Gunning Daily News

How-To: Build a Strong Retirement Plan If You’re an Entrepreneur

September 10, 2012 5:50 pm

According to a recent report conducted by The American College, 40 percent of small business owners have no retirement savings or pension plan in place. Furthermore, the study found that three-fourths of those owners have no written plan as to how they intend to fund their retirement.

Small business owners know the value of a solid business plan. Unfortunately, too many of those entrepreneurs neglect to place the same effort in planning for their retirement. Business owners focus so much on growing and maintaining their business, that often their own retirement is put on the back burner.

"It's important to have personal retirement savings outside of your business because the value of that business can fluctuate significantly over the years," says Brad Smith, Kansas City President, M&I, a part of BMO Financial Group. "Additionally, having a retirement nest egg is important should the unexpected arise, such as a major health issue or needing to sell the business sooner than expected."
Below are some tips for small business owners on how to effectively save for retirement:

Take care of yourself - Invest in yourself, not just your business. As a small business owner, the instinct is often to invest back into the business. However, it is very important to pay yourself as well, especially when planning and saving for retirement. Relying on selling the business to fund retirement can be a risky approach that does not always work.
Invest in an IRA and SEP – Having a diversified financial plan, including both an IRA and SEP, is a great way to accumulate wealth outside of the business. Investments in these plans grow faster due to tax-deferred compound growth, and IRAs and SEPs with conservative holdings are effective during times of instability, offsetting the volatility of business returns. SEPs can provide great tax benefits by reducing the owner's taxable income.
Team of experts – Surround yourself with a group of experts, including a financial professional who specializes in small business, an accountant, a tax specialist and a lawyer. They can offer sound advice and provide insight on how to build your retirement savings independently of your small business. A financial professional can also help develop a detailed financial retirement plan that outlines your goals and progress.
Explore other investment options – Consider other investment strategies that will help build your retirement savings like investing outside of your IRA and SEP. It is also important to take precautions against the unexpected, like an illness or disability, by considering life and disability insurance.

As with any investment, you should consult with a tax advisor to determine what works best for your personal goals and financial situation.

"Although it's tempting to concentrate solely on investing in their business, small business owners owe it to themselves and their family to have personal retirement savings to help ensure a comfortable retirement," says DiVito.

Source: BMO Harris

Financial Tip of the Week: Improve Your Credit Score

September 10, 2012 5:50 pm

Just like a top football, basketball or hockey player is drafted based on their stats, your credit score is used to determine your financial fitness.

Your credit score is the best way to define your ability to handle debt. It's based on several aspects of your financial picture and can help creditors determine if you're responsible with your money.

Improving your credit is one of the easiest ways to improve your overall financial scorecard. Doing so may help you get approved for loans and lower your interest rates and insurance premiums.
The following steps can help you improve your credit score:

Pay on time. Payment history is one of the most important factors used to calculate your credit score, so consistently paying on time is one of the easiest ways to boost your score. To help you pay on time, consider enrolling in an e-bill pay program that will make payments automatically on your behalf and guarantee they arrive on time.
Reduce debt-to-credit ratio. Focus on paying down the amount you owe on your credit cards so each one has an available credit of at least 50 percent. Doing so improves your debt-to-credit ratio and in turn will improve your credit score.
Use more than one type of credit. Your score is built around both revolving (ex. credit card) and installment (ex. mortgage loan) credit. Having both types in your credit history shows you can responsibly handle multiple kinds of credit, and in turn may improve your score.
Stick with the accounts you have. Opening new accounts means new inquiries on your credit report, which may lower your score. On the other hand, avoid closing accounts you already have, even if you don't use them that often. Doing so can negatively impact your debt-to-credit ratio and credit history – both of which are used to calculate your score.

Source: BMO Harris Bank

Word of the Day

September 10, 2012 5:50 pm

Settlement. The day on which title is conveyed.

Q: If Faced with Foreclosure, What Are My Options?

September 10, 2012 5:50 pm

A: Talk with your lender immediately. The lender may be able to arrange a repayment plan or the temporary reduction or suspension of your payment, particularly if your income has dropped substantially or expenses have shot up beyond your control. You also may be able to refinance the debt or extend the term of your mortgage loan. In almost every case, you will likely be able to work out some kind of deal that will avert foreclosure.

If you have mortgage insurance, the insurer may also be interested in helping you. The company can temporarily pay the mortgage until you get back on your feet and are able to repay their “loan.”

If your money problems are long term, the lender may suggest that you sell the property, which will allow you to avoid foreclosure and protect your credit record.

As a last resort, you could consider a deed-in-lieu of foreclosure. This is where you voluntarily “give back” your property to the lender. While this will not save your house, it is not as damaging to your credit rating as a foreclosure. Exhaust all other viable options before making a decision.

Protect Yourself with The Latest Consumer Fed Data (Part1)

September 7, 2012 2:40 pm

I took note that credit and home repair and construction concerns once again topped the list of complaints made to state and local consumer protection agencies. This is according to a survey by the Consumer Federation of America (CFA) and the North American Consumer Protection Investigators (NACPI).

Thirty-eight agencies from across the United States provided information about the most common, fastest-growing, and worst complaints they received in 2011. They were also asked about new types of consumer problems, and what new laws are needed to better protect consumers.

The data helps consumer protection agencies follow trends in fraud, educate the public, and share information with each other, which will ultimately assist in investigations according to Tonya Hetzler, Interim President of NACPI.

Some key findings in the latest Consumer Complaint Survey Report include:

The top five fastest-growing complaints were about fraud, debt collection abuses, Do Not Call violations, mortgage-related problems, and home improvement.
The top five worst complaints involved mortgage-related problems, home improvement, timeshare sales and resales, Internet sales, and fraud.
New types of consumer problems that agencies dealt with last year covered a wide spectrum of subjects, from bedbugs in apartments to penny auctions on the Internet, from gold buying companies to telemarketing and mail solicitations for home repairs disguised as “free” energy audits. Some agencies also noted that scammers are exploiting a new form of payment, prepaid card products, to get cash from consumers.
Budget cuts and limited resources were most frequently cited as the biggest challenges that state and local consumer protection agencies faced last year. Another major challenge was the evolving nature of fraud and the fact that many scammers are located in other countries, complicating efforts to resolve complaints.

In the next couple of segments, we'll drill in to some of these consumer issues that could affect home and property owners, or those looking to become one in the near future. See the entire report now at consumerfed.org.

Protecting Your Home against Winter's 'Silent Killer'

September 7, 2012 2:40 pm

(ARA) - It’s colorless, odorless and the No. 1 cause of accidental poisoning in the United States. And, it worsens in the winter.

Known as the “silent killer,” carbon monoxide (CO) is responsible for an average of 450 deaths and 20,000 emergency room visits each year, according to the Journal of the American Medical Association. With more than two-fifths of all CO poisonings occurring between December and February, homeowners are at increased risk once temperatures begin to drop.

“During the winter months, many families turn to heating sources they might not use at other times of the year,” says Deborah Hanson, director of external affairs for First Alert, the most trusted name in home safety. “While these heating sources may be effective at providing warmth, they also can pose great risks if not used properly. To help protect loved ones from the dangers of CO poisoning, it is important for homeowners to take proper precautions when dealing with any kind of fuel-burning heat source.”

First Alert recommends the following tips and tools for keeping your home and loved ones warm – and safe – this winter and all year long:

Protect against CO poisoning
Run kitchen vents or exhaust fans any time the stove is in use. The kitchen stove is among the most frequent sources of CO poisoning in the home. To help eliminate danger of overexposure, never use the oven to heat a home. Always run exhaust fans when cooking, especially during the holidays when stoves are left on for longer periods of time. Also, open a nearby window periodically when cooking to allow fresh air to circulate.

Never use generators indoors. In the case of a power outage, portable electricity generators must be used outside only with power brought into the structure with a cord. Never use them inside the home, in a garage or in any confined area that can allow CO to collect. And be careful to follow operating instructions closely. Also refrain from using charcoal grills, camp stoves or other similar devices indoors.
Have fuel-burning appliances inspected regularly. Arrange for a professional inspection of all fireplaces and fuel-burning appliances – such as furnaces, stoves, clothes dryers, water heaters and space heaters – annually to detect any CO leaks.

Be mindful of the garage. Warming the car in the morning before work is common during the winter months, but running vehicles inside an attached garage, even if the door is open, is hazardous, as CO can leak into the home.

Install/test CO alarms. Carbon monoxide alarms are the only way to detect this poisonous gas in a home. For maximum protection, alarms should be installed on every level of the home and near each sleeping area. Test alarm function monthly and change batteries every six months. In addition, alarms should be replaced every five to seven years to ensure proper function. If the installation date is unknown, replace immediately.

For more information on carbon monoxide safety, visit www.firstalert.com.

The New Appeal of High-Yield Bond Funds

September 7, 2012 2:40 pm

(ARA) - With short-term interest rates at historic lows, many investors are turning to “high-yield” bond funds to generate more income from their investment portfolios. They could make sense for you, too.
High-yield bonds are bonds issued by companies that do not carry investment-grade credit ratings. These companies often have higher-than-average levels of debt, suggesting that they are at greater risk of defaulting on their obligations to bondholders. To reward investors for taking that risk, companies pay higher rates of interest on their bonds. In late August, for example, when intermediate-term corporate bonds from investment-grade companies were yielding about 2.4 percent, high-yield bonds were offering about 7 percent.

Despite this riskier profile, high-yield bonds historically have had a relatively low default rate – about 4.4 percent annually, on average, over the past two and a half decades. For the first six months of this year, with corporate profits strong, the default rate was only 2.5 percent.

A mature marketplace
The market for high-yield bonds is larger and more diversified today than it was a few decades ago, when these securities were often referred to as “junk bonds.” It is now a $1 trillion-plus marketplace featuring bonds from companies in a wide range of industries, and broadly diversified in terms of credit quality. Rating agency Standard & Poor’s has a dozen different rating levels for high-yield issuers, ranging from “BB+” for those one notch below investment grade to “D” for those that have already defaulted on some of their financial commitments.

This diversity in today’s high-yield marketplace makes it easier for investors to manage default risk, since they can build portfolios of bonds in various industries and maturities across the credit spectrum.
Although high-yield bonds can fall in value when the economy weakens and investors start to worry about getting paid, those at the top of the ratings scale tend to fall the least. And they usually fluctuate less dramatically than stocks. In fact, research by Thrivent Financial analysts has shown that over the past 25 years the total return on high-yield bonds has been about equal to that of the Standard & Poor’s 500 Stock Index, but with only about two-thirds of the volatility.

“There are risks to investing in the high-yield market, just as there are risks in any market,” says Mark Simenstad, vice president and head of fixed-income funds for Thrivent Financial for Lutherans, a diversified financial services organization. “But it’s not a monolithic market. Many of the higher-quality bond issuers are established, well-known companies with good business prospects, which wasn’t always the case 20 or 30 years ago.”

Investing prudently in high-yield bonds
Beyond focusing on credit ratings, one of the simplest ways to minimize the risk of investing in high-yield bonds is through diversification. Instead of buying one bond, investors are encouraged to buy several issued by different companies in different industries. That way, one default can’t take down the entire portfolio. They also can incorporate other high-yielding assets into their holdings, including preferred stocks, convertible bonds and even mortgage-backed securities.

Unfortunately, assembling a diversified high-yield bond portfolio can be a tall order for many investors, who often don’t have the time or resources to assess the financial health and business prospects of many different issuers. Accordingly, most choose to invest via mutual funds specializing in that sector of the market, delegating security selection and trading decisions to a professional money manager.

Paul Ocenasek, manager of the Thrivent High Yield Fund, says high-yield bond funds can be appropriate for several types of investors. “They can certainly make sense for anyone looking to generate income from their investment portfolio,” he says, “since the yields they offer are often higher than what’s available from investment-grade corporate bonds, and typically higher than the yields on conservative cash investments.”

To be sure, high-yield bonds are not risk-free. They can go down in value when interest rates rise or when business conditions deteriorate and market sentiment sours. And, as noted, they can fall into default. But, Simenstad stresses, while investors should not ignore the risks associated with high-yield bonds, neither should they exaggerate them. A prudently managed high-yield bond fund, he maintains, can play a meaningful role in almost any broadly diversified investment portfolio.

Source: Thrivent Financial

Q: What Is a Prepayment Penalty?

September 7, 2012 2:40 pm

A: Some mortgages have prepayment penalties written into them. This means you will have to pay the lender a percentage of the principal, or some other stated amount, if you decide to repay the loan early.

The prepayment clause is usually in effect for only one to three years and may be waived for special circumstances. Lenders impose the penalty to recover any losses related to your early payment.

Ask about prepayment penalties before signing for a home loan. If you are applying for a new loan, the penalty should be disclosed in the truth-in-lending statement.

Agency Warns about Targeted Foreclosure Relief Scam

September 7, 2012 2:40 pm

Sad to say - but I have to draw attention to people being scammed by mortgage rescue schemes. Enter Tom Pool at the California Department of Real Estate (dre.ca.gov) whose office has issued a Consumer Alert to help Spanish-speaking consumers avoid falling victim to foreclosure rescue scams.

Pool's partner in crime solving, DRE Chief Counsel Wayne Belland says the typical scam involves the promise of a loan modification or other mortgage or foreclosure relief in exchange for an upfront fee, but once the fee is paid little or nothing is done to help the homeowner.

The warning provides these tips so homeowners can avoid mortgage relief scams:

Watch out for promises of guaranteed success. An ad on the television or radio, or in a newspaper, magazine or on the Internet, does not mean that what is advertised is lawful or truthful. No one can promise that a loan modification or other relief plan will be successful.
Do not place your trust in someone just because he or she speaks Spanish or may share the same or a similar background. A scammer will use a similar background and language to convince you to part with your money and/or property.
Never pay an upfront fee for loan modification services- they are illegal.
Never pay in cash, or wire cash to anyone who offers you home loan relief. With extremely limited exceptions, cash payments, and cash that has been wired, cannot be recovered.
Never transfer or sign your home over to any third party or anyone else who claims that such a transfer can or will help you repair your credit or keep you in your home. And do not make your home loan payments to anyone except your lender.

While the information comes out of Cali, it's mostly wise advice that can be applied anywhere in the nation. No matter where you live, get personalized advice on mortgage scams or the risks tied to your mortgage at no charge to you - by calling 1-888-995-HOPE, or online at www.hopenow.com.

Concrete Challenges of Converting Basements or Garages to Living Space

September 7, 2012 2:40 pm

(ARA) – For homeowners looking to improve the value of their homes – and cope with the needs of multiple generations living under one roof – basement and garage renovations make sense. Both can enhance home value and add much-needed living space for less than one might spend on building an addition.

Basement and garage projects recoup 66.8 percent and 57.2 percent of their original costs, respectively, at the time of resale, according to Remodeling Magazine’s Cost vs. Value Report. And millions of American households now consist of multiple generations living under one roof, U.S. Census Bureau statistics show.

Before you dive into one of these worthwhile renovation projects, you should consider an often-overlooked logistic of working in a basement or garage – the concrete floor beneath the structure. Often, converting a basement or garage into usable living space involves adding plumbing for a bathroom or kitchenette. Usually, that means cutting into the concrete to install pipes, drains and storage tanks.

“Professional plumbers may regard digging through concrete as simply one of the hazards of their trade,” says Chris Peterson, West Coast regional sales manager for SFA Saniflo, which makes above-floor plumbing products. “But cutting through concrete is simply a bad idea whose time has long gone. There are some truly sobering hazards to ponder before homeowners agree to allow anyone to cut into the concrete floor of their basement or garage.”

* Cutting through concrete undermines the structural integrity of the slab, no matter how carefully the cut is made or patched. If the contractor fails to use the same or a better grade of concrete, the patched section will be weaker than the rest of the slab.
* Conditions are unpredictable. Plumbers won’t always know the depth of the concrete, whether rebar or tension cables are incorporated in it or what surface – sand, rocks or a ledge – is beneath it. Cutting into internal structures meant to strengthen the slab can further weaken it.
* No matter how careful a cut a contractor makes, edges can crack or crumble, and once a crack begins, it can extend across the entire slab, and even affect the footing or walls of the room.
* Once a stress crack evolves, it can allow radon and groundwater to seep in. Extended wet weather – the kind you get in the spring in many parts of the country – could be enough to allow water to leak into the structure.
* Breaking through concrete generates dust and noise – a lot of both. While the noise will stop once the cut is completed, the dust can linger much longer. Concrete dust is not like regular household dust; it’s thicker and particulate and can get into everything, including your heating, ventilation and cooling system.
Finally, the factor that can be the biggest issue of all for homeowners trying to keep a project on budget: cutting concrete can be very costly.

“The actual expense of cutting concrete depends on the size and complexity of the job, as well as the availability and rates of labor in your area,” Peterson says. “In some parts of the country, the per-foot rate may be a few hundred dollars, and $1,000 or more in others. If the job turns out to be harder and more time-consuming than he expected, or if he has to rent additional tools, a contractor will likely pass those cost-overruns on to the homeowner.”

So what’s the solution if you must add a bathroom or kitchen to your basement or garage renovation?
“Above-floor plumbing is a more cost-effective, time-friendly alternative to cutting through concrete and installing traditional below-floor plumbing,” Peterson points out.

Macerating – or up-flush – plumbing systems don’t require installers to cut through concrete or dig. The system can be installed right on top of the existing floor. Waste and water from a toilet, tub or sink is pumped through small-diameter piping, rather than flowing down like conventional plumbing. The up-flush system doesn’t store waste like a sewage ejector system; waste and water move to the septic or sewer system with every flush. Log on to www.saniflo.com to learn more about above-floor macerating systems.