Roth IRA's

As I was walking up the street, I came upon a phone booth with an ad on it.  The ad referred to Roth IRA's.  (See photo.)

I've mentioned them before, but they bear repeating.  Roth IRA's.  If you don't have one, get one.  If you don't know what they are... google it, ask a friend, an adviser, a CPA, or look at my previous blogs and read up.  The sooner you have a Roth and start putting money into it, the better.

And you may (or may not) know about the recent Wall Street slump.  Stocks are waaaay down.  Which means it's an even better time to jump in and get yourself a nice little mutual fund.

Don't know where or how to open one up?  Leave me a comment and I'll gladly respond.

Hackers and your money

We never think about it because it hasn't happened to us.  Yet.  Well, hopefully this isn't a problem any of us will ever have to encounter, but there is always a possibility of getting your online accounts hacked.  And below I'll be posting a link to an article that goes into a little more detail about online hacking at bank sites and what you can do to help prevent it.  One of the things it mentions is never accessing your account from a wifi network, such as a coffee shop or an airport.  I know I've done this before and it really didn't occur to me that it might be a problem just because I figured with passwords and site keys, they've gotta be safe, right?  Well, apparently that's not the case.

When you're choosing and setting up a new account online, this probably goes without saying, but you want to consider using numbers and letters (upper case and lower case) in your password.  It's definitely a good idea to never use your birthday or address in any passwords either.  The article recommends not using the same password for any accounts.

All that being said, we'll keep our fingers crossed and hope that none of us ever get hacked.  And if we do, most likely we're protected and can recover our losses in a timely manner.

http://finance.yahoo.com/banking-budgetingk/article/109549/could-online-hackers-steal-your-cash?mod=bb-checking_savings

Real Estate Scam

Being a real estate agent in NYC, I've learned an awful lot about just how dishonest the real estate business is.  I've worked at three different companies and left them all for various reasons.  One thing the last two had in common: fake advertisements and fake photos of listings.  They would say in the ad "Upper East Side Gem, located in the east 70's."  They would post a photo or two of a super nice looking place.  Well, they stole the photo from a legitimate broker's website, then posted it as if it were their own.  The ad was a fake because there wasn't an actual specific listing they had for rent.  They were advertising a "listing of theirs" to get people to call.  Then when a client phoned in about "the specific listing," they would say "ok, so you're looking in the East 70's and your price range is such and such.  Great!  We've got five listings just like that to show you."

However, anyone who isn't a realtor doesn't know that those brokers go to a website called OLR.com.  OLR stands for online rentals.  The broker finds five "open listings" which are available to any and all brokers to look through and take clients to.  But they try to tell you that those are exclusive listings of theirs.  They pretty much lie to your face.  I quit the last two places because of this very practice.  I would rather be honest with people and tell them that those are "open listings" and get a good night's sleep.

For a quick article about real estate overstatements and exaggerations, this article will enlighten you:
http://finance.yahoo.com/real-estate/article/109494/4-biggest-lies-in-real-estate?mod=realestate-buy

Another Article About Credit Cards

As I've mentioned before, it's good to keep cards around even if you don't use them much, because they don't hurt your score.  Sometimes they even help your score by reducing your debt to credit ratio.  Below is an article about why it's important to use that extra random card of yours once in a while.


http://finance.yahoo.com/banking-budgeting/article/109451/dont-leave-credit-cards-unused?mod=bb-creditreports

ING allows person to person transfers for FREE

If you're considering moving to or opening a new checking/savings account, you might consider ING Direct.  They now offer the ability to transfer money from your account to someone else's for no fee at all.  Of course, you should have the other person check and see if they incur a fee for having $ transfered to their account from an account outside of their bank.  Sometimes there is a $10 charge for such transactions.  But ING comes up with yet another reason to use their bank.  To learn more about ING, check out the section at the top about Checking/Savings.

Apartment Hunting

If you're about to go apartment hunting, here are some helpful hints:

1. Know your credit score
2. Know your total income from last year and the year before
3. Have $500 cash readily available
4. If you have bad credit, have your guarantor lined up
5. Be ready to negotiate


1. KNOW your credit score!

If you're dealing with a broker, one of the first questions they'll ask is "how is your credit?"

If you haven't checked it lately, or ever, you should. Refer to the post on getting your credit score.

And if you're not dealing with a broker and you work directly with the owner of the apartment, they will want to know if you have good credit as well. Chances are, anyone who rents to you will run your credit report. So you should run it yourself before you even go look at places just to make sure all is well and that there aren't any mistakes or blemishes on it.

2. You HAVE to know your total income from the past two years. Better yet, you should have a copy of your tax returns for the past two years with you when you go apartment hunting. When you have all of you paperwork ready, it makes the broker, apartment manager, or owner take a much more serious look at you and will motivate them to get you the apartment.

3. Have $500 cash available. You might even want to have it on you when you shop. If you find an apartment you like, chances are other people will like it too. And in Manhattan, apartments go fast. I mean FAST. I looked at a place last year. I liked it. I told the broker I wanted to go look at another place just to make sure. I took a half an hour to go do that. By the time I got back to the broker about the first place I wanted, it was gone. Another broker had shown up and his client took it. His client had cash and all his paperwork ready to go and his application was taken right away.

4. If you have bad credit, have your guarantor's paperwork ready to go. What does that entail? Have copies of their taxes from the last two years, including W2's. Have copies of their last two month's worth of paystubs. Have their social security number. Their drivers license number. And ALL of their contact info.

5. Be ready to negotiate. Being a real estate agent, I can tell you that EVERY company out there is willing to negotiate down on their price by $50 to $200. There was a recent article in the NY Times about how rents are starting to slowly creep back up. But landlords are still willing to negotiate. And if you're shopping in Astoria/queens for an apartment, you can negotiate the broker's fee. Lots of times they'll take 80% of a month's fee or even 50%.

In Manhattan and Brooklyn lots of brokers have access to "NO-FEE" apartments. Just ask ahead of time. If you know for sure that you don't want to pay a fee, tell them on the phone so they don't waist your time showing you places that collect a fee.

Debt To Income Ratio

Okay, another ratio you NEED to know about: Debt To Income.

What does it mean? I promise it's super easy.

You add up all the debt you have in terms of monthly obligations. Let's say you have a minimum payment of $130 on your credit card. Your car loan costs you $140 a month. And your student loan is $185 a month. That's a total of $455 a month in what's known as "debt servicing."

Now, let's say you have a monthly income of $3,200. So divide $455 by $3,200 and voila! 14.2%

When figuring out your monthly debt expenses (debt service) you do NOT include rent, utilities, cable, internet, cell phone, or any other kinds of costs.

HOWEVER: if you have a mortgage you include the monthly payment, plus interest, plus homeowners insurance, plus property taxes.... and all of those costs are usually lumped into one payment or sum anyway.

When you live in Manhattan and are about to purchase a coop to live in, most coop boards (which are a HUGE pain in the neck in some buildings) will be ok with a debt to income ratio of no more than 33%

The same is true for renters. If you are going to rent an apartment on your own.. you should know what your debt to income ratio is.

Same holds true if you plan to purchase a car and use financing to pay for it. If you're already at 33%, you may run into trouble getting financing for a car that costs a lot of money.

More to come on car and home buying in the future.

Debt To Credit Ratio

Many people would like to know what exactly is a "debt to credit ratio."

It's really easy:

Let's say you have a credit card with a line of credit for $10,000. And now let's say you owe $2,000 on that card. Assuming that card is the ONLY line of credit you have and you don't owe ANY other money to anyone else... then your debt to credit ratio is 20%.

$2,000 divided by $10,000 is 20%, right?


So, if you have three credit cards with a total line of credit of $20,000 and you owe $8,000 on those cards.. then your debt to credit ratio is? 40%

Most lending institutions would like to see this ratio be no higher than 30% as mentioned in yesterday's finance for actors post.

Raising Credit Scores

Today, as my groceries were being bagged at Trader Joe's, the checkout clerk asked what my plans were for the night. "A little reading, I think, after I cook my awesome dinner of course." "Oh? What are you reading?" "Well, I'm reading a book about entrepreneurship and another one about personal finance." "Are you an accountant?" "No, just a nerd. I'm also consulting actors and teaching them about personal finance." "Wow! Great idea!" She was intrigued. Her biggest question had to do with credit scores. "Can you raise a credit score?" "You bet!"

She wanted to know HOW does one raise their credit score. In the one minute I had left to explain it to her I gave her the most basic and important elements. "Don't borrow more than 30% of your available credit. Which means, if you have a credit card with a $1,000 line of credit, don't ever charge more than $300 dollars on it." And if you do have a balance on your card or possess any other kind of loan (car, mortgage, student) NEVER miss a payment." She thought it all sounded pretty easy. And she was right. It really is easy if you are diligent and stick to your financial plan.

A big part of your plan HAS to be making sure you never miss payments on any of your loans or credit cards or bills. If you always make payments on time, your score will do nothing but go higher. Of course, you have to obey the 30% rule on your lines of credit. Student loans are a different story. You borrow the full amount and you're still ok. Just make sure that when you're in "repayment status" that you always make your payments on time. Do you see a trend here? I'm not a fan of beating dead horses, but that's just how important it is to never miss payments.

Also, if you have several credit cards, it's not a terrible thing. Let's say you have a TOTAL of $30,000 worth of credit lines between four credit cards. If you never borrow more than $9,000 on those cards, you're credit score will remain high. HOWEVER!!! If you have one card that's WAY over the 30% rule, you could hurt your score until that card is back in the 30% range.

For a great article about credit score myths, click here.


As you can see, your income does NOT affect your credit score at all.

And one thing not mentioned in the article is that the longer you have a card, the more it helps your score.

Let's say you have four credit cards. You got your first one 8 years ago, your second card 5 years ago, your third 3 years ago, and your fourth 2 years ago. So, you have four cards and total of 18 years. That's an average of 4.5 years of credit. If you never use the first card that you got 8 years ago and decide to cancel it, your length of current credit (or credit history) goes down to an average of 3.3 years... thus reducing your "credit history" or length of time you've had your accounts. The lower the number for your credit history, the lower your score. So? Keep that old card open even if you don't use it. And better yet. Use it. Once in a while make a charge on it. Every couple of months buy your groceries with it and pay it off right away... just to keep it active and to keep the line of credit where it's at. If you NEVER use a card, the card company can lower your line of credit without any notice. If that happens, it could take down your OVERALL available credit and raise your debt to credit ratio.