July 2010 Financial Articles


What the New Credit Card Rules Mean to You | Top


Did you know that there are new rules governing the fees and penalties that credit card companies can charge you? The provisions in the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 should save consumers at least $10 billion a year, according to the Pew Foundation. The  Virginia Society of CPAs (VSCPA) explains why the changes are important, and offers some advice on dealing with credit cards.

Response to consumer concerns

In recent years, many consumers have complained that it has become more and more difficult to understand how many credit card deals work, since companies sometimes seemed to raise their rates without notice or imposed surprise fees on bills paid even a few hours late. Consumers felt the contract terms were often not satisfactorily explained or were difficult to understand.

New disclosures

The new rules are intended to change all that. For example, with some exceptions, the terms that you agree to when you sign up for a card must stay in place for at least one year, and even promotional rates for new account holders must last a minimum of six months. Once the credit card company raises rates, it can only apply them to new charges for cardholders in good standing. Rates cannot be applied retroactively to existing balances. And your payments must be applied to your highest interest-rate balances first. In addition, payment due dates must be clearly indicated and consistent from month to month, and the bill must be sent at least 21 days before the payment deadlines. Consumers will be told when they’re about to exceed their credit limit, enabling them to avoid over-limit fees.

Knowing where you stand

It should also be somewhat easier to understand your credit situation. Your monthly statement will now include information on how long it will take you to pay off your outstanding balance if you pay only the minimum due or if you pay off your debt in three years, and how much you will pay in interest in each case. These disclosures may be a valuable wake-up call for many consumers who don’t realize what their outstanding balances are costing them.

Option to opt out

When credit card companies are set to raise rates or impose a new fee, they must now ask customers in advance if they will accept the new terms or would like to cancel the account before those increases go into effect. Consumers must be offered the opportunity to pay off their balance at the old “lower” interest rates. In the past, some consumers only realized months later that their rates had been raised, but you can now opt out of any unattractive deals.

Read your mail

Even though the new law contains many consumer protections, it’s still important to be alert to changes in the contract terms that could cost you money. That should be easier to do, because your credit card company in most cases must now let you know 45 days in advance before it can raise its interest rates, charge you certain fees, or implement other significant changes.

Turn to your CPA

The average credit card debt per households that have cards is around $16,000. That means that many people are still racking up too much consumer debt and spending much of their hard-earned money on interest rates. If you are having trouble handling your credit card debt, or would like sound advice on managing your money, be sure to turn to your local CPA. Your CPA can help you find the right answers to all your financial questions.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. The money management columns are a joint effort of the VSCPA and the American Institute of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.”


 

Ways To Save On Gasoline Costs | Top


The cost of fuel may fluctuate, but saving money on gasoline is always a top priority for consumers. While you may have no control over prices at the pump, the Virginia Society of CPAs (VSCPA) advises that there are steps you can take to be a smarter gas consumer. Of course, the most obvious choice might be to consider a more fuel efficient vehicle if you’re driving a gas guzzler. But if an auto purchase isn’t on your current agenda, here are some of tips that will lower your gas costs no matter what type of car you’re driving.

Maintain your car properly

Your car will be more fuel efficient if you keep it in top running condition. That includes getting regular tune-ups to ensure the engine is working right, which can improve gas mileage by up to 4 percent, according to www.fueleconomy.gov, a U.S. Department of Energy website. Replacing a dirty air filter can enhance mileage by as much as 10 percent. Making sure that your tires are properly inflated can add up to 3.3 percent to your mileage. And, using the grade of motor oil that the manufacturer advises can give you a one to two percent boost in mileage. All of these small steps are worth taking because they can add up to big savings. Another benefit is that they will likely help lengthen the life of your car and minimize repair costs over time.

Slow down

Driving below the speed limit can definitely reduce your costs at the pump, as well as make your trip a little safer. For example, a Consumer Reports test showed dropping to 55 miles per hour from 75 increased gas mileage by 33 percent. It’s a good idea, too, to avoid rapid acceleration, numerous stops and starts and lengthy idling, since all of these will reduce gas mileage. If your car has cruise control, try using it to ensure a steadier pace at a reasonable speed.  

Lighten up

The heavier your car, the higher your fuel costs will be. Many people use their cars as a kind of moving storage space, hauling around items they don’t really need. Believe it or not, all that extra weight is costing you money. Removing an extra 100 pounds from the car can save you as much as 12 gallons of gas in a year, according to the Alliance to Save Energy. Once you have a clean trunk, use it instead to transport items you might have carried on your roof. The added weight and drag from carrying materials on your roof can cut gas mileage by 5 percent.

Think twice about premium

Many experts recommend that regular unleaded gasoline is acceptable for most cars. If your engine shows signs of trouble with regular — such as knocking — then it is best to go back to premium. Otherwise, you can save a lot by switching from the premium grade.

Consolidate your trips

A little bit of planning can help save a lot of green when it comes to gas usage. Before you begin your day, consider where you need to be in the next few hours and try to figure out how to do it in as few trips as possible. That will not only lower your gas usage, it will also give you more free time.

Consult your CPA

Consumers are regularly faced with rising costs and complicated financial choices. Your local CPA can help by offering ideas on how to create a budget and address spending options. A CPA can also help with any other financial issues facing your family.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. The money management columns are a joint effort of the VSCPA and the American Institute of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.”


 

Do Your Retirement Plans Need Retooling? | Top


Where does your retirement plan stand? Although this phase in everyone’s life looms in the future, many people fail to set aside the money they will need to fund a healthy and happy retirement. Others who have saved diligently over time may have been hit hard by the stock market declines of the last couple of years, finding that their nest egg has declined sharply in value. If you’re not sure what your next best step might be, the Virginia Society of CPAs (VSCPA) offers this advice for anyone dealing with the new realities of retirement.

It’s still smart to save

Even if your retirement portfolio took a beating in the stock market last year, don’t throw up your hands and stop contributing to your plan altogether. You will still need to pay for your expenses in retirement, and it’s smart to have more than Social Security payments to cover your costs. If you’ve been burned in the markets and are reluctant to dive in again, you may want to choose investments that are least subject to market volatility and less likely to decline in value. If you’re uncertain about the best choices, speak to a trusted business adviser, like your CPA, about your best investment options. But don’t stop saving now or you’re sure to regret it later.

Assess your situation

The news has been full of stories of people whose retirements have been affected by market volatility, but don’t immediately assume you’re in the same boat. Instead, make a careful analysis of your financial situation to see where you stand. Do you know if your retirement portfolio will still cover your income needs in retirement? The CPA profession’s 360 Degrees of Financial Literacy program offers free resources to help you get started on answering that question. On the program’s website, www.360financialliteracy.org, you’ll find tools to assist you in evaluating how much money you’ll need in retirement and closing gaps in your retirement income. Once you understand a little more about your expenses down the road, you can make better savings and investment decisions today.

Consider ways to increase your nest egg

At what age do you plan to retire? Obviously, the longer you work, the more money you’ll be able to set aside for your retirement account. And, of course, by continuing on the job you delay the point when you begin withdrawing from your retirement savings, which means there will be more waiting for you when you do quit working. In addition, your Social Security benefit will be affected by your age at retirement. Let’s say you were born in 1954, which means that your full retirement age for Social Security is 66. If you were eligible to receive a $1,000 monthly benefit by retiring at age 66, that benefit would be cut to $750 if you retired at age 62. Of course, you do begin receiving the benefits sooner, so the total you get will average out over time. Given these variables, the best plan is to consider your individual and family circumstances and review the benefits you will receive at different ages before you make your decision. Learn more on the Social Security Administration website at www.socialsecurity.gov.

Consult your CPA

Having trouble calculating your retirement needs and creating a reasonable savings plan? Remember that your CPA can help. Ask him or her about all the financial questions facing you and your family.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. The money management columns are a joint effort of the VSCPA and the American Institute of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.”


 

When You Need Cash In Retirement | Top


Last year’s stock market declines took their toll on many Americans, but those in retirement were among the most affected. After saving diligently, most people probably believed they could now safely enjoy their post-career years, but market losses that ate into their portfolios put an end to many of those assumptions. If your nest egg took a hit, the Virginia Society of CPAs (VSCPA) offers some advice on the best ways to stretch your dollar in retirement.

Cut back to necessities

If you are experiencing serious financial problems, it’s time to consider smart spending cuts. Of course, there are many steps that apply to any consumer, including skipping takeout or restaurant meals, carpooling and forgoing vacations for the time being. In addition, many people who are in or approaching retirement will purchase a second home in a dream location. It may be a good idea to look into selling that property or renting it to generate cash. Downsizing to a smaller house will also cut down on expenses, and could require less time and money spent on maintenance than a larger residence would. A downsized residence may even be better designed to deal with physical and mobility challenges a retiree might encounter in the future.   Finally, make sure you take advantage of the many senior discounts available on everything ranging from transit fares to movie tickets.

Adjust to your new situation

Despite the bad news of any financial losses you may have suffered, the good news is that your expenses may drop because of your change in position. For example, your tax position may have altered if your income or assets have declined, so consult with a qualified adviser, such as a CPA, to determine if you should be paying less in taxes. If you have children in college, find out whether your changed circumstances qualify you for greater financial aid or better deals on student loans. By taking such steps, you may be able to cut fixed costs without making drastic changes to your lifestyle.

Consider your home equity

Tapping into your home’s equity can be a great source of cash, especially if you have lived in your house for many years and do not have a large existing mortgage. If you have gone into debt because of a financial reversal, a home equity loan will likely carry a lower interest rate than credit card balances and the interest may be tax deductible. Shop around to find a second mortgage or home equity line with the lowest interest rates and fees. But be sure not to squander your home equity unless you truly need it or plan to use it for a worthwhile purpose. Your CPA can help you determine when using home equity is right.

Branch out in a new direction

As the American population gets older, more and more people in their sixties and older are staying in the workforce. In fact, by 2016, workers age 65 and over are expected to account for 6.1 percent of the total labor force, up from 3.6 percent in 2006, according to the U.S. Bureau of Labor Statistics. If money is tight, it may be time to join the many Americans of traditional retirement age who continue to work full or part time. It’s a great way to supplement your income and you might find a new interest or social circle through your new job.

Consult your local CPA

No matter how your current cash crisis occurred, you’ll want to take steps to ensure it doesn’t happen again. Now’s a good time to create a new budget and research investment options to see if you are on the best financial footing. If you’re unsure about how to proceed, remember that your local CPA can help. Turn to him or her with any financial question facing your family.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. The money management columns are a joint effort of the VSCPA and the American Institute of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.”

Copyright 2010 American Institute of Certified Public Accountants. 360 Degrees of Financial Literacy