on track, consider these options to improve your financial well-being in the New Year.

Read more: http://financialedge.investopedia.com/financial-edge/1211/Innovative-Ways-To-Get-Your-Finances-In-Order-In-2012.aspx#ixzz1jf3O7N8x

How Does The Strait Of Hormuz Affect My Gas Prices?

Unless you're a geography enthusiast or have ties to the region, there's a better-than-average chance that you've never heard of the Strait of Hormuz. A strait is a small channel of water that connects to larger bodies; in this case, the Persian Gulf and the Gulf of Oman which connects to the Arabian Sea. Iran sits to the north of the strait and the United Arab Emirates to the south.

However, this small body of water has a large impact on world economies. It's the only waterway open to the oil rich countries of the Persian Gulf and with an average of 14 tankers holding 15.5 million barrels of oil passing through the strait each day, it's vitally important for the world's oil supply. Twenty percent of the world's oil passed through the Strait in 2011.

Sanctions - The United States, along with other nations, have grown increasingly concerned that the Iranian nuclear program isn't as non-military as they claim. Iran's refusal to cooperate with United Nations mandates has forced nations to impose trade sanctions against them. On New Year's Eve, these sanctions were further tightened making it increasingly difficult for Iran to sell their oil.

China, one of Iran's biggest customers, has cut their purchases by more than half and EU countries have recently agreed to similar actions. These sanctions have caused the value of Iran's currency to plummet more than 40% and the even tighter sanctions will make the pressure on their economy even worse.

Iran's Warning - In response to these sanctions, Iran has warned that if they can't sell their oil, other nations won't either. They've threatened to block the Strait of Hormuz, preventing oil from reaching the markets. The U.S. as well as the U.K. have pledged to take military action if Iran attempts to block the waterway.

The Effects at the Pump - If Iran attempts a blockade of the Strait of Hormuz, energy analysts believe that oil prices could rise as much as $50 per barrel in only few days, making prices at the pump well above $4 per gallon. Any long-term standoff could have severe economic effects to cash-strapped consumers forced to pay higher prices.

The likelihood of Iran following through on their threat is slim. Iran sends 2 million barrels of oil through the strait each day and any further disruption of their shipments would be catastrophic to their already weakened economy, according to Energy Department analysts. Second, Iran knows that economies all over the world would unite to keep the strait open in order to keep oil prices low. Moreover, Iran's Navy would be no match for the combined militaries of the world.

What may be most devastating is a slow escalation of the conflict causing oil prices to slowly move higher, as they have since the tension began. As insurance companies raise premiums for the tankers, oil companies pay higher wages for crews willing to take the extra risk and the market responds to the political tensions, Iran could accomplish its goals without an actual blockade.

The Bottom Line - The oil market is very sensitive to events like these. Analysts believe that an actual blockade likely won't play out, but tensions may cause pump prices to rise in the short term.

Read more: http://financialedge.investopedia.com/financial-edge/0112/How-Does-The-Strait-Of-Hormuz-Affect-My-Gas-Prices.aspx#ixzz1jf1c4kmk

How Much Is A Homemaker Worth?

The life of a homemaker is one that includes an endless amount of demands and to-dos. Depending on the size of the home and family, the position of homemaker can go well beyond the usual nine to five. We examined some of the tasks that a homemaker might do to find out how much his or her services would net as individual professional careers. We only take into consideration tasks which have monetary values and use the lowest value for each calculation.

Private Chef

Meal preparation is one of the major tasks of most homemakers. From breakfast to dinner, there is plenty of meal planning and cooking to be done. The American Personal Chef Association reports that its personal chefs make $200 to $500 a day. Grocery shopping is another chore that needs to be factored in. A homemaker must drive to the supermarket, purchase the food and deliver it to the home. Grocery delivery services charge a delivery fee of $5 to $10.

Total cost for services: $1,005 per five day work week x 52 weeks = $52,260 per year.

House Cleaner

A clean and tidy home is the foundation of an efficient household. Typical cleaning duties include vacuuming, dusting, sweeping, scrubbing sinks as well as loading the dishwasher and making beds. Professional maids or house cleaning service providers will charge by the hour, number of rooms or square footage of the home. For example, bi-weekly cleaning of a 900-square-foot, two-bedroom apartment with five rooms, costs $59-$124. A 1,300 square-foot, single-story home with seven rooms runs $79-$150. A 2,200 two-story three bedroom home with nine rooms averages $104-$180. Additional tasks such as oven or refrigerator cleaning and dusting mini blinds can run an extra $20-$25.

Total cost for services: $118 per week X 52 Weeks = $6,136 per year.

Child Care

Homemakers provide full-time, live-in child care. This type of service from a professional provider would usually come with a host of perks including health insurance, paid vacation and sick days, federal holidays off, dental and vision coverage, and bonuses. The International Nanny Association's 2011 survey found that nannies make $600 to $950 per week in gross wages, on average.

Total cost for services: $600 a week plus perks/benefits x 52 Weeks = $31,200 per year.

Driver

A private car service might seem like a high end luxury to most, but the beneficiaries of a homemaker get this service on a daily basis. Companies like Red Cap, which provides personal drivers that use the client's own car as the means of transportation, offer a glimpse into the cost of this homemaker task. An elite membership which includes 365 days of unlimited, round-trip service is $1,000 a year plus 33 cents - $2.03 per minute.

Total cost for services: $1,000 per year + [(estimated miles driven 8000 miles / 50 MPH) x 60 min/hr x $0.33 per minute] = $4,168 total per year.

Laundry Service

Clean clothes come at a cost when you have to pay for the service that most homemakers do for free. Professional laundry services charge by the pound. For instance, Susie's Suds Home Laundry Service, Inc. in Texas charges 90 cents to $1.00 a pound to wash, dry, fold, hang and steam your clothes. Items that take longer to dry such as comforters, blankets, rugs and winter clothes are assessed at a price of $12-$15 each.

Total cost for services: $0.90 per pound x 4 pounds of clothes per day x 5 days per weeks x 52 weeks = $936 total per year.

Lawn Maintenance

Basic maintenance of the exterior property is a less common, but possible duty of a homemaker. This could include things such as mowing, debris removal, edging and trimming the lawn. These services cost about $30 a week on average.

Total cost for services: $30 per week x 52 weeks = $1,560 total per year.

The Bottom Line

Total for a year of all services is: $52,260 + $6,137 + $31,200 + $4,168 + $936 + $1,560 = $96,261 per year.

The daily work of a homemaker can sometimes be taken for granted by his or her family members. However, these services could earn a homemaker a considerable wage if he or she took those skills to the marketplace. Homemakers in general contribute a lot more to the home in addition to these tasks, and no amount of money can fill those needs.

Read more: http://financialedge.investopedia.com/financial-edge/0112/How-Much-Is-A-Homemaker-Worth.aspx#ixzz1jeyB4DSy

Accidental death and dismemberment

You've probably received offers for accidental death & dismemberment (AD&D) from your credit card companies, mortgage holder, bank or other organizations. But it's important not to confuse this type of insurance with standard life insurance. It's especially important to avoid relying solely on AD&D to provide for your dependents in the event of your death.

AD&D policies are relatively inexpensive and easy to understand. At first blush, purchasing an AD&D policy might seem like a wise investment for anyone. If you die accidentally, your beneficiary stands to collect lots of money. If you lose an arm or other limb, or your sight, you would collect a significant sum (specific payments will be spelled out in your policy application).

But is AD&D really a good value? Some industry experts say it's probably not, if you consider the odds of making a claim (and the small number of actual claims is why these policies can be offered so cheaply).

Just how likely is it you'll die from an accident? According to the Centers for Disease Control and Prevention, 121,599 people died from unintentional injuries in 2006 (the latest data available). A 2009 National Center for Health Statistics report says that age is also a factor in the leading causes of death. If you are a 35-year-old nonsmoking male, you are four times likely to die in an accident before age 45 as you are to die from heart disease. If you are a woman of the same age, you’re twice as likely to die in an accident than from breast cancer. Compare that to the death rates for the No. 1 killers of heart disease (204.1), malignant neoplasms (cancer, 185.7) and cerebrovascular diseases (such as diabetes, 44.4).

You're more likely to die from natural causes than from an accident if you are older than 45, according to the NCHS report. You're also more likely to become disabled by a back injury than you are to lose a limb, but that also depends on what sort of risks you engage in.

Because AD&D policies pay out only in specific, generally unlikely circumstances, you're far better off putting your insurance dollars into other policies that will provide broader coverage, such as:

• Life insurance: For protection against the more likely risks, like dying of old age or cancer, you're better off putting your monthly premium payment toward a standard life insurance policy.
• Health insurance: If you're injured in an accident, health insurance will help cover hospital and medical bills. Of course, health insurance does not pay you a lump sum should you lose a limb or your sight.
• Workers comp: If you do lose a limb — or hurt your back — on the job, workers compensation likely covers treatment for your injury.

However, AD&D may fill in some gaps. If you do have an AD&D policy, it will pay out in addition to other coverage you have. For example, if you lose a limb on the job, workers comp would still pay for your treatment and the AD&D policy would pay you a lump sum.

Target Funds End Year Far From Bull's Eye

By Sarah Morgan, Smart Money

Often billed as the fund and brokerage industry's quick fix for retirement planning, so-called target-date funds took an unexpected turn for the worse in 2011.

The funds, which have become an integral part of many Americans' 401(k) plans, are designed to protect investors by decreasing their exposure to stocks and increasing their bond holdings as people get closer to retirement, or their "target" year. But the average fund with about four years until its target date fell 0.4% in 2011, according to Morningstar Inc., a fund-research firm. That trails the Standard & Poor's 500-stock index, which gained 2%, including dividends, and is well below the Barclays Capital Aggregate Bond Index, which rose nearly 8% for the year.

The results may revive a debate over whether the funds expose investors close to retirement to too much stock-market risk.

The funds have become a popular option for company 401(k) plans, with $368 billion in assets in 2011, more than double the amount they held in 2008.

As part of the Pension Protection Act of 2006, target-date funds were made one of a few permissible "default options" for retirement plans with an automatic enrollment feature, meaning some employees are automatically enrolled in the funds. But far from protecting investors, many target funds performed worse than other funds during the market crash of 2008.

Since that downturn, the funds have generally done well -- until last year.

Experts say target funds' broad array of holdings actually hurt last year, as many investors fled to blue chip stocks and long-term government bonds.

Despite widespread criticism from regulators and lawmakers after 2008, the average fund nearing retirement today has 40% of its assets in stocks, down only three percentage points from 2008.

And while retirement experts say target-date funds are still well-suited for investors without the knowledge or desire to select their own investments, many financial advisers recommend that more independent-minded investors build their own retirement portfolios.

2011 End of the Year Report

To say that 2011 was a challenging investing year would be a understatement. We started the year with optimism based on the United States continuing to grow from the “Great Recession”. Analysts were convinced we would continue the modest upswing that began in 2010.

In fact through May 2011, the stock market had appreciated 8 percent. Then all hell broke loose. While the U.S. economy continued to modestly expand, global events to include partisan gridlock in Washington, regime changes in Egypt and Libya, the earthquake in Japan, and European sovereign debt issues, drove wild fluctuations in stocks, bonds, and commodities. 2011 was one of the most volatile years in stock market memory.

The Washington stalemate over increasing the U.S. debt ceiling brought the U.S. to the brink of default which led Standard and Poor’s to strip the country of its Triple-A Debt rating. That “shot across the bow” reduced investor confidence and led to many selling their investments for things like gold, and cash. In August the markets dropped over 4 percent. Then stocks went into a freefall losing 12 percent by the end of September. The Japanese tsunami and earthquake severely disrupted global supplies of many manufactured goods. By then the European sovereign debt crisis took center stage. Countries like Greece and Spain have significant debt they can neither repay nor grow out of. And because of the common Euro currency, the effected countries cannot craft individual national monetary policies to resolve the issue. In addition, China’s economic growth, which had been feasting on commodities and manufactured goods produced from around the world, slowed which dragged the global economy down some more.

The resultant steady stream of bad headlines sparked stock market volatility. On good news days the market would jump several percentage points while on bad news days the market dropped a similar amount. By the end of the year we finished 2011 more or less where we started. The Dow Jones Industrial Average eked out gains of 6% while the S&P 500 ended the year essentially where it started. Certainly disappointing. Of note, Hedge Funds, typically run by the smartest minds in the business recorded, on average, 5 percent losses in 2011.

Those of you who invested early in the year enjoyed positive gains before sliding back to where you started. Those of you who invested mid-year got in at the peak and endured the subsequent slide before making some of it up later in the year. Those who invested in Autumn, got in at the market lows and captured all of the upside of the rebounding markets. If there is a lesson to be learned here, it is to invest what you can, when you can, in order to take advantage of dollar cost averaging.

So what does 2012 have in store? While the crystal ball always remains fuzzy, consensus is we should expect to see more of the same for early 2012 - - Moderate growth with wiggles up and down. European sovereign debt problems will continue to percolate but it appears that initial steps have been taken to restore confidence in some sort of a solution. Similarly, in a Washington DC election year, analysts expect partisanship to decrease in favor of improved deficit and debt policy as both parties vie for the White House and control of Congress.

After a “more of the same” start, analysts remain guardedly optimistic for 2012. Today U.S. economic growth remains around 2%, unemployment is now less than 9 percent and new jobless claims are decreasing, housing construction spending is increasing, and consumer confidence slowly improving. While not dramatic, these are significant improvements compared to where we were. That being said, we still have significant headwinds with an aging population (and demands for entitlements), a weak housing sector, and significant debt and deficit spending. Estimates are the U.S. economy will grow another 2% in 2012.

Stocks Predict Who Will Be President With 88% Accuracy

The S&P 500's price performance during the three calendar months leading up to the presidential election has been a good predictor of whether the president or his party would be re-elected or replaced. An S&P 500 price rise from July 31 through October 31 traditionally has predicted the reelection of the incumbent person or party, while a price decline during this period has pointed to a replacement. Since 1948, this election-prognostication technique did an excellent job, in our view, recording an 88% accuracy rate in predicting the re-election of the party in power (it failed in 1968). What's more, it recorded an 86% accuracy rate of identifying when the party in power would be replaced (it failed in 1956). Therefore, pay attention to the market's performance in the three months leading up to the presidential election, as it will probably do a better job than the plethora of political pundits prognosticating on the presidency.

Read more: http://www.businessinsider.com/stovall-stocks-president-election-year-2012-1#ixzz1icZwyFSZ

How to Do a 'Needs Analysis' Before you Buy Life Insurance

When buying life insurance, don't choose a policy before you understand the financial needs of your beneficiaries.

Most people's thinking is backwards when it comes to life insurance. They decide on the product they want -- whether it's basic term insurance, permanent life insurance or a combination -- before they consider how much protection they need.

You really need to figure out how much life insurance you want and then think about which product, in that distinct order.

The best way to determine how much life insurance -- if any -- you should buy is with a needs analysis. A new study by the international insurance consulting group LIMRA finds that people are 1.5 times more likely to buy life insurance if they first do a needs analysis.

Analyze current and future expenses

A good needs analysis will look at immediate, ongoing and future expenses.

Immediate expenses include any outstanding medical bills and the cost of a funeral. Ongoing expenses include your mortgage and any other outstanding debt you have.

People typically want their families to be able to pay off their debts when they die. Debts are a much bigger issue today than they have been in the past.

The mortgage is another thing you'll want to pay off at death because it's such a big part of the budget.

Ongoing and future expenses might include sending your children to college. Consider whether your children are likely to seek advanced degrees and spend more time in school. The more detail you can provide about the cost of college, the better.

What you're worth to your family

Bates says his company looks at your lifetime economic value to help you determine the amount of life insurance to buy. The formula is based on your answers to these questions:

• How old are you?
• How much do you earn before taxes?
• What's the annual value of the things you do for your family, such as chauffeuring kids, cutting the lawn, or whatever your survivors would have to pay else someone to do?
• How much do you pay in taxes?
• How much do you receive in employee benefits, such as health insurance and contributions to retirement savings?
• At what age do you plan to retire?
• How much do your beneficiaries need for personal necessities such as food, clothing and transportation?

A good needs analysis also considers how much the death benefit from the life insurance policy is likely to earn if it's invested.

Be honest when doing a needs analysis. The insurance company selling you a policy isn't likely to ask for tax returns to verify the information you've provided, but the final analysis will be only as good as your answers.

Online life insurance calculators

You can find calculators online to do your own needs analysis. For example, Insure.com offers a life insurance calculator.

While online calculators are a good starting place, everyone's needs are different. A good agent or financial planner will start with a basic form, he says, but customize the questions and go deeper to come up with a more accurate figure.

Ask several agents to do separate analyses. You should get more than one proposal from more than one life insurance company so that you can compare life insurance quotes.

You should also review all your policies -- including auto, home and disability insurance coverage -- to be sure they're meeting your needs. If your goals and objectives change, so could your insurance needs.

Read more: http://www.foxbusiness.com/personal-finance/2012/01/03/how-to-do-needs-analysis-before-buy-life-insurance/#ixzz1iVk5rt6S

Tax Tips for Single Women and Moms

Tax season might seem far away, but it has a certain way of creeping up on us and it will be here before we know it. Here are some tips for female tax filers to eliminate some of the angst out of preparing taxes:

1. Get organized. Create a file for the current tax year. During the year slam in paperwork for transactions that impact your taxes, e.g. copies of letters from nonprofits thanking you for charitable contributions, receipts for IRA contributions, closing statements from a refinancing, receipts for vehicle registration and property tax payments, beginning and ending odometer readings if you use your vehicle for business. Then in January when all those important tax documents arrive – W2s, K-1s, 1099s, etc – put those in the tax file and voila, you have a compilation of your tax data without a lot of extra work. Begin a new file at the start of every year.

2. If you suspect your ex-spouse will attempt to take your kid(s) as dependent(s) on his tax return and he is not entitled to the deduction, beat him to the punch by filing your taxes first. The IRS will not get in the middle of a domestic dispute. Whoever files first gets the deduction. If the later-filing party is entitled to the deduction, he or she will have to make a case for it.

3. Keep important information relating to the validity of deducting your dependent in your tax file. This includes paperwork such as school records, which show the child lived at your address, and records to prove that you provided more than 50% of the child’s support

4. At year end, ask your child care provider for a statement showing how much you paid. Make sure you have the provider’s federal ID number or Social Security number and address in order to take the credit.

5. Track alimony payments--this is taxable income to you and must be reported on your income tax return. Compare your total with your ex’s total; one way to avoid an audit is to be sure alimony numbers on both party’s tax returns match. Child support is not taxable nor is it a deduction for the spouse who provides it. If you are getting a divorce, talk to your tax pro to ensure that support payments you receive will be allocated properly between alimony and child support.

6. Track tuition, books, computers, and fees that you pay on behalf of your dependent child because you may be able to claim an education credit or deduction for the amounts you pay. And remember, if the child goes away to school, and you are providing more than 50% support, you may still claim head of household status even during the absence of the child.

7. If you are going through a major life change including, marriage, divorce, purchase of residence, loss of a residence, changing jobs, or becoming self employed, be sure to identify the tax ramifications of your new course, and consult a pro if necessary.

Read more: http://www.foxbusiness.com/personal-finance/2011/12/29/seven-tax-tips-for-women/?intcmp=featuredmedia#ixzz1iViAP37O