Saver.Spender.Investor's Personal Finance Blog

Evansville Business Magazine--June/July 2012

Don’t go looking for the 2012 football schedule for Western Governors University. There is no football team at WGU, or school mascot. There’s not even a campus or classrooms.

While it may be W G Who? to many people, it’s the college of choice for 30,000 students across the country who are now enrolled in the online, non-profit institution.

Indiana Governor Mitch Daniels shows up in television commercials touting WGU Indiana, calling it “Indiana’s eighth state university.” Indiana has been part of WGU since 1997 when Frank O’Bannon and 18 other governors, primarily from western states, created the online college so that working adults could earn a bachelor’s degree or master’s degree at their own pace and at a low cost. The idea sounded good and has worked well in some regions, but in 2010, Indiana had a paltry 275 students enrolled in WGU, much less than the number of Hoosiers enrolled in for-profit online colleges such as University of Phoenix. So Daniels mixed together one part marketing skill and one part financial incentive to create WGU Indiana. His TV commercials put the new ‘WGU Indiana’ name in front of the public, and his mandate to allow Indiana residents to use their state-funded financial aid to attend WGU made the offer more of a bargain. The result is that more than 2,500 Hoosiers are now enrolled in WGU Indiana, where students can earn degrees through the WGU Teachers College, College of Business, College of Information Technology, or College of Health Professions. The cost is approximately $3,000 for each six-month term. For the average student, five terms are necessary for graduation.

“Online education is a good fit for a lot of people; traditional education is a good fit for a lot of people,” says WGU Indiana Chancellor Allison Barber.

“The best thing is, people have more choices now. The average age of our student is 37, so we are meeting a specific need.”

Indiana ranks a dismal 42nd in the number of adults with a bachelor’s degree, according to Inside Higher Ed. If WGU Indiana can improve that ranking, its mission will be accomplished. Maybe then it can start planning to suit up a football team.

Whether you call it the Affordable Care Act or ObamaCare, one thing is for sure: major parts of the health care law have already taken effect. While we sit and wait for the Supreme Court to rule whether it is constitutional to require people to purchase health care insurance, people at all income levels have started to take advantage of the law.

There are two parts that apply directly to those who are retired or nearing retirement.
1. More than 32 million people 65 and older have already received free preventive services, including an annual ‘wellness’ visit to a doctor. There is no co-pay or deductible, and no need for a Medicare supplement. Preventive care is also free of charge for working people as part of their employer health plans. The idea here is that an ounce of prevention is worth a pound of cure.

2. The so-called prescription drug ‘donut hole’ is shrinking, and by 2020 it should go away entirely. The donut hole is the portion of the Medicare Part D drug benefit program in which prescription drug costs skyrocket until a certain payment level is reached, and then costs go back down. Prescription drug costs for name-brand drugs have been reduced 50%, and as a result, more than three million Medicare recipients have saved about $2 billion on their prescriptions.

Other parts of the law that have taken effect: (1) The Pre-Existing Condition Insurance Plan (PCIP) provides insurance now for people who are uninsured and have a pre-existing condition that prevents them from getting health coverage. (2) Federal tax credits are now available to small businesses that offer health insurance to their workers. (3) Young adults can now stay on their parents’ health insurance plan until the age of 26.

Your doctor’s office or your employer’s human resources department can tell you more about how the law affects you. Most polls show that by a slight margin, Americans are against the new health care law. But like it or not, you may be able to benefit right now.

For long-term investors, the stock market continues to offer the greatest opportunity for gains, and the greatest risk for losses. Here are five tips that may lower your stock risk:

1. Choosing mutual funds and exchange traded funds (ETFs) over a few individual stocks means your eggs are spread among more baskets. If you are creating your own portfolio with individual stocks, make sure those stocks are spread among different industries.

2. Choose funds and ETFs with low expenses. A mutual fund that charges you 1.5% annually compared to one that charges 1% may not seem like much, but it can mean thousands of dollars over a 20-year period.

3. Invest in different industries. Mutual funds and ETFs often do this for you, but it’s also possible to latch onto funds that invest strictly in a particular field. Resist the temptation to predict the booming areas of growth over the next 10 or 20 years.

4 Invest globally. It can be hard for Americans to understand the industries of Brazil, China and Australia, but funds and ETFs with a global reach may give you greater diversification. Many American companies also have a strong presence around the world.

5. Have patience. The nearly 60% drop in the S&P 500 in 2008 and early 2009 proved that the stock market can wield cruel blows. Those who stayed put have regained most of what they lost. Those who jumped out near the bottom are poorer.

As the past 10 or 12 years have shown, there are no guarantees in the stock market. The good news is that the 30-year period from 1950 to 1980, and the 30-year period from 1980 to 2010, yielded nearly identical 10% annual gains in the stock market. Patience does pay off, but the journey to get there is rarely easy.

"If a business does well, the stock eventually follows." Warren Buffett

(Evansville Business Magazine…February/March 2012)

OK, it’s mid-winter and your New Year’s resolutions about money are kicking into high gear…or, more likely, you’ve simply kicked them down the road. Fear not. ‘My Money’ has produced the definitive ‘There’s Still Time’ resolutions for you.

20-Somethings: In the words of Suze Orman, you are young, fabulous and broke. (1) Cobble together $500 to start an emergency fund. (2) Pay off student loans. They will always be an anchor around your financial neck. (3) Contribute enough to your 401(k) to earn the company match—a.k.a. free money. (4) Don’t buy insurance that you don’t understand. (5) Work hard to increase your salary, and have some fun.

Young Families: Your life is no longer yours. It belongs to your employer, your spouse and your kids. Quit whining; you’re now officially a grown-up. (1) Put as much as possible—automatically, every month—into your retirement account. It gives you no reward now, but you'll be so glad it's there when you need it. (2) Open a 529 college savings account for your children and ask every relative to help fund it. (3) Buy a house if you can put down at least 20%, or move up if it’s affordable. Mortgage rates are incredibly low. (4) Read to your kids, and have some fun.

Established Families: Your life is still not yours. Now you’re dealing with teenagers and/or aging parents. (1) Keep socking away the retirement and college savings money. (2) Consider long-term care insurance. It’s affordable at your age. (3) Prepare now to retire, even if it’s 20 years away. Sitting down with a pro to map your financial future can help tremendously. (4) Plan so you can pay off the mortgage before retirement. (5) Your wallet’s probably lighter than you hoped; find cheap ways to have some fun.

In Retirement: It’s not as relaxing as young folks think. You worry about your health and outliving your money. (1) Exercise daily, even when the body wants to sit in the rocking chair. (2) Understand Social Security and Medicare rules so that you take full advantage of both. (3) Keep your investments conservative, but keep investing. You have plenty of years remaining. (4) Stay engaged by working part-time or volunteering. Do all that, and you’re sure to have some fun!

(Evansville Business Magazine…April/May 2012)

Despite the Dow’s ability to bust through the 13,000 level earlier this year for the first time since 2008, investors at all income levels continue to hold their breath instead of letting out a big sigh of relief. Europe still appears shaky, especially with the prospect of another bailout of Greece looming. In this country, the economy must slog through a poor housing market, high gas prices, and debt, in order to keep climbing. Lipper, a fund-tracking company, found that investors pulled out $3.6 billion from stocks in January and February at the same time the stock market was rising 8%, the best start since 1998.

At least one veteran Evansville financial advisor believes investors have more to fear by sitting on their money than by trusting at least a portion to the stock market.

“A lot of people are way too defensive,” says Certified Financial Planner Mark Pettinga, chief executive officer of Pettinga Financial Advisors. “The biggest opportunity is for those fully allocated in a balanced portfolio that includes stocks and bonds. That’s not very flashy, but I really believe that is what will work best in the long run. I also think the tide is beginning to change. People see virtually no interest credited to their savings accounts, they see inflation moving up, and at least in the early part of the year they’ve seen the stock market go back up. People are not shooting for the moon. They just want to get back to an acceptable level of return.”

Here is Pettinga’s list of five ways for investors to prosper:
1. Maximize your 401(k) or 403(b) retirement account.
2. Diversify your assets.
3. Have exposure to the stock market.
4. Make sure the stock market exposure includes international funds, including emerging markets.
5. Monitor your debt. Make it a manageable amount in case of a job loss or some other unforeseen event.

“I get it,” Pettinga says about investors’ caution. “They’ve been through crashes in 2000 and 2008. They’ve seen some pretty harsh treatment, and there’s more negative news out of Washington. But despite the lack of pro-economic policy-making, the private sector has continued to strengthen. That’s what keeps me optimistic.”

Rarely does an insurance product receive an endorsement from the Governor’s office, but it’s happening in Indiana.

A letter from Governor Mitch Daniels has been going out to Hoosiers for the past two years, encouraging residents to consider long-term care insurance. No, the Governor isn’t moonlighting as an insurance agent. He does have a vested interest, however, because nearly half of Medicaid payments come from state funds. Medicaid takes over when people run out of money and still require care. This scenario plays out far too often for nursing home residents since a nursing home stay can cost $65,000 or more per year, quickly wiping out the finances of many people. From the Governor’s point of view, the more that people invest in long-term care insurance, the less likely they will require Medicaid.

Indiana added to this incentive nearly 20 years ago with the Indiana Long-Term Care Partnership. By purchasing long-term care insurance through the Partnership, residents protect assets so that Medicaid cannot take them away. Let’s take a 65-year-old couple in good health. They buy a three-year policy that pays out $200 per day, which is approximately the daily cost of nursing home care. They are covered for up to $73,000 in long-term care expenses ($200 x 365 days) for each of three years. Money left over after three years can be used for long-term care until it is gone. They would spend about $585 per month to pay for the insurance, which is worth a total of $220,000 (three years x $200 per day). Under the Indiana Long-Term Care Partnership, for every dollar they spend from insurance, they keep that much in assets. So if they spend the entire $220,000 in the insurance policy, their future long-term care expenses will be covered by Medicaid once the value of their assets such as cash, savings, stocks, bonds, CDs, cash value of life insurance, even a second home, drops to $220,000. Other states have similar Partnership plans. Indiana is unique because if residents buy a Partnership policy worth a certain amount (in 2012 it’s $277,000) and receive care in Indiana, they could qualify to keep all of their assets.

The younger you buy, the lower your premiums—makes sense since you’re paying those premiums for a longer
time. Plus, putting off the purchase risks that your health may deteriorate and you become uninsurable. A 60-year-old couple that buys the same policy (three years, $200 per day) would pay approximately $420 per month, a lower amount because they are five years younger than the example above. A 60-year-old woman would pay about $275 per month.

OK, we know that long-term care insurance is a good deal for Governors who must balance a budget. Is it good for their citizens? For those with total assets under $200,000 or over $2 million, probably not. The insurance is too expensive for those in the former group, and not necessary for the latter since they can self-insure. For the rest of us, it’s worth a look. Cost has scared away people in the past, but today’s policies cover in-home care, which is less expensive than nursing home care. Plus, no one wants to be shipped off to a nursing home if they can stay in their own home. Keep in mind, however, that many people purchased LTC insurance while they were working, then surrendered the policy when they couldn’t afford the premiums with their reduced income during retirement.

A primary advantage to long-term care insurance is protecting assets for heirs, but there are even better reasons to consider LTC protection. Insurance can provide the money necessary to give you a wider choice of assisted living facilities or nursing homes, and keep you there. In Evansville, several popular facilities may not accept or keep Medicaid patients.

Insurance can also relieve the burden on loved ones. Everyone would like to stay at home for as long as possible, but that often means extra work for daughters and sons. Insurance can bring professional health aides into the home and alleviate the demands on children who still have their own lives to manage.
Many people purchase policies that pay only a portion of the daily in-home care or nursing home bill, but there’s nothing wrong with that. The insurance allows them to keep enough assets so they can supplement the policy, if necessary, with their own funds.

Like many complicated insurance products, this one requires another set of eyes to make sure you receive the right coverage. Second opinions from local health care organizations, senior citizen advocacy groups or your own doctor can help you decide if you are purchasing valuable protection, or an expensive product that you might drop right before you need it.

With a little help from behavioral economists, I presented the following points this week at our monthly University of Evansville Lunch & Learn. It was a good discussion with a good group of people!

Making Your Money Grow…
With A Little Help From Financial Psychologists

1. We frustrate ourselves with our inability to control our investments
2. We could have more control over our investments, but we get greedy
3. We dwell more on losing investments than winning ones, and become fearful

So…

1. Keep your goals reasonable and realistic
2. Once your goal is established, determine how much risk you must take
3. The longer you have to save, the more risk you can stomach

Maximizing Your Savings

10. Start with your retirement plan…understand your options…learn about various investments to find out what’s best for you…put in enough to get the company match.

9. Don’t forget the flexible spending account if it's available through your employer. You’ll spend about 25% less in taxes on the money you put into the FSA.

8. Keep some money outside your retirement plan in separate accounts, including an emergency fund, new car fund, vacation fund, Christmas fund, house improvement fund. Studies have proven that people save more when they set up specific accounts.

7. Above the company match, consider a Roth IRA ($5,000 annually; $6,000 if 50 or older). Not all of your money should go into retirement. You can always take out your contributions penalty free, and you may never have to pay taxes on a Roth.

6. Annuities are as close as most of us come these days to receiving pensions. Annuities guarantee you money at an interest rate higher than you can get with a bank savings account or certificates of deposit.

5. Dump your debt. Pay off student loans, car loans, the mortgage, and get your credit card balances to zero. The Dave Ramsey way—smallest debt to largest so it becomes a 'snowball.' Many others recommend first paying off the bill with the highest interest rate. The best way? Whichever works for you.

4. Keep a list of every expense for just one month. It's boring. It's nerdy. But it works to find those nickel and dime expenses that add up.

3. Invest in retirement ahead of saving for your children’s college. Hopefully you can do both, but remember that you can get tax credits and low-interest loans for college, not for retirement.

2. Make sure that money you are trying to save gets deposited automatically, before you ever see it. For most people, once it's in their hands, or even in their checkbook, it's spent.

1. Set a specific goal(s) on paper no later than this weekend. Make sure the goal is realistic, and has an end date. If you have a spouse or significant other, decide on your spending and saving goals together. That's not easy since there's often a spender and saver in each relationship, but communication--and patience--go a long way.

Financial Psychology Reading:
Your Money Personality, by Dr. Kathleen Gurney
The Intelligent Investor, by Benjamin Graham
The Behavior Gap, by Carl Richards
Nudge, by Richard Thaler and Cass Sunstein

If you are in your 40s or 50s, and already have your 62nd birthday highlighted on the calendar with a big smiley face, here’s some advice: check your math first.

Age 62 is when Social Security payments first become available to most of us. However, full benefits don’t kick in until 66 for current retirees, and 67 if you were born after 1959. There are two reasons to consider waiting. One, taking the money now puts less in your pocket later. Let’s take a 62-year-old woman who retires this year and qualifies for $9,000 annually. She will get $12,000 if she waits until her full retirement age of 66, and $15,840 if she waits until 70. If our 62-year-old takes the money now, her grand total will be greater for about 12 years than if she waited until 66. At age 74 in this case, she begins to fall behind. Keep in mind that Social Security is adjusted for inflation annually.

Secondly, if you remain in the workforce between 62 and your full retirement age, your income may take a big chunk out of Social Security. If our same 62-year-old takes Social Security but continues working, she could earn $14,160 from her job this year and still keep her $9,000 in Social Security payouts. For every $2 she earns above $14,160, however, she forfeits $1 of her Social Security until she hits full retirement age.

Patience may be a virtue, but there are reasons why more than 70% of retirees take Social Security before their full retirement age. Some really need the money. Some figure that Social Security benefits will dwindle, given the nation’s debt load. And some figure they might not live long enough to enjoy the money in their mid-70s, when waiting finally pays off.

“Choosing when to retire is an important decision, but it’s also a personal choice and one you should carefully consider,” says Martina Dunkerson, Social Security Administration public affairs specialist for southern Indiana. She suggests you go to the Social Security website at http://www.socialsecurity.gov/pubs/10147.html to help make that big decision: whether the smiley face stays or goes.

(Evansville Business Magazine, August, 2011)

If you like roller coasters, you’ll love these two stomach-churners: the Dow Jones Beast and the S&P 500 Raven. The economic quarter that ended June 30 included a quick 4% ride upward into early May, followed by a 7% drop into June. Then came the big finish: a 5% rebound in just five days to begin the current quarter. Halfway through the 3-month white-knuckler, a Goldman Sachs report described the markets as “puzzling.” If Goldman Sachs is scratching its collective head, what are the rest of us investors supposed to do?

“If you watch the markets daily, it’ll make you crazy,” says Myra Teal, a financial advisor for Edward Jones in Newburgh, Ind. “It all starts with having a plan, and then we stress three things: buy high quality products, diversify, and hold for the long term.”

Certified Financial Planner™ Chad Sander, 46, began his career as an investment advisor in the 1990s when double-digit stock market returns were the norm. Now director of investments and vice president at Payne Wealth Partners in Evansville, Sander knows the ride has become bumpy.

“My first five years in the business, it all seemed pretty easy,” he smiles. “Those 15 and 20% returns were nice, but we are in a lower return environment now and probably will be for quite awhile because of several factors, primarily debt here and in Europe.”

Both Teal and Sander agree that investors of all ages should establish goals, understand how much and how fast their money must grow to reach those goals, and prepare for the V word.

“Dealing with volatility is a big part of investing,” Sander says. “Having the discipline to stick with your investment strategy in uncertain times is difficult, but it’s critical to reaching your goals.”

Adds Teal, “I have clients 70 or older who have seen the ups and downs for years, and they’re often the ones who come in when the markets look terrible and say, ‘You know, I think it’s time to buy.’ If you ignore most of what the media says, and know the world’s not going to implode, you’ll do well in the long run.”

In the meantime, hang on tight and enjoy the ride.

If your household income is less than $180,000 and there's a college or vocational school student in your family, here's a way to get a bigger refund on your federal taxes next spring: take advantage of the American Opportunity Credit.

The tax credit is two years old, but relatively unknown. It replaced the Hope tax credit, designed for lower income families, by expanding the income limit to $90,000 for single tax filers, and $180,000 for married-filing-jointly. The first $2,000 you spend on eligible college expenses (tuition, books, fees) comes right off the top of your tax bill. That's what makes a tax credit much better than a tax deduction. Plus, you can take 25% of the next $2,000 to give you a total tax credit of $2,500.

Here's a warning. If you have a 529 education savings plan or a Coverdell savings account, you'll need to split your spending. In other words, you can't pay the entire school bill with your 529 account and also claim the American Opportunity Credit. No double-dipping allowed. What you can do is pay the first $2,000 through the AOC and get all $2,000 back through the tax credit. If you have a little extra cash, pay the first $4,000 out of pocket and get the full $2,500 American Opportunity Credit. Then pay the remainder with your 529. In fact, you'll want to pay all room & board expenses with your 529. Those are not covered by the American Opportunity Credit. If you live in a state like mine, Indiana, you can get back $2,500 from the federal government for using the American Opportunity Credit, and up to $1,000 from the state as a tax credit for contributing to your 529.

For parents who have put their own savings on hold to pay for their kids' college or vocational school, tax credits can take a brick or two off that load you're carrying on your back. The money you receive from the tax credits can go right back toward paying the next college bill. Or it can go straight into your own retirement account. Or it can go into that envelope you have in the back of your underwear drawer, for the cruise to Cozumel to celebrate your final school payment.

Thanks to tax credits, you might even be able to spend a few extra days on the beach.

Referees and umpires figure they've been fair if both teams are squawking at them equally when the game ends. Political writers are pleased if both the Democrats and Republicans bemoan their coverage.

Based on those ground rules, members of Congress who voted for the financial overhaul bill that President Obama will sign next week should feel pretty good about themselves. The nation's biggest banks say the bill went too far and ties their hands. Consumer protection groups say lobbyists convinced lawmakers to water down the bill.

Thomas Donohue, president of the U.S. Chamber of Commerce, denounced the bill: "Today is a sad day for the U.S. economy, for jobs, and for the future of our capital markets," he said. "Consumers will pay the ultimate price in higher fees, less choice, and fewer opportunities to responsibly access credit."

Then there's Congressman Barney Frank, one of the bill's co-sponsors, who complained that, "In some areas the legislation did not go far enough."

The 2,000-plus page bill sprang from the financial meltdown of 2008 that continues to plague virtually everyone, from business owners to employees, and especially those pink-slipped in the past two years. The bill does little or nothing to get us out of the Great Recession. Hopefully it helps keep us out of the next one.

Here are the highlights:

*There's now a process in place to break up troubled financial firms whose quick collapse might seriously harm the overall economy (can you say 'AIG' and 'Lehman Brothers'?). That's the primary reason President Obama keeps saying that taxpayers will no longer bear the brunt when 'too big to fail' institutions fail.

*Hedge funds now must be more accountable to regulators, although they still have more freedom than mutual fund companies. Derivatives such as credit-default swaps, which made our nation's economy look like a house of cards when home prices began tumbling at the end of 2007, also get regulated more.

*Much of the regulation comes from the new Consumer Financial Protection Bureau, designed to keep an eye on credit card companies, mortgage lenders, banks and credit unions. Already on the books is something familiar to most of us: the amount guaranteed on our bank accounts from the FDIC. It's now permanently at $250,000, thanks to the financial reform legislation.

Of course, it's more complicated than that. For example, the new consumer protection bureau doesn't have power to snoop into the lending practices at your local car dealer. Their lobbying group fought hard to keep dealers exempt, and politicians who have been trying to keep American car companies alive decided not to add to the car dealers' challenges.

"It's a victory for auto dealers and for consumers," said Bailey Wood, legislative and communications director for the National Automobile Dealers Association. He says regulation by the new consumer protection bureau would have driven up the costs of auto loans.

On the other hand..."Here we have an industry that came to taxpayers desperate for help, and the American taxpayers saved this industry's hide," said Douglas Heller, executive director of Consumer Watchdog. "Yet, they thank us by using their lobbying might to exclude them from oversight."

See, no one's completely happy. The politicians may have gotten this one right.

Memorial Day is coming up, and every year there's all kinds of fun--cookouts with friends, the first trip of the year to the beach, skydiving through volcanic ash in Iceland.

This year, try something really exciting. Next Saturday, stay home, click on SavingForCollege.com, and learn about the tax benefits of saving for college. May 29 is, appropriately, 529 College Savings Day in many states.

'529' is IRS talk for the section of the code which allows families to set aside money that grows tax-free for college or vocational school expenses such as tuition, books, room & board, and fees. Mom and dad, grandmas and grandpas, and anyone else can put money into a 529 account for baby Susie (or anyone planning on attending school) through the plan of any state they choose. That money is invested, grows--hopefully--and when the tuition bills begin arriving, your payments for her schooling come from tax-free money.

Even better, 34 states now offer tax deductions or credits for 529 contributions, according to Kiplinger's Personal Finance. In my state, Indiana, there's a 20% tax credit for contributions to Indiana's 529, up to $1,000. Remember, credits are better than deductions because they lower your tax bill dollar for dollar. So if I put $5,000 into the Indiana 529 this year for our high school senior, I get $1,000 back on my state taxes next year. It's often pointless to start a 529 if Susie is already 16 years old, but the tax credit/deduction makes it well worth the effort. In fact, despite being Indiana residents, my wife and I opened our first 529 account 10 years ago through TIAA-CREF's plan in Minnesota. At the time, their fees were lower than my own state's plan, and there was no Indiana tax advantage. When both the fees went down and Indiana adopted the tax credit, we quickly switched.

529s have other advantages. The contribution maximums are much higher than the old-fashioned education savings accounts, usually up to $300,000 per account, and the federal financial aid formula counts only 5.6% of parents' 529 account balances toward their expected contribution to college. What if Susie wins American Idol at age 17, signs the big record deal and never goes to college? Mom and dad can transfer her 529 account to another family member, or just cash it in, minus a 10% penalty.

This all sounds swell enough, but the stock market drop of 2008 decimated many families' 529 accounts. That's because many were heavily weighted in stocks, just a few years from needing the money. This is not a long-term investment, folks. At most, it's a 20-year bet. When you know withdrawals are coming soon, stocks are not your best friend.

Fortunately, 529s offer low-risk investments, including age-based plans that become more conservative as the college years approach.

You know, on second thought, go ahead and heat up the grill, head for the beach, and pack your chute next Saturday. After all, holidays don't come often enough. First, however, get out your calendar and pick a day--say, June 29, and make 6/29 your 529 day. You and your future college student will be glad you gave up one day in the summer of 2010 to make paying for college easier. You may even save enough to afford another trip to Iceland.

We all have our favorite writers: Ernest Hemingway, Jane Austen, John Steinbeck...Jackie Collins. We savers/spenders/investors have our own list: David Bach, Janet Bodnar, Dave Ramsey and the venerable Jane Bryant Quinn are some of my favorites.

From their wit and wisdom, I have compiled a Top 10 list of saving, spending and investing guidelines. All four have a slightly different perspective on personal finance, but they all espouse these ideas:

1. Educate yourself. That doesn't mean spending months becoming an expert. Read Kiplinger's Personal Finance (kiplinger.com) or learn about investing at Morningstar.com. Two good books are Dave Ramsey's 'Total Money Makeover' and David Bach's 'The Automatic Millionaire.' Both are easy reads that cover most of the saving, spending and investment fundamentals you'll ever need. If you want the bible that covers virtually every personal finance topic, pick up (carefully) Jane Bryant Quinn's 1,000-page 'Making The Most Of Your Money.'

2. Make a budget. Rich, poor and in between, we all get more fun out of our money when it's working for us rather than the other way around. For one month, keep track of every dollar from your paycheck. Don't cheat. Be honest, and after that one month, you'll find money you've wasted. Mint.com is one of the most popular budgeting websites.

3. Invest early. See page 95 in David Bach's 'Smart Couples Finish Rich' to see what happens when Susan puts away $2,000 per year for eight years, beginning at age 19. Her buddy, Kim, does the same thing starting at age 27. When they both turn 35, guess who has $59,322 and who has $29,874. Ah, the magic of compound interest. Investing early doesn't mean latecomers should give up. Even if you're just starting to squirrel away money at age 35 or 55, 'investing early' means starting this month rather than next year.

4. Expect the best, prepare for the worst. That's why all of our favorite authors agree that a $1,000 emergency fund (prepare for the worst) comes first, followed by socking money into stocks and bonds for the long run (expect the best).

5. When your boss offers free money, take it. Hopefully you are one of the 53 percent of employees covered by a 401(k) or similar retirement plan at work. Most of them offer a match. You put in 8%, for example, and they'll put 4% of the company's money into your retirement account. Short of an inheritance from Aunt Maude, this is the easiest money you'll ever find.

6. Insurance is really boring, and really important. You need health insurance and disability insurance, and your kids who live at home need the security of your life insurance. If you drive a car, own a home, or rent, you need the appropriate coverage. But watch out for those selling variable annuities, whole life or universal life insurance. That's where insurance agents get their biggest commissions.

7. Your credit card balance should be $0.00. It's tough to save when you're paying Visa every month. It's also tough for most of us to put off buying the TV, phone or granite countertops we really want. But if you'll save up and wait until you have the cash, that big-screen will look even bigger and brighter.

8. Buy the big items wisely. A house can be a good investment, especially if you put down 20% (allowing you to skip private mortgage insurance), keep your mortgage to 20 years or less, and make sure your monthly mortgage payment is no more than 25% of your take-home pay. The average new car is twice as expensive as the same car with two years and 20,000 miles on it, according to Edmunds.com. And you'll come out ahead in the long run if you buy rather than lease.

9. This, too, shall pass. 2008 was a terrible year to be in the stock market. 2009 was a great year. No matter how good or bad the investing world appears, all you can be sure of is change. That's why the 'D' word is so important. Staying diversified according to your age (your investments should become more conservative as you get older) is your best strategy.

10. Spend it! Tightwads, listen up. Your goal is not to skip every vacation opportunity, or ignore giving to charities or your church, just so you can die with a million bucks. Your kids will end up spending money they didn't earn, and you'll be turning over in your grave (which is very uncomfortable). Frugality does not have to be a lifelong lifestyle. In the words of Dave Ramsey, "Live like no one else now, so that one day you can live like no one else."

The late Senator William Roth was one of America's biggest tax dodgers...and people of all income levels should thank him for that.

No, there was nothing shady about the Delaware Republican. In fact, he was the guiding force behind the legislation that Congress put into law in 1998--the Roth Individual Retirement Account. It may be the most significant investment assistance in the last 20 years for most Americans.

The Roth is a great deal for young people. True, there's no tax deduction up front as there is with traditional IRAs or 401K retirement accounts, but if you're young and don't have a ton of money, the tax deduction isn't substantial. So go ahead and pay income tax on your money, then take out up to $5,000 per year and invest in a Roth IRA tax-free for the rest of your life. You keep putting money in, the beauty of compound interest kicks in (assuming that investments begin behaving normally again) and voila, you have a nice chunk of change when you retire. Then, when everyone else is paying income taxes on withdrawals from their 401(K) and traditional IRAs, you are paying zero taxes on your Roth withdrawals.

It gets even better. Roths give you flexibility. They're best left untouched until retirement, but if an emergency comes up, contributions can be withdrawn at any time (remember, you've already paid taxes on the money you've put in). You can also take out up to $10,000 to buy your first home, or you can tap the keg to pay many educational expenses.

When you hit age 70 1/2, you must begin withdrawing money from your 401(K) or a traditional IRA whether you need the money or not, but with a Roth it's strictly your choice. Since you paid taxes on that money way back in the early 21st century, the IRS can't tax those dollars again. Roth money can even go tax-free to your heirs.

We helped our oldest son open a Roth five years ago when he got his first job at age 17, and younger brother opened his own this summer, also at 17. It takes some searching, but there are well regarded, no-load mutual funds that will allow you to open retirement accounts with $1,000 or less.

There are rules regarding a Roth--(1) you'll get slapped with penalties if you touch any earnings during the first five years, or if you withdraw any earnings before age 59 1/2 except for the aforementioned purchase of a first house, education expenses, or major medical expenses; (2) you must have income at least as high as your Roth contribution each year; (3) you can only put in $5,000 per year; $6,000 if you're 50 or older; and (4) your modified adjusted gross income (MAGI) for 2009 has to be less than $166,000 for those married and filing jointly, or less than $105,000 for single filers. Good news for the more wealthy: beginning in 2010 anyone can transfer money from a traditional IRA to a Roth. Right now that can only be done by those making less than $100,000. Yes, you must pay full taxes on your current IRA before turning it into a Roth.

As great as they are, Roth IRAs should not replace your company retirement plan if the company matches a portion of your contribution. Always take the maximum match; that's free money. However, a growing number of financial planners are suggesting that employees put beyond-the-match retirement money into Roths as a way to create tax-free retirement money, according to consulting firm Hewitt Associates.

You can't get much better in the personal finance world than guilt-free tax evasion. Thanks, Senator Roth.

Next time: OK, you're lapping up the Roth Kool-Aid. Now, how do I invest my money in a Roth?

Much to my chagrin, my wife told me about the birthday present that the minister at our church gave to his wife: a Mustang convertible. That came right after I bought my wife a candle for her birthday.

The Mustang was actually a week-long rental, a sort of trial run after both agreed she could use--and they could afford--a new car. What a guy. I probably would have offered up an '89 Dodge Duster.

So, Barbara falls in love with the Mustang and a week-long garage guest becomes a permanent fixture, right? Nope. She decided on a Ford, alright, but not a Mustang ragtop. She bought a used Fusion. The story was told in church on Sunday as an example of living simply. She could have afforded the Mustang, but the Fusion made their financial life simpler.

That's a good end to the story for some of us, but not everyone is willing to put frugality above shiny new wheels. Just look at how fast the government burned through one billion dollars last month by sponsoring the Cash For Clunkers program. Do you really think anyone saved money by trading in their bucket of bolts for a new vehicle? Of course not. Forty-five hundred bucks won't come close to paying for the privilege of driving a new car or truck off the lot. But the C-For-C participants put new wheels in their driveway, and they're happy about it.

The hard part is having your stuff-- whatever you're lusting for--and keeping life simple. The answer is simple, too--save up before you buy. Americans have proven it's possible. The Labor Department reports that the country's savings rate has gone from negative 1 percent in 2007 to plus 7 percent in 2009. Advertisers try to convince us that we need to call now, go online now, come on down to the dealership now, because these great deals won't last much longer. Yes they will, and a struggling economy will survive without you providing an immediate stimulus package from your own wallet. A great deal today is even greater one year from now after you've socked away $200 or so each month. Not only have you spent 12 months figuring out whether you can make a monthly payment, you've put $2400 toward the purchase of your new car/ATV/helicopter/submarine/whatever.

Better yet is to follow the advice of Dave Ramsey--save up and pay cash for everything with the exception of your home. But if that thought makes you roll your eyes, go ahead and fall in love with that Mustang you've been eyeing. Just make sure your new relationship is on your terms: simple terms.