The holiday season is upon us. Believe it or not, Thanksgiving is here and Christmas, Hanukkah, and Kwanzaa are right around the corner. This is usually the time that some of the most sensible people throw caution to the wind and charge it! Amidst all the joyous festivities, many unfortunately rack up a ton of debt. In case you didn't know, on average it takes about nine years to pay off a $1000 balance at 18% interest. That's 2018! Is the sweater really that cute?

Recently, I have received a lot of requests for credit management workshops. I normally talk about what a credit report is. I always jokingly say that a credit report is a "grown up report card." I usually get a lot of nodding heads and nervous laughs. I think most people know that it's true. We are judged based on our current and past credit history. I then ask why we need credit. Some of the responses I hear include: to buy a home, a car or get a job; all of these answers are correct. With the shortage of "good jobs", something like a blemish on your credit report could be the difference between getting the job and remaining unemployed.

Next, I normally talk about why everyone should check their report. I get a variety of answers. There are a number of reasons to check your credit report. The best reason I can think of is to make sure the information on the credit report is correct. Besides verifying accounts and balances on file, it is just as important to verify your name, date of birth, social security number, current and past addresses and employers. If any of this information is incorrect, it's probably a good idea to dig deeper and file a dispute, if necessary. I always suggest to workshop participants to get a free copy of their credit report from all three credit bureaus because there is always the possibility that the information is not the same. To obtain a free copy of your credit report, visit www.annualcreditreport.com.

Towards the end of the workshop, I usually talk about the components that make up the credit score such as payment history, amount owed, length of credit history, new credit, and types of credit. If you are holiday shopping and opening credit cards at every store you patronize to get the discount on your purchases, beware that it might cost you a dip in your credit score and inevitable a higher cost for borrowing money.

If you want to keep your spending under control during the holidays, consider establishing a holiday budget. The budget can include gifts, food, decorations and supplies, holiday cards, and other miscellaneous items. Lists will be an important part of creating your budget. Create a list for holiday gifts that include what you plan to purchase, the estimated cost and where you plan to purchase it, if possible. This will help you stay focused during your shopping trip. Your food list should include everything on your menu, including ingredients. Check your refrigerator and cabinets before your shopping trip so that ingredients are not purchased unnecessarily.

Finally, reflect on the year we have had. It's been a pretty rough time this year. We have worried about plummeting stock portfolios, foreclosures, and our healthcare coverage. Now, it's time for us to be thankful for the things that we have. If your 401(k) took a dive, be thankful you even had one; many employees don't. If your home went into foreclosure this year, be thankful you had somewhere else to go; someone ended up homeless. Finally, if your HMO or PPO wasn't the greatest, at least you had coverage; millions of Americans are without any coverage at all. During this holiday season, be thankful for the people and the things that are important to you. In the final analysis, that's what really matters. Have a wonderful Thanksgiving. Happy Holidays!!!

I've come across a couple of different articles this week about risk tolerance and risk capacity, after writing my blog post last week. (Maybe it's the same phenomenon as when you learn a new word that you think you've never heard before. But then you hear it 5 more times in the next week.)

The November issue of Money Magazine has an informative article, How Much Risk Can You Stand? by George Mannes. And through the end of November, they have arranged for readers to have free access to FinaMetrica's risk tolerance questionnaire, which the article says is one of better risk tools available.

One of the interesting points in the article is this: "Risk tolerance isn't about how much risk you ought to take when you invest; it's about how much you can take before you crack." Meaning, your risk tolerance (and the asset allocation that it would indicate) should provide an upper limit for the amount of risk (i.e., the amount of stocks) you could assume in your portfolio, rather than a target allocation.

The article also contends that a good risk tolerance assessment tool should limit itself to assessing your "appetite for risk" and not your risk capacity. I think it's important to assess both. But they are probably right that the two should be evaluated separately.

In an ideal world, your tolerance for risk, your capacity for risk, and the actual amount of risk in your portfolio should be in agreement. I have a target allocation for my household's investments; it is based largely on an assessment of our financial ability to withstand losses (risk capacity). I was curious whether it would also match up with my risk tolerance. So I took advantage of the free access to the FinaMetrica tool and got my risk tolerance score. While FinaMetrica does not provide advice about what an appropriate asset allocation would be for any given score, the Money Magazine article suggests a "comfortable ceiling in stocks" for various scores. I was very happy to see that my actual allocation was right in synch with the suggested stock allocation for my score.

But the thing I will take away is this: this number should probably be my maximum stock allocation, rather than my target. My husband and I stood firm with our investments over the past two years, other than doing some rebalancing which actually means we moved money from bonds funds into stock funds. So our risk tolerance was able to handle the craziness of the stock market during that time. But I need to keep a close eye on our allocation. If the stock market continues to make significant gains, we could quickly be over our upper limit for stocks and take on more risk than we want. If we scale back a bit on the stocks, we'll be less likely to exceed our level of risk tolerance before I get around to rebalancing again.

Risk tolerance is a word that gets thrown around quite a bit when you read about investing. I think it's helpful to differentiate risk tolerance (your emotional reaction to risk) from your risk capacity (your financial ability to handle investment risk).

You're talking about risk tolerance when you ask questions like, "What would I do if the value of my investments dropped 30%?" You're trying to predict how you would respond. But you're assessing your risk capacity when look for facts about your financial situation, such as,

• How many years will it be before I need to use this money?
• How much do I save each year? Or, do I spend more than I earn?
• How much do I have in my emergency fund? (Please note that your emergency fund should be saved, not invested. By that, I mean its value can't drop, or not by much.)
• In retirement, how much of my expenses will be covered by Social Security or by a pension? And how much will I rely on my investments for my living expenses?

Determining how much risk you can handle and choosing an appropriate asset allocation may be as much art as it is a science. I'd be curious to hear what your personal experiences are, and what you think about the risk tolerance tools that are out there.

To learn about different types of investments and the various kinds of risk they have, visit University of Illinois Extension's interactive website, Plan Well, Retire Well, Your How-to-Guide at www.RetireWell.uiuc.edu. You can also read my latest news article about risk tolerance which is also posted on that webpage.

My husband and I just had our 28 year anniversary; you can calculate that we're getting older! But do I feel like retirement is around the corner? No, it still seems like an abstract thought that is likely to happen someday but I can't really imagine it happening to me. So when will it feel like the right time to save for retirement?

Today we spent time planning some new landscaping for our backyard. It made me think about another time we did a major landscaping project. As graduate students we decided to cover our backyard with rock -- this is something people do in the Arizona desert. We invited several friends to help move many cubic yards of rock and paid them with a dinner. That was cheap labor! Did we feel like it was the right time to save for retirement when we were in college? No.

The next few years included the birth of our three sons. Time flew by with little sleep but many happy moments. As young parents, did that feel like the right time to save for retirement? No.

When you're in your twenty and thirties it seems like you have forever until you'll be old enough to think about retirement. It's easy to think that someday it'll feel like the right time to save for retirement. Now as I get older with two kids in college and one more to start soon, does it feel like the right time to save for retirement? Do you need to ask with three kids soon to be in college at the same time? No.

Clearly I'm not the only one who hasn't felt like it was the right time to save for retirement. According to the latest EBRI Retirement Confidence Survey 54% of workers report less than $25,000 in total savings and investments (excluding their home and defined benefit plans). Many people will live 20 to 30 years, or more, after retirement. Twenty-five thousand dollars will not provide a financially secure retirement.

The moral of this story is that you can't wait until the time feels right to save for retirement. You need to save for retirement all of your life. By the time I feel like it's the "right time," I'll be out of time to save.

The only way I know to be successful at saving for retirement is to start doing it when you're young -- too young to even be able to imagine what you will be like when you retire. Start small but save every month. If you have the option through your employer, put your savings on automatic through payroll deductions. Otherwise, choose a retirement savings option and fund it regularly. I have used these saving tips myself, and they have worked for me.

A little bit saved each week will add up significantly. Can you save $20 a week? In a year, you'd have over $1,000. Would you like a million dollars when you retire? Visit the Plan Well, Retire Well website to calculate how much you need to save monthly to be a millionaire. Once you've logged into the website, click on Save for Retirement to go to the calculator. The Plan Well, Retire Well website also has information about retirement saving plan options for you.

Saving money regularly, before you feel like it's the right time to save, will lead you towards a financially secure retirement. Now is the time to start saving.

Who couldn't use a little more cash each month! Refinancing your home mortgage might be the solution.

Given today's economy, interest rates on home loans are relatively low. It may make sense for you to refinance your existing home loan. Or, it might not! Like most financial decisions, you need to think about the costs and benefits.

Why do people take the time to refinance home loans? You might be asking yourself, "The loan I have now is working fine ... why should I change it?"

Refinancing a home loan can help people who have different goals. Refinancing can allow people to:

• get a lower loan interest rate,
• change from an adjustable rate mortgage (ARM) to a fixed rate mortgage,
• change from an ARM loan to a different ARM but one with better terms, or
• change the number of years on a loan.

To decide if refinancing a loan makes financial sense for you, you need to start by asking yourself these questions:

• What are the initial refinancing loan costs? (It's important to ask about all costs. Costs can vary depending on the lender.)
• How long do you expect to own this home?
• When will savings from a lower interest rate loan pay for the refinancing costs?

For example, let's assume refinancing a home loan costs $3,000. In this example, the homeowner will have a mortgage payment of $50 less per month after refinancing. Then we know ($3,000 divided by $50) that it will take 60 months (or 5 years) for the savings to pay for the refinancing costs.

You can use a mortgage calculator, like the one at Bankrate.com, to help you calculate whether or not refinancing your home makes sense to you.

For more information about refinancing a home loan, visit the U of I Extension website, Opening Doors to Housing Success.

And, if you do decide that it makes sense to refinance your home mortgage loan, what should you do with that extra cash? Why, invest it for your retirement! What else would I recommend?! For ideas about how to effectively save for retirement, visit the Plan Well, Retire Well website.

Comments? Click on my name below and send me your thoughts!

This week I attended the Smart Women Smart Money Conference hosted by the Illinois State Treasurer's Office. There were numerous workshops going on including one by our own Karen Chan. To my surprise, my next door neighbor, Shundrawn Thomas, President of Northern Trust Securities, did a presentation on the State of the Economy. I decided to sit in on his session. He provided historical data, information on the current status and future outlook of our economy. I would classify his presentation as a lesson in macroeconomics, the study of the overall economy. Today, I want to speak with you about microeconomics, your personal economy.

By now, you have probably been overwhelmed with quarterly statements from your retirement and investment plans, your Social Security statement, your annual employee benefits enrollment booklet, and maybe even your Notice of Proposed Assessed Valuation from your county assessor's office. This is a great time to re-evaluate your personal economy. Are you financials in order? Is your economy in a recession? Let's look at your mail one piece at a time to see how things are going.

Quarterly statements

First of all, if you don't have any, that might be a problem. See Social Security section below. Otherwise, look at your statements. Generally, you will have performance data for the current quarter and year to date information. If you are not happy with your investment performance, consider rebalancing your portfolio. For more information on rebalancing, check out our website at Plan Well Retire Well. Are you saving enough? Do you have more month than money? Explore the Extension website to find out ways to get more for your money.

Social Security statements

Your Social Security statement was sent out recently. The two components that your need to review for accuracy are the estimated benefits and earnings record sections of the statement. The estimated benefits section provides vital information on your estimated benefits at retirement, disability, and death. You should verify your birthdate on file, estimated taxable earnings for 2008, and the last four digits of your social security. The earnings record is a running record of your earnings each year since you started working. It is important to verify this information for accuracy; benefits are determined based on this information. Note: if you had more than one job or had self-employment income in addition to regular income, your earnings for the year would be the total of both jobs. Will the estimated benefits be enough?

If you are depending on Social Security to get by in your golden years, think again. In case you didn't read ALL of your Social Security statement, one of the women in our workshop reminded us that on the front page of the statement, Social Security states that "in 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted." This statement explicitly says that someone's personal economy will likely turn into a depression if additional retirement resources are unavailable. Therefore, if you are not currently participating in your company's retirement plan, now is the time to join. If you are self-employed establish your own retirement plan, there are several to choose from. If you don't have an IRA, consider opening one. The more income options you have at retirement, the better off you'll be. To view your statement or apply for benefits, visit the Social Security website.

Property Tax Assessments

Your county assessor normally assesses your property every three years. This year, due to massive foreclosures and the plunge in the real estate market, many assessor offices are providing special assessments to adjust property values to reflect our current market. However, once you receive your notice, if you disagree with the assessed valuation proposed on your property, you have a small window of opportunity to appeal. In many cases your appeal can be filed online at the county assessor's website. You will need the property index number (PIN) of your property and likely other similar properties in the area that fall into your same property class. The deadline to appeal normally appears on the statement.

Employee Benefits Package

Sometime this month, you have likely received your open enrollment forms. Besides retirement accounts, this is a great way to reduce taxable income and protect your family against unexpected loss. Usually, you will be asked to choose between an HMO and PPO plan of one or more providers for health insurance. The HMO is normally more economical, while the PPO ordinarily offers more flexibility. Which plan you choose, depends on your family's specific needs.

Basic life, supplemental life and accidental death and dismemberment insurance plans are offered as well. Most companies provide basic life coverage equal to your annual salary for free. However, you can purchase additional (supplemental) life insurance coverage for up to several times your annual pay at relatively low group insurance rates. Check your current insurance needs. If something happened to you, would your family be able to survive on what's left? If not, in addition to private insurance, consider coverage with your employer.

Finally, are you taking advantage of your employer's flexible spending accounts? Many employers offer pre-tax withdrawals from your paycheck to set aside to cover health and child care costs. Some may even offer reimbursement accounts for transportation, which includes parking, tolls, and bus and train fares. Participation in these programs provides a reduction in your taxable income, and thus a tax savings to you throughout the year.

So, before your enrollment period ends, see which benefits will be to YOUR benefit.

Final Thoughts about Your Economy

Like the broader economy, your household economy is made up of more than just a few things. You have budgets consisting of income and expenses, savings, and many other factors to consider. However, I wanted to highlight some of the things that get overlooked or placed on the back burner because you feel that other matters are "more important." In retrospect, had we paid more attention to the "less important" contributing factors, our economy would have likely been a lot better off today. So, open your mail. You'd be surprised at how little things like verifying information or making slight changes in coverage can make a big difference on your long term outlook. Our economy will eventually turn around. Make sure you are prepared when it does.

Until we talk again,

Legal scholars Richard Kaplan, Nicholas Powers, and Jordan Zucker detail the "increasingly troubled state of employer-provided health benefits for retirees" in a recent analysis. Their paper, published in the Yale Journal of Health Policy, Law, and Ethics (Vol. 9, No. 2, 2009), is titled "Retirees at Risk: The Precarious Promise of Post-Employment Health Benefits." (A version of this paper is also available on the Social Sciences Research Network website for download.) They document the economic and financial pressures on private business firms that help explain the erosion of retiree health benefits, and they highlight the adoption of new accounting rules that force firms to recognize the financial cost of retiree health benefits on their books as a major factor in the decline of employer-provided retiree health benefits. They also turn their attention to public sector units claiming "another wave of broken promises may lie just ahead" since the state and local government employers also need to represent these obligations in their accounting.

The overall message of this paper for retirees and for people planning for retirement (that includes nearly all of us!) is the significant erosion already in employer-provided retiree health benefits and the real chance of further declines in employer-provided health coverage for retirees. For the individual few good strategies exist to remedy the loss of coverage. Certainly, those of us in the planning years and period of our lives when we are saving and investing for our future financial security may need to bump up our saving rates to help cover the short-fall and be ready to have some flexibility in our retirement budgets to handle changes. A letter to your legislative representatives expressing concern about the week legal protections provided by ERISA may also be in order.

Currently the national law allows people to collect unemployment benefits for 79 weeks. 79 weeks is already an extension of the usual time limit for unemployment and, yet, legislation is being considered that would extend this benefit time. Why? Because many people have been unemployed for longer than 79 weeks, and the number of people unemployed continues to increase.

According to a recent article in the New York Times, "Some 5 million people, about one-third of those unemployed, have been without a job for six months, the highest number since data was first collected in 1948. There are nearly six unemployed for every available job."

The questions people are asking me lately are very different from the types of questions I received a couple of years ago. Now people call wondering where to go for bankruptcy counseling? Or, how they can pay for college when expected loans are suddenly not available?

If you're facing financial challenges, now is a good time to seek help so that you can make informed decisions. University of Illinois Extension has several websites that can help you.

Getting Through Tough Financial Times provides clear information and strategies to manage your finances with reduced income.

Choosing a Financial Professional discusses how to evaluate financial professionals and to choose one that is a good match for your needs.

Every day brings interesting new twists and turns in the healthcare debate. From Rep. Joe Wilson's outburst to more talk of death panels, the debate continues on and public opinion has become more polarized than ever. In my last blog, I told you if you sent me an email, I may include your comments in my next blog. Boy, do you have opinions. I received a cross-section of responses from health professionals, concerned citizens, and outraged taxpayers. Here are some of the comments you posted to my Facebook page.

Tanyanika Conaway commented on how she has noticed that people without insurance receive "okay" service, but not the best because they don't have insurance. Karen Grove Hereford, another health professional, feels that if healthcare is free for everyone, services will be substandard. She sees the bigger picture of hospitals not being able to charge their normal rates, which would lead to salary cuts to employees. She stated "I pay a lot for my insurance and I feel I should get good service. I give excellent service to patients whether they have insurance or not."

Daryl Van Johnson feels a competitive public option would balance things. "There is no incentive for insurance companies to do anything for us. They deny claims that are expensive for them, they drop people who get too sick and all this while pushing the cost of premiums through the roof. A public option would cause the cost to be lower, which would force insurance companies to lower their prices to keep people from moving to the public option."

Tasha Thomas, an RN Supervisor said "I hear what everyone is saying and you all have good points. The health care system is big and there is not an easy fix to it...Research Canada universal insurance...you are put on a waiting list for surgery (if it is not emergent). The taxes in other countries for universal insurance are expensive. Remember that employers pay their share into benefits and they pick the packages for their employees...and they set limits to the benefits offered to their employees, not the insurance company. I always tell people to educate themselves regarding the health care system because what you don't know can hurt you."

To place this debate in perspective for you, please allow me to share my personal medical stories over the past month. In August, my mother-in-law passed away. She died of complications related to lung cancer. She had been in and out of the hospital for quite some time. She had Medicare and Medicaid. I'm sure her bills were in excess of $1 million. We have not seen a bill yet; my guess, it's all been paid. My son got food poisoning that same week. He went to the emergency room and was admitted for overnight observation. He was released by 12 noon. He didn't spend a full 24 hours in the hospital. His bill was almost $10,000 and we are expected to pay a little over $1,000 out of pocket.

In addition to all of this, my husband has been having the same tests done for about four years now. Our insurance normally paid the entire cost minus a $20 co pay. Last week, we received a bill for almost $300 for his routine tests. The tests were not considered "necessary" and we were responsible for the entire cost (which would have actually been $750 without insurance). Our health insurance was switched to a different carrier this year by my husband's company. We supposedly have "good insurance." The thing is we pay a higher premium and are responsible for more out of pocket costs than in the past. When I think back to what we paid three to five years ago, health insurance costs have skyrocketed. Left or right, I think we can all agree if something isn't done, we will all be in trouble.

As far as the death panel discussion goes, I believe as many of you do, these panels have existed all along. This won't be anything new. My father-in-law has been in the hospital for a couple of months. Talks of placing him in hospice care have escalated recently; his insurance is running out. When insurance companies and hospitals decide that it is medically unlikely that your condition will improve, financial considerations take priority.

I would like to close this blog with the comments Dr. Tonya Coats stated in her email to me. "I am very conflicted about this debate. It is mainly a matter of semantics. We call it a "healthcare" debate when it is actually a "health care coverage" debate. This is where people who are worried about the government's interference in our lives get it twisted. I believe everyone should have access to basic healthcare screening and emergent needs. It doesn't matter if the economy is good or bad because for some it is always bad. My big problem as a healthcare provider has been the lack of personal responsibility. Take cervical cancer, for instance, screening for it will prevent death. So everyone should be screened. But, it is a sexually transmitted disease. Are we willing to stop having inappropriate or unprotected intercourse? (Personal responsibility) Further, some of the most common and expensive disease processess (hypertension, diabetes, heart disease, and even some cancers) are strongly impacted by life choices. No one wants to put down the fork and get up and exercise to lose weight (Personal Responsibility). None of this is being discussed and all we seem to want to do is throw money at the problem - "The American Way." Finally, nobody wants to take the financial responsibility. Paying for health insurance has to come from taxes, get ready to pay. When this bill passes a lot of people are going to be very disappointed when they don't become magically healthier."

It's up to us. We have to take responsibility for our lives; no one can regulate our choices. But, as Christina Glover so profoundly stated "I understand about personal responsibility, but sometimes bad things happen to good people." If we have a choice, we should choose wisely. Until we talk again…

Earlier this year, my husband's employer notified him that it was freezing his pension plan. By law, he will retain all the benefits he had earned up to that point, but his pension benefit is "frozen" at that level and will not increase. Additional years of service or pay increases will have no impact. At the same time, they suspended company matching contributions to his 401(k). None of this is good news. But what actions should we take to mitigate the impact?

Revise Retirement Income Projections

We should revise our expectations for retirement income by re-calculating any projections we've done. I've always been conservative with projections where our pension income was concerned. I've either used just the benefit that we've already earned, or only assumed another year or two or service credit. So the numbers I ran in the past may still be valid.

But many people base their projections on the benefit they'll earn if they continue to work for their current employer until retirement age. Those projections show a lot more pension income than you're likely to actually receive. For those rose-colored projections to come true, several things have to happen:

• Your employer has to stay in business. Even if it's bought out by another company, your benefits could change.
• You have to remain employed there until you choose to retire. With the frequency of layoffs over the past 10 years, I'm not sure what the odds are for that. In today's economy, middle and upper level employees are just as at risk of layoff as lower-wage earners.
• Your employer has to continue the pension plan.
  • They are under no obligation to continue the pension plan, and funding pensions is a big financial commitment for companies. If the organization is having financial problems, freezing a pension could be a logical choice. This is especially true if other employers who hire people with similar skills aren't offering a pension, or when unemployement is high - as it is now. One of the main reasons companies offer good benfits is to retain employees. Today, retention is not the main problem companies face. It's turning a profit.

Check Your Insured Benefit Amount

One thing you probably don't have to worry about -even if your employer files bankruptcy - is getting the pension benefits you've earned so far. Non-government employers pay into the Pension Benefit Guarantee Corporation to insure those benefits. In the event the employer goes bankrupt and they have not set aside sufficient funds to cover their pension obligations, the PBGC will cover the payments. There are limits; if you're a highly paid employee, your pension might exceed the insured amounts. But the PBGC says, "Most people receive the full benefit they had earned before the plan terminated."

Here's a quick run-down of the maximum insured benefits for selected ages for plans that end in 2009:

*Both spouses the same age.

For more details about PBGC insured limits, see their news release.

There is no insurance for your 401(k), 403(b), 457, or other defined contribution plan; it's up to you to manage those investments wisely.

Increase YOUR Contributions

To make up for losing future employer contributions toward your retirement, you probably need to increase the amount of your personal savings and contributions each year toward retirement. Some options for doing that are to start or increase contributions to:

• Your employer "defined contribution plan" such as a 401(k) or 403(b),
• Your own IRA.
• A spousal IRA for a nonworking spouse
• A SEP, SIMPLE, or Keogh plan if you have any income from self-emloyment
• Non-tax advantaged savings accounts. If you use a "buy and hold" strategy in these regular accounts, you effectively get tax deferral on the growth in the investment until you sell it. Index mutual funds are good candidates for this.

If you no longer have any employer retirement plan, not even one to which you can contribute from your paycheck, you might have an option that was denied you in the past: deductible contributions to an IRA. "Active participants" in employer plans whose income is over certain limits cannot make deductible contributions to traditional IRAs. If you have not had any contributions to employer plan at any time during the year, you are no longer an active participant and you can deduct your IRA contribution regardless of your income. For 2009, those limits for adjusted gross income are:

• Single filers $55,000 -$65,000.
• Married filing jointly $89,000-109,000.
• Married filing separately $0 to $10,000.

See IRA Basics for more information about traditional and Roth IRAs.

I'll save the issue of whether you should consider an annuity to fill the gap left by a frozen pension for a future post. So stay tuned.

To send questions or comments about this post, click on my name below.

If you are like me, until recently, you have probably half-heartedly followed the news reports on healthcare reform. I thought I'd wait until the dust settled and a more finalized draft of the healthcare bill had been developed before I weighed in. Needless to say, I was very surprised to hear all the uproar about less than pleasant protests taking place all over the country. I decided maybe I'd better find out sooner than later what all the fuss was about. As most of you know, our country is in a healthcare crisis. President Obama and the 111^th Congress want to overhaul our current healthcare system and develop a system that would provide healthcare coverage to every American. That sounds easy enough. However, there are various points that proponents on each side of the debate need further clarification on.

Because I wasn't following the reform closely, there are several things that I was unaware of. First of all, I didn't know the correct name of the legislation is America's Affordable Health Choices Act of 2009. You may not have known that as well. In the media, we have always heard terms like Obama-care, the Obama plan, healthcare reform and so on. Secondly, I didn't know that there were two versions of the healthcare bill, a house version and a senate version. Both bills are lengthy. Here's a summary of the house version.

Laurinda Dodgen, University of Illinois Extension Community Health Educator says "there are many myths about the new reform bill floating around." While preparing to write this blog, I found many online. Some points of contention include:

1. "Myth": Seniors will be euthanized.

"Truth": The house bill addresses estate planning issues.

2. "Myth": Private insurance costs will increase or private plans will be eliminated.

"Truth": A public insurance exchange will be created; the government plan will be one of many

3. "Myth": Medicare benefits will be cut to fund the healthcare reform.

"Truth": Medicare savings come from cutting billions of dollars in overpayments to insurance companies and the elimination of fraud and abuse, not from reductions in patient care.

4. "Myth": The quality of care and services will decrease.

"Truth": With more options available, quality of care is expected to increase. Services will remain the same, and won't be rationed out as critics have suggested.

5. "Myth": Employees will have to change plans and doctors.

"Truth": Employees can keep their same plans, doctors, etc. The public plan will be an available option, not the only option.

Both of these arguments have some validity. I cannot say that one has a better argument than the other. I believe the answer lies somewhere in the middle. The one person that everyone believes could have brought both sides together is the now deceased U.S. Senator Edward M. Kennedy. Sen. Kennedy has been a force to be reckoned with for many years. He has influenced a wide variety of legislation, including many that dealt with healthcare. It has been said that even from his sickbed he made calls and spoke to legislators about getting the healthcare reform passed. Now that he has passed away, strong recommendations have been made to name the reform bill after him. Will his death play a part in getting the bill passed? It's hard to say. If it does, it's too bad Sen. Kennedy won't be around to see his dream of universal healthcare become a reality. He has been advocating for universal healthcare for the past 30 years.

The question remains whether both sides will be able to come together and find common ground. I believe they will. As I looked at the bills, there are more things that are similar than different. I think a neutral party, without political or financial interests will be needed to mediate between the groups. Will the wrinkles get ironed out before the end of the year? Who knows? We will have to wait and see. In the meantime, send me an email with your reactions to the healthcare debate. I'd like to hear the thoughts of average Americans. Maybe I'll share your thoughts in my next blog.

Web Sources:

www.moveon.org

www.cnn.com

www.foxnews.com

www.abcnew.go.com

www.whitehouse.gov

www.huffingtonpost.com

This question comes up regularly between my colleagues and me. When you're in the business of financial education, it matters where people go to ask questions about money.

Where do you go? If you want to find out about IRAs or the new credit laws or how to choose a mutual fund, do you

• visit a website,
• read a newspaper,
• check out a library book,
• call a relative,
• ask a friend on the weekend,
• read a blog, or
• watch TV?

According to a recent Wall Street Journal article, more and more people are going to independent financial advisors (rather than brokerage firms) for their financial information. If you have been thinking about visiting with a financial advisor, check out the U of I Extension's website, Choosing a Financial Professional, for tips on questions to ask.

Extension Educators are always looking for new ways to provide education to people who can use it. We know people have questions about finances. It seems likely to us that people are asking financial professionals questions such as:

• What should I do with my retirement plan now?
• When does long-term care insurance make sense?
• What's the truth about reverse mortgages?

But how do we get the objective, research-based information we have to the people asking questions? We keep trying new methods.

This year we're trying a new way to provide financial education: teaching financial professionals who are talking regularly to clients. In September, my colleagues and I are teaching a special one-day symposium through the University of Illinois Tax School: Strategies for Today's Economy. The symposium will be offered three times in Illinois:

• September 28: Oakbrook Terrace
• September 29: Peoria
• September 30: Collinsville

For more information about these symposiums, visit online Strategies for Today's Economy.

And, we're open to ideas for other ways to reach people with financial education!

I'd really like to know -- where do you go? Drop me a note by clicking on my name below and tell me where you go for financial information.

I was a little surprised to see an article in the August issue of Money Magazine titled "Cure the Summer Landscape Blues." But it reminded me that I've been a true cheapskate when it comes to my garden. So I thought I'd share a few of my strategies with you.

I have re-used or repurposed so many things in my garden- plants, hardscape, even sod and dirt.

• If I'm removing sod in one place to expand a flower bed, I take it up carefully and look around to see where I need to improve the grass, and plop it down - after a little prep of the site, of course.
• When we replaced our paved driveway with concrete, they removed the existing gravel and sand base. I save a few wheelbarrows full and used them as the base for my paved landings at the foot of the stairs from my deck.
• The first owners of our house had a sandbox for the kids. The next owners poured soil into it and turned it into a not-very-functional planter. I finally tore it down, and used that wonderful topsoil/sand mix to top dress an area of my lawn where the soil is absolutely horrible. That grass has looked better this summer than ever before.

I'm careful with gardening expenses in other ways too. If I'm not sure a new plant will like my site - or that the rabbits will like it too much - I start small, often one from an even an end-of-season sale.

Many store closings are not places to find deals. It's made the news about how the liquidators may charge more for an item than you could have bought it for on sale before the store closing. But I have been fortunate in the past with landscaping materials. When a K-Mart closed a few years ago, I stocked up on bagged mulch at 50% off. And as far as I know, mulch NEVER goes on sale.

But later, I found an even cheaper way to mulch my flower beds and trees. My village (in any other state, it would be called either a town or a city) chips trees and branches that are downed in storms, pruned limbs from parkway trees, or brush placed on the curb by homeowners during seasonal pick-up days. All those chips are available free for the hauling. Actually, if I wanted an entire truck load, they would deliver. But I'd have no control over the quality of the load.

How to get this stuff home? I use the large paper yard waste bags that we are required to use if we dispose of yard waste. They cost about $.50 each. Wait, you say, that's a waste of money! It would be, if I used the bags once for this purpose and threw them away. But I don't. I can usually use the same bag for 2 or 3 trips to the chip pile if I don't fill them too full. Then I dry them and put them away, to use when I have yard waste that I can't dispose of on my own property.

And speaking of paying to have yard waste hauled away: I keep that to an absolute minimum. We almost always mulch our grass clippings and let them fall back onto the lawn. I shred and save my leaves each fall, corraling them with hardware cloth or other spare items. Next year, when I'm putting down new wood chips, I'll spread a layer of leaves first, then the wood chips.

Right now, I've got my eye on a pallet of bagged top soil at the local grocery store. The price has already been reduced. But I'm trying to wait until they've given up on selling it, in hopes they'll accept my offer for an even lower price. Keep your fingers crossed for me.

I'll bet any of you who are gardeners have tips about how you've kept costs down. Click on my name below and tell me about it. We'll share those ideas in a future post.

Everyone is talking about energy use and saving money with home energy improvements. People are buzzing about white roofs in the New York Times, By Degrees: White Roofs Catch On as Energy Cost Cutters, to tax credits in the The American Recovery and Reinvestment Act (ARRA).

I like the tax credit because it helps save money in two ways: first, you can save money for home energy improvements by receiving the tax credit and second, you will save money in energy costs once you've made these home improvements.

Remember, a tax credit helps you on your tax bill more than a tax deduction. When you receive a tax credit, the amount is subtracted from the amount of tax you owe. (In contrast, a tax deduction is deducted from your income before you calculate the tax you owe.)

The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements, and raises the maximum credit limit to $1,500 for improvements made to your home between January 1, 2009 and December 31, 2010.

Be sure to consult a tax professional and read the IRS fact sheet 2009-10 about the Residential Energy Property Credit to be sure your improvements qualify before planning to use this tax credit.

Which home improvements will qualify for this tax credit? Home improvements such as the cost of insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems qualify. Installation doesn't qualify. For a list of qualified improvements, visit the Energy Star website.

How can you benefit from this tax credit? For example, new ENERGY STAR qualified windows can help reduce your energy bill up to 15 percent. Now, with the tax credit you can reduce the cost of installing new windows. If you have noticed drafts in the winter, or one of your rooms with many windows feels especially warm in the summer, then these are good clues that your home might benefit from new Energy Star qualified windows.

For other ways to save on home improvement costs, also at the energystar.gov website is a "rebate finder" webpage. You can enter your zip code and find out about other rebates and credits for making home energy improvements.

Now may be a good time for making home energy improvements. I know I'm planning to investigate some home energy improvements that we need to do while I can take advantage of this tax credit. What about you?

With the changing economy, people are asking me about credit scores but the questions are different than they were a year ago. Maybe you've been wondering about your credit score -- and what affects it -- too.

Generally when people talk about credit scores they are actually referring to FICO credit scores -- the main provider of credit scores. Consumer Reports Money Advisor Newsletter recently provided information about FICO credit scores that reflect the type of questions I'm hearing. Lets take a look at some of these questions:

What happens to my credit score if a lender lowers my credit limit on a credit card?

Probably not much. As reported by Consumer Reports, a study done in 2008 found very little change in credit scores for people whose credit limits had been cut.

Will paying down or off my credit balance hurt my credit score?

Actually, paying down balances is one of the best ways to improve your credit rating. However, you may not want to completely zero the account and then not use the credit at all – a little bit of activity on the credit card may be beneficial.

Karen Chan's recent blog post, Should I cancel this credit card? Will it hurt my credit score? talks about this more.

Does having a sub-prime or adjustable rate mortgage hurt my credit score?

Not at all. The type of mortgage loan is not in the FICO score calculation. What is important is that you keep up with payments.

Most people have heard the commercials for debt-relief where someone promises to reduce the amount of debt you need to pay. Will entering into a "partial payment agreement" with a debt-relief firm affect my credit score?

Most likely, yes. Even though this may be a much better solution than not paying your bills at all, it will still count as a negative on your credit score. However, even though your score may initially dip, working with a credit counselor may help you get your finances in order. As your payment history improves, so will your credit score.

If you do decide to work with an agency to restructure your debt, I would suggest you work with a nonprofit agencies with counselors who are members of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. Also check with your local Better Business Bureau. Be sure you understand the fees and costs to you before signing any agreements.

Absolutely yes. The FICO scores gives equal weight to late payments no matter the type of loan.

While it's important to think about how your credit use will affect your credit score, remember to keep your financial goals in mind when strategizing about credit use. Using wise financial behaviors will ultimately help your credit score.

This is probably the most common question I get about credit. A person has a credit card she's no longer using, and she's thinking about canceling it. But because we're all so concerned about our credit scores today, she wants to make sure that cancelling it won't hurt her score.

Years ago, the recommendation was clear: cancel any credit card you aren't using. But today, the issue is more complex. Whether canceling a credit card will hurt your credit score depends on several things.

Amounts Owed: Utilization Ratio

Part of your credit score (about 30%) is based on "Amounts Owed." One of the factors considered here is, What proportion of your available credit lines are you using?

If you have any individual credit card charged up close to the limit, you'll lose points because your "usage ratio" is too high. And you'll lose points if, looking across all your credit cards, you're using too much of the combined credit limits. What's too much? Transunion, one of the three major credit reporting agencies, says that the average proportion of balances to credit limits is 34%, so you want to be substantially below that. I've heard that less than 10% should be your goal.

Canceling the card could hurt you, because your utilization ratio may go up when you lose that credit line. This is especially true if your card has a high credit limit and you charged little or nothing on it, .

Lots of people don't realize that the credit scoring algorithm can't distinguish between a balance that you're carrying from month to month, and one that you'll pay off when you get the bill. If you're applying for a mortgage or a new car loan, don't put a big charge on your credit card even if you plan to pay it off before the due date. The credit card might report to the credit bureau on a day when that huge balance is on your card, making it look like you're carrying a large balance in relation to your credit limit.

How much this will affect your credit score will depend on the other information in your credit history.

Amounts Owed: Number of accounts

You know that having too many credit cards is not a good thing; so does your credit score. This is another factor in the "Amounts Owed" part of calculating your credit score.

The average credit report shows 4 or 5 bank credit cards (as opposed to store credit cards). A good goal is to be no higher than that.

Length of Credit History

Length of credit history determines about 15% of your credit score. You gain points for having a long credit history. Although negative info can only stay on your credit history for seven years, good stuff can stay on forever. So my credit history shows that I've had one particular credit card since 1990. Only seven year's worth of payment history is reported, but the date I opened the account will stay there as long as I have the account. That earns me a some points on my credit score. Canceling that account could take away those points, especially if my other credit cards were opened much more recently.

Final tip

Your credit score is simply a reflection of all the information that's in your credit history. Rather than paying to get your credit score, or paying for a service that lets you access it, start by getting a free copy of your credit history from each of the three major credit reporting agencies. Use the REAL authorized website to get them, at www.annualcreditreport.com. Make sure all the information is correct, and follow the instructions on the report to dispute incorrect entries. Paying your bills on time is the single most important thing you can do to have a good credit history. And keeping your balances low could be the 2nd most important thing. Take care of your credit history, and your credit score will take care of itself.

Update 7/28/2009

Thanks to Jeff Rose, this week's host of the Carnival of Personal Finance for selecting this post for inclusion in the Carnival. Check it out, and see what other financial bloggers are talking about on his Good Financial ¢ents blog.

The past couple of weeks have been filled with discussions on wills and trusts, guardians and executors. Unless you have a legal background or some knowledge of how these things work, some or all of what has been said may have gone right over your head. I will attempt to shed some light on the discussion of Michael Jackson's estate. I just viewed the Will of Michael Joseph Jackson. At first I was taken aback by the simplicity of it. Surely someone as wealthy as Michael Jackson would have a more elaborate will. However, after noticing that the will placed all of his assets into the Michael Jackson Family Trust, I understood why it was simplistic. It was actually a pour over will. A pour over will literally pours over your assets into a living (inter vivos) trust that you would have established during your lifetime, i.e. the Michael Jackson Family Trust.

I've said a mouthful already. Let me begin by telling you what a will is. A will, according to the American Bar Association, provides for the disposition of property owned by you at the time of your death. A will can also answer questions as to your last wishes concerning your minor children. Michael Jackson's will clearly names his mother, Katherine Jackson as the guardian of his minor children and Diana Ross as the successor guardian. A guardian is a person legally responsible for the care of another person and/or her assets. His assets, however, will be placed in trust. A trust is an estate planning arrangement where a trustee (which can be one or more individuals and/or banks) takes title to the assets of the original owner for the benefit of one or more persons known as beneficiaries. Michael Jackson's will named three co-executors of his estate. An executor is in essence a manager of the estate. This person makes sure that all debts and taxes are paid and that proceeds are passed on to the proper beneficiaries. By now, we all know the beneficiaries of Michael Jackson's estate are his three children, his mother, and the charities named in his family trust.

So, is Michael Jackson's will the final word? Not necessarily. Deborah Rowe, the biological mother of the children is still living. Unlike property, children cannot simply be passed along if a living parent still has rights to them. There is speculation that Debbie might contest the will and fight for custody. When someone contests a will, he challenges the validity of it or its terms. The competency of the maker of the will at the time of signing can also be challenged. It will be interesting to watch how this all unfolds in the coming weeks and months.

Although Michael Jackson was a wealthy man, you do not have to be wealthy to establish a will and/or trust. If you have minor children, you can use a will to provide instructions on who will care for your children and their assets in the event of your death. I started my will years ago when my children were small. I did not complete my will because I did not know who I would feel comfortable with caring for my children and their assets. My mother and mother-in-law are both older women with health challenges. Although I knew what I needed to do, I did not do it. Had my husband and I died, the courts would have been forced to make a decision for us because we would have died intestate, without a will. Our children could have ended up with someone that we did not approve of. However, as of the typing of this blog, I have contacted an attorney and am in the process of establishing my will and family trust. Just in case all of this isn't enough to convince you that planning is important, I have include a list below of the benefits of having a will/ trust.

Benefits of a trust (State Bar of Arizona)

1. Cost savings – avoiding probate provides substantial savings on fees and costs
2. Incapacity management – named trustees can manage assets for a settlor's benefit if he or she is incapacitated, avoiding the need for a court-appointed conservator
3. Tax savings – a trust arrangement can reduce estate taxes for a married couple in certain situations. See an attorney for more information
4. Beneficiary protection – setting up a continuing trust arrangement in either a will or living will can protect beneficiaries who are too young or otherwise unsuitable to receive all of their inheritance outright in a lump sum, and can help protect against loss of assets or use on antisocial purposes such as drug addiction.

For more information on will, trusts, and estate planning, visit the following websites:

American Bar Association

Illinois State Bar Association

State Bar of Arizona

The amount of money in your bank or credit union account that is insured will stay at $250,000 through Dec. 31, 2013 as a result of the Helping Families Save Their Homes Act of 2009. Even if you have nowhere near that amount of money, this reminds us that money in US banks and credit unions is safe. Just check that your financial institution is insured by FDIC or NCUA.

Before last October, most account were insured up to $100,000. Congress raised the limit to $250,000 to help reassure account holders as the stock market and real estate markets fell, and some banks failed. Thanks to insurance through the FDIC and NCUA, accountholders at insured institutions lost no money, as long as their account balances did not exceed the limits.

You may not normally have that much money in your bank or credit union. But you could easily have more than $100,000 in an account if you:

• panicked during the stock market roller coaster over the past year, and cashed out some of your investments.
• lost or quit your job and rolled your 401(k) or other retirement plan into an IRA at your bank or credit union.
• sold your house and deposited the proceeds into your bank or credit union account.

Only deposit accounts - CDs, saving, checking, money market accounts - are insured. Investments purchased through a broker who has a desk at your bank are not insured.

The insured amount would have reverted to $100,000 at the end of this 2009. But the new law extends the higher coverage until December 31, 2013. This is good news, especially for people who may have large amounts that they would like to put into longer term CDs. With the extension, you could put up to $250,000 into a 4 year CD before the end of 2009 and know that it would be insured until its maturity date.

Retirement accounts were already covered up to $250,000 before these two temporary pieces of legislation, and insurance on those accounts will remain at $250,000 even after the legislation expires.

You may have even more insurance, depending on how your account(s) are titled. Joint accounts and accounts with POD (Payable on Death) designations are two situations where you have 2 or more times the base amount of $250,000. You can use the FDIC insurance calculator to figure out how much coverage you have.

This is one of the benefits of having money in a bank or credit union, compared to holding cash or keeping it in investment accounts that are not insured. is that most are covered by insurance. If the bank or credit union should fail, account holders are insured up to certain amounts. The general limit has been $100,000 for quite a long time.

To find out if your bank is insured by the FDIC, call 1-877-275-3342, use "Bank Find" at www.fdic.gov/deposit, or look for the official FDIC sign where deposits are received. As of 2007, the FDIC says that insured banks should be displaying the new official FDIC sign:

For credit unions, find out if your credit union is insured and how much insurance you have onthe NCUA website.

The personal savings rate is inching up. Bob Murray, from WTAX Radio in Springfield Illinois, and I chatted this morning about saving money -- how quickly a little bit can add up and some ideas on how to get started. Listen to the radio interview to jump start your savings!

For more money saving tips, visit the Plan Well, Retire Well website.

Financial planners always say to save money for the unexpected. I think we should just admit that the unexpected expenses will always happen -- that's just life! We may not be able to predict just what the unexpected expenses will be ... but something will need to be repaired or replaced. Whether it's a flat tire, an appliance that breaks, or something else, unexpected expenses happen to everyone.

My latest unexpected expense is our house foundation. We have a quite large crack in foundation, plus the wall is starting to curve in -- yikes! I really wish it was as simple as a flat tire! Luckily we do have savings to pay for this so that we don't have to pay for this unexpected expense with a credit card with high interest rates or take out money from our retirement accounts. If we didn't have savings, paying for this expense by other means would have made our repairs even more expensive.

How can you plan for "unexpected" expenses? You need to build up a savings fund in either a savings account or money market account from which you can withdraw money easily. If you need help finding money to save, visit the Plan Well, Retire Well website. Saving tips and strategies at this website can help you get started.

How much should you save for home repairs? A good rule of thumb is to save 1 to 2 percent of the purchase price of the home for annual maintenance and repairs. If your home or the appliances are older, you may need to save an even bigger amount.

Plan ahead for major purchases and estimate when you might have to purchase something new. According to industry officials, the average life span for the following appliances is estimated at:

• Roof – 20-25 years
• Heating system – 25 years
• Refrigerator – 20 years
• Freezer – 20 years
• Clothes dryer – 18 years
• Range/oven – 18 years
• Room air conditioner – 15 years
• Clothes washer – 13 years
• Water heater – 13 years
• Central air conditioner – 12 years
• Dishwasher – 12 years

Do you have a savings fund for those unexpected expenses that we can all expect? If not, now is the time to start building it up!

Hi there,

Please allow me to introduce myself. My name is Kimberly Nute-Jones. I am a Consumer and Family Economics Educator in Cook County. My office is located in Matteson, Illinois. I generally service the south side of Chicago and the south suburbs. I am a wife and mother of two teens. My hope in participating in this blog is to connect my real life experiences to many of the topics that we teach every day. Therefore, you will probably hear personal stories and get to know me in an intimate way. So, read the story below, and let me know what you think.

My son just recently graduated from 8^th grade. He collected about $400.00 in cash. Boy was he excited! He told me that he wanted to open a bank account. He already has investment accounts for college, but no longer has a local bank account. I agreed to take him to the bank to open an account. Being a financial educator, I figured this would be a great teachable moment.

First, we talked about the banks where we already have accounts. We decided to compare rates, minimum requirements and all the usual things that are considered before opening an account. When my son saw the interest rate on the savings accounts, he hollered "THAT'S IT?!!" At first, I attempted to explain that in the past rates were higher, but since the recession, things have gone down quite a bit. That answer wasn't quite good enough. His response was "I might as well keep my money at home."

My daughter didn't make things any better. Years ago, they both had minor savings accounts. Although the bank wasn't supposed to charge fees, they were erroneously taking fees out of the kids' accounts every month. Each month I would have to call the bank and have them credit the fees back. My daughter remembered the experience and did not want to open another account.

I tell both stories because in times like these, it is human nature to focus on the negative instead of the positive. Retirement planning is a long term process where benefits may not be realized for years. Like my son, some of you are asking "why should I save for retirement? Things are bad!" You should save because you are not saving for today's rate, but for tomorrow's return. Buying low and selling high is still a good principle to live by. When the economy turns around, the investors that bought at lower prices will reap the greater reward.

Those who have had bad experiences, like my daughter, tend to write off the saving and investing world all together. My question is: what are the alternatives? When you choose not to invest in your company's 401(k) or open a personal IRA, what do you have left to depend on during retirement? Will Social Security be enough? Will Social Security still be around? To see what your estimated monthly Social Security benefits will be, go to the Social Security benefits calculator at http://www.ssa.gov/estimator/. Can you survive on that? If you want more, use one of our financial calculators at http://www.ace.illinois.edu/cfe/calculators.html to figure out how much you need to save. These are just some things to think about.

Needless to say, both kids opened bank accounts and are waiting for their debit cards to arrive. They saw the need to have a place to hold their money for safe keeping and I hope that you will, too. If you have been sitting on the sidelines waiting out of fear, hopefully you will find a reason to trust again. Get off the sidelines. Do your research. We have volumes of information on saving and investing on our website. If you still have questions, we are around to help; shoot us an email or give us a call. I look forward to sharing my thoughts, and at times, my complaints with you.

Until we talk again,

Kim

It used to be that retirees from state and local government positions and union retirees could look forward to receiving generous health benefits in the form of subsidized health insurance premiums or fully covered health expenses in retirement. Those days seem to be moving into the past rather quickly. The mega-bankruptcy and restructuring of General Motors will likely see retirees losing significant health benefits as some previously covered services such as eye-care coverage and dental coverage are dropped and some co-pays get increased dramatically. At the same time the Medicare program may see out-of-pocket expenses increase for its participants, leading to a double-squeeze on the affected union retirees.

Similarly, state employees and state government retirees may face a similar sea change in their covered health benefits as retirees. States such as Illinois, California and West Virginia face budget gaps in the billions of dollars. Moreover, they confront significant gaps between the expected future cost of benefits promised by their pension systems and the assets controlled by the pension systems. While current state employees and retirees may retain their benefits, it is quite certain that future state employees face a distinct possibility of receiving less generous retirement health benefits.

The issue of fiduciary responsibility has been a hot topic for some time, and it looks like that will continue. In 2007, the Financial Planning Association (FPA) sued the Securities and Exchange Commission (SEC) over a rule that was commonly known as the Merrill Lynch Rule. This rule allowed brokers to provide investment advice without being required to meet the same standards required of investment advisers. The FPA won. But what does that mean?

The Investment Adviser Act of 1940 requires that investment advisers meet a fiduciary standard. A fiduciary must put the interests of the client first. In other words, they must recommend the investment that is the best for you. But a broker only has to meet a lower standard, the suitability standard. They must recommend only investments that are suitable for you. They can consider their own interests in determining which investment to sell you. So it's legally OK for a broker to choose exactly which mutual fund to sell you based on whether she will earn a higher commission, a prize, or the favor of her supervisor by selling that particular fund to you.

When brokers were allowed to provide investment advice but were not required to be fiduciaries, things got pretty confusing for consumers. Unless you were really well-informed, you probably had no idea whether that person was really looking out for your interests or not.

So the FPA sued the SEC and won. Now, brokers shouldn't provide investment advice or be able to portray themselves as investment advisers. They should be paid via commission, and not by a fee for advice. And they shouldn't be able to switch hats, calling themselves a broker (technically, a registered representative) at one time and an investment advisers at another.

But now the game has changed. FINRA (the Financial Industry Regulatory Authority, which is not a governmental agency but a self-regulatory body which licenses and regulates brokers) and the SEC, which regulates most* investment advisers, are now engaged in a new discussion about the legal definition of fiduciary. NAPFA, the FPA, and the Certified Financial Board of Standards have formed a coalition to give input on this discussion, hoping to keep the fiduciary standard at its current, stringent definition.

As an educator whose goal is to help you make wise decisions when you choose financial advisers, I sincerely hope the outcome will be clear guidelines that consumers can understand. Consumers need to know 1) exactly what services they can expect from a given type of financial professional, and 2) to whom their financial adviser owes their allegiance. Stay tuned to see how this unfolds!

Want to know more? Check out our website, Choosing a Financial Professional. Follow this issue in the news. And make your voice heard with your elected officials.

And let me know what you think about this. Click on my name below to send me an email.

*The others are regulated by state securities agencies and are held to the same standards as those registered with the SEC.

For great ideas on how to save money and be green, visit Chicago's Museum of Science and Industry's new exhibit, Smart Home: Green + Wired.

The house – and the exhibit is actually a full-scale house – is a modular home powered by solar energy and a wind turbine. Everywhere you turn in the house is another motivating idea or innovative product. I was completely jazzed after my visit. If you live near Chicago -- go see this exhibit. If you don't, visit their website for a virtual tour.

One thing about visiting this type of exhibit, while we can't easily do all the things the home shows us about energy conservation, there are many ideas that we can incorporate into our own homes to save energy and money.

Here are some ideas that you can do today:

• Reverse the rotation of your ceiling fan blades. In the summer, use the ceiling fan in the clockwise direction. While standing directly under the ceiling fan you should feel a cool breeze. The airflow produced creates a wind-chill effect, making you "feel" cooler.
• Unplug chargers for cell phones, portable music players, or other portable devices; these devices draw energy even when they're not being used. OR, purchase a plug strip that will turn off this power drain when the item is in "sleep mode." This is a new gadget I've recently purchased for my home.
• As your light bulbs burn out, replace them with compact fluorescent lights (CFLs). Replacing six incandescent bulbs with CFLs can save more than 4% on annual energy costs.

Saving money on energy is a big plus. However, it's not only our own budgets that suffer when we don't practice energy conservation -- our society's budget suffers too. Pick a few new conservation practices that you can adopt this summer. Every little bit makes a difference.

Last week at a workshop I was giving, one of the participants asked me if it was a good time to buy stocks. This is what I know for sure:

• This is a better time to buy stocks than it was a year ago, when the Dow was at 13,000. Right now, stocks are about 35% lower than than they were then.
• This is a worse time to buy than it was the first week of March, when the Dow hit its 52-week low of 6470. Stocks are about 30% higher now than they were then.

But is this a good time to buy? Who knows! That's the nature of the stock market. As Burton Malkiel stated in the title of his book, it's "A Random Walk Down Wall Street." Today does not predict tomorrow. We can guess, we can try to look for indicators. But no one really knows.

So what's an investor to do?

For that question, I do have an answer. Do the same things that you should have been doing a year ago, or 10 years ago. Follow the boring, tried and true investment strategies:

• Dollar cost average
• Diversify
• Keep an emergency fund so you won't be forced to liquidate investments at the wrong time.
• Determine an appropriate asset allocation for yourself.
• Rebalance to maintain that asset allocation.

Want to know more about sound investment strategies? Visit the Choose Investments section of our website, Plan Well, Retire Well: Your How-To Guide at www.RetireWell.uiuc.edu.

As I'm fond of saying in my workshops, investing is like horseshoes. In the game of horseshoes, you can score points by either throwing a ringer, meaning that your horseshoe lands encircling the stake (3 points) or is within a horeshoe's width of the stake (1 point). If you try to throw ringers, you can easily end up with nothing. Many games have been won by just consistently throwing "close shoes". In investing, consistently getting "close" will also probably garner you better results over time than trying to pick the winner. Therei s one difference between horseshoes and investing. In horeseshoes, practice and skill will increase the likelihood that you can throw ringers. But it's much less clear that the same is true of investing!

What an amazing week. Money Smart Week has come and gone in Illinois like a whirlwind! People from all walks of life and careers came together to help people better understand finances. I love this event because Money Smart Week partners include bankers, community educators, school teachers, media, stock brokers, financial planners, grocery store managers and more. And, of course, the Federal Reserve Bank of Chicago - who is the sponsor for this event. Without the Federal Reserve Bank of Chicago's leadership, and their dedicated staff, this Week wouldn't happen.

During the week I had the opportunity to talk to people who were attending several programs. They came to my program with their highlighted Money Smart Week Calendar ready to learn and take action to improve their financial picture. It was energizing and exciting week!

Did you miss it? Oh no! Well, here's two bits of good news. One, as soon as the date is available, we'll let you know when Money Smart Week 2010 will be and you can put it on your calendar. Two, the Illinois media was very helpful in covering events. Here are few of the links so that you can learn more about Money Smart Week and handling your money:

cbs2chicago Morning News with interviews about investing (with our own Karen Chan), foreclosures, and more.

WCIA has several video clips posted including an interview where I talk about saving money on food costs and also one on how to match your investments with your short and long-term financial goals.

Karen Chan next talked about budgeting and saving money on ABC News in Chicago.

Extra News posted an article about how to Improve Your Financial Situation: Tips on how to beat these tough financial times.

This is just a short list of organizations that helped promote Money Smart Week and do financial education too. Thank you to all media partners who helped publicize Money Smart Week.

And, stay tuned in for more updates about Money Smart Week in the future.

Would you like to share your Money Smart Week experience? Click on my name below and send me your comments to be posted.

From April 18 to April 25, take advantage of the numerous workshops and other public events that are part of Money Smart Week. In the Chicago metropolitan area, there are more than 450 separate events. There are also numerous events in Champaign-Urbana, Bloomington, Peoria, Rockford, and the Quad Cities. Led by the Federal Reserve Bank of Chicago, the purpose is to provide education, and no sales pitches. University of Illinois Extension Educators are providing many of these workshops. Come join us! Check of the calendar of events on the Federal Reserve Bank of Chicago's website. Or check University of Illinois Extension's calendar for those events taught by our own educators.

Many Extension offices across Illinois will be hosting a special panel presentation via teleconference, Saving and Investing in Turbulent Times. You can check the U of I calendar for a location near you.

Some people have given up on diversification. You've heard or read about them - people who are so fearful that the current market downturn is the beginning of the end that they will only keep their money in US Treasury securities or insured bank accounts. Maybe you are one of them.

It's understandable. Even the most novice investor knows the mantra, Don't put all your eggs in one basket. Diversification is supposed to protect us. Everything isn't supposed to drop in value all at the same time. Thus, we own not just US stocks, but foreign stocks as well. We don't own just the stocks of large companies, but also small and mid cap companies. We have some money in bonds of US companies, foreign entities, money market funds, real estate investment trusts, even commodities. And we thought we were safe.

Now we feel that diversification betrayed us. The value of our homes, US stocks, foreign stocks, even bonds to a degree, all dropped in value. That wasn't supposed to happen.

To make matters worse, there seemed to be nowhere safe to run. There was even a scare about money market funds last fall.

So some investors have thrown up their hands and surrendered. They're not even going to try to figure out how to invest in hopes of keeping ahead of inflation and taxes. They're content to earn next to nothing on their money on insured bank accounts or US Treasuries, just so they can avoid the pain of perhaps losing more. They've given up on diversification.

But what does that mean for these investors in the long term?

The Alternatives

William Bernstein, columnist for Money Magazine and a hedge fund manager, sees two alternatives to using diversification. He discusses these in the April issue.

Everything in one basket, "and watch that basket," he quotes Mark Twain.

• If that basket is Treasuries, you won't lose any money. But over time, after taxes and inflation, you'll very likely just break even or even lose value. That may be OK in the short term, but it means you're going to have to save one heck of a lot of money in order to have what you need in retirement or for your newborn's college education.
• Or maybe you choose Wal-Mart and McDonald's as your "basket," since they are two of the few bright spots in this recession. What happens if hamburgers and french fries suffer the same fate as Krispy Kreme doughnuts? After its meteoric initial public offering, the low carb trend (and perhaps other factors) caused its stock price to drop from $12.60 at the end of 2004 to $1.68 at the end of 2008. Or perhaps Wal-Mart and McDonald's don't do poorly, but small US companies and foreign stocks outperform them by large margins year after year.

The point is that without diversification, without investing in a variety of assets, you make yourself vulnerable to other types of risks.

If you can't stand the heat, get out of the kitchen is the label Mr. Bernstein puts on his 2nd option. I'd call it market timing. This strategy says, when things get too crazy, I'll get out of the stock market. And I'll get back in when things are safer. Sounds great in theory, but in practice, almost nobody can make those calls on a consistent basis. That's the whole reason that few actively managed mutual funds beat index funds over the long haul. Making one prescient decision doesn't make you money; you have to do it time, after time, after time.

The Final Word

Well, it's possible that those who believe the sky is falling are right, and that US and foreign stocks will tread water or lose more value for years to come. But after considering the alternatives, for my money, I'll go with diversification.

For more about diversification and sound investment strategies, visit Plan Well, Retire Well and check out Choose Investments. Or join me and my colleagues for a workshop during Money Smart Week, April 18 to 25.

Once upon a time, in a land very close by, a wise person decided that he (or maybe it was a she - I actually don't know) wanted to make the world (or at least Chicago) a better place. This person worked at the Federal Reserve Bank of Chicago, so of course they wanted to help the people of the land learn how to better manage their money. And so this person put out a call across the land to bring together a group of like-minded people. And that was how Money Smart Week was created.

OK, I'm no Aesop, this is no fairy tale, and I've probably taken a few liberties with the truth. But Money Smart Week truly has become a legend. Starting in Chicago around 8 years ago, it has spread across Illinois and to many other states. From April 18 through the 25th, we will observe Money Smart Week 2009 across the state of Illinois. During this weeklong observance, partners from literally hundreds of organizations provide free workshops on every conceivable financial topic. It's a bonanza of financial education opportunities. Most programs are in English, but some are in Spanish or other languages. They cover everything from how to do a budget or manage your credit, to choosing investments and planning for retirement. And best of all, they're taking place at all sorts of locations, probably one near you - maybe your library, or a bank, or a community organization, or a University of Illinois Extension office in your community.

University of Illinois Extension has been an active partner in Money Smart Week from the beginning. I and the other Consumer & Family Economics Educators across Illinois will be presenting dozens of workshops, drawing on our research-based, unbiased store of knowledge.

Come join us! Check out the searchable online calendar for your part of the state:

• the Chicago calendar of events,
• the Illinois calendar, which includes the greater Peoria area, Bloomington/Normal, Champaign, Springfield, and Rockford
• or the Quad Cities calendar.

You can also check our Extension calendar to find events where our educators will be presenting, during Money Smart Week or at any time of year.

Have you been to a Money Smart Week event in the past? Click on my name below and tell me what you thought about it.

If you are like me, you read a headline today - "Madoff pleads guilty in largest Ponzi scheme ever."

The largest Wall Street scam to date has everyone questioning how such a scam could happen. Even more so, many people might be asking how do I know who to trust with my money?

So, how do you know who to trust with your money? To help you in the process of choosing a financial professional, University of Illinois Extension has developed a website entitled: "Choosing a Financial Professional." The website provides resources and answers to questions everyone is asking about who do you trust with your money?

For those of you that want a few quick tips, here are my thoughts:

• Do your homework. Choosing someone requires you to investigate and make your decison more from your research and should be based on more than name or reputation or recommendations from a friend.
• Make sure you interview the finanical advisor and ask questions. This is your money they are handling and you should how are they investing your money!
• Check out qualifications. Because financial professionals can have a broad range of titles and licensure, it is important to investigate any said designations. Find out if an advisor is licensed and registered by checking with your state regulatory agency and FINRA.
• Visit the Choosing a Financial Professional website for more detailed answers to your questions about finding someone you can trust with your money.

My last bit of advice for today's blog --- remember, if it sounds too good to be true, it probably is!

Yesterday, I met with a group of colleagues for a session about retirement planning. A number of them could retire at any time. But should they? Starting to take distributions from your investments when values have dropped so much is a worst-case scenario. But what other factors should they consider? Perhaps you would enjoy taking the very unscientific, magazine-style self-test that I gave them:

1. I have projected what my expense will be in retirement.
1. Yes
2. No
2. If you retire now, where will the money come from for expenses not covered by a pension or Social Security?
1. sell investments
2. use money in savings accounts, money market accounts, savings bonds, etc.
3. use my credit card or borrow from other sources
3. I expect to have some large expenses early in my retirement, such as home remodeling or extensive travel.
1. Yes
2. No
4. I have already moved all my money to cash.
1. Yes, after I'd already lost quite a bit.
2. Yes, before the bear market started.
3. I only moved some of it, but I'm thinking about moving more of it to cash.
4. No.
5. For government workers: I have done a calculation of my Social Security benefits including reductions for my government pension.
1. Yes
2. No
6. I currently track my expenses and/or follow a budget.
1. Yes
2. No
7. Right now, I spend less than my income.
1. Yes
2. No
8. I have a plan for how to manage my investments in retirement.
1. Yes
2. No
9. I know how my money is invested, and why it's invested that way.
1. Yes
2. No

What's the moral of the story? You can't control or predict how the stock market will perform, but you can control your spending decisions and have a plan.

How many points do you think each of these answers should get? Click on my name below and let me know. You can also go to www.RetireWell.uiuc.edu to learn more about how to save, invest, and prepare for retirement.

Happy America Saves Week! American Saves promotes saving money and reducing debt all year 'round but this week is a special celebration. Saving money sounds like a good idea. But, how do you save a dollar when you feel like you don't have a dime to spare?

You need a goal that is important to you to work towards. You need to believe that small changes in behavior can make a big difference in savings. And, you need to take action to change your spending.

What do you want to be doing in 5 years? Where do you want to live in 10 years? Do you want a financially secure future in 25 years? Now is the time, to start working towards these goals by saving money.

Does saving enough for a goal seem too difficult? It's easy to put off starting to save. But, what if we think about how much money we can save each week and then see how it can grow over time? $20 a week can make a significant difference in your savings. Think about it -- $20 a week is $1040 a year. You could start a retirement savings account with this money.

If you saved $80 a month in an investment that had a rate of return of 5%, in 15 years you'd have over $21,000. What a wonderful gift to a college-bound child when they graduate from high school. When you realize that a $21,000 goal requires $80 a month, then you can change your spending to find the $80.

For many practical ideas on how to save money, read Strategies for Spending Less at the Getting Through Tough Financial Times website.

Are you ready to take charge of your financial future? America Saves is here to help. America Saves is a nationwide effort to encourage non-saving Americans to save. Enrolled savers receive the American Saver newsletter which offers information on a wide variety of savings topics and introduces you to other Savers who are achieving their financial goals. If you'd like to join America Saves go to www.americasaves.org.

Would you like to share your thougths and tips about saving money? Click on my name below and send me an email; I'll be glad to add it to this blog post!

In the past week or so, I've had conversations with two people who discovered that their credit or debit card had been cancelled because it had been "compromised." The first person was alarmed, the second was angry. And neither really understood what was going on. Thus, the topic for today's post.

What's going on? This is the most likely story: You made a purchase somewhere and as a result, your card number was stored on a computer. Maybe a hacker got into the computer. Maybe those files were transferred to a laptop that was lost or stolen. Your card number, along with thousands of others, is now potentially in the hands of a criminal who will either use the number himself or sell it to other criminals. So the bank that issued the card takes action. They cancel your credit card or debit card and replace it with a new one that has a different number. In many cases, the first indication you have that anything has happened is when you get a new card in the mail with a note that your old card will no longer work.

Maybe your card number would never have been used fraudulently. But if it were, you could suffer a lot of inconvenience, and the bank would suffer financial losses. By cancelling your card, the bank is ensuring that fraudulent charges cannot be made.

Our Plan Well, Retire Well team recently ran a series of teleconferences for the average investor and saver titled "Saving and Investing in Turbulent Times." In the teleconference I spoke about the risk and how the market's volatility increases as we go into a period of adjustment and market decline. I used a graph of the standard deviation (a statistical measure of variation or dispersion) by month of the daily close of the Dow Jones Industrial Average for the time period of January 1, 2000 through December 10, 2008.

In this graph, the standard deviation is simply a measure of how dispersed the market close of the DJIA is over a month. The month 480 on the x-axis refers to January 2000.

To me there are several take away lessons and messages from this graph. First, in previous investment downturns (such as the early 2000s in the graph) we have seen levels of volatility that are similar to what we have experienced in the past year. Second, it raises the question of what level of risk do people have in mind when they are planning and allocating their investments. When a person does his or her investment allocation does he or she expect to see the historic highs in terms of market variability? If we are making allocation decisions in a period of relatively low market variability do we tend to assume things will continue this way going forward? A third question is whether the markets are now fundamentally more risky than they were previously. The graph doesn't answer this specific question but it shows the high levels of market fluctuations we have experienced in the last year.

Two other lessons come out from the graph with implications for savers and investors. First, making sure your investment allocation can handle a period of significant market fluctuations (and the implied drops) is important. Many investors find a tool like a ladder of bonds that will mature at different dates to be a good way to build in some of this cushion so that they do not need to drawn down their equities while the market is down. Second, taking a long-term view of the markets and their capability for fluctuations is important and reinforces the need for rebalancing portfolios periodically (for many of us about once a year).

We'll be doing another teleconference in April of 2009. Please keep an eye for more information related to venues where you can participate in the teleconference workshop.

Paying bills on time might seem like a simple thing but it is something that many people struggle with. Sometimes the problem is being disorganized, but sometimes the problem is that there is not enough money to pay all the bills.

Things can happen in our lives that we don't expect (whether it's reduced income or unexpected emergency expenses) that can make it difficult to pay bills on times. If this happens to you, it's important to figure out a plan of action and contact your creditors BEFORE you're late on a bill.

Before you call your creditors take time to look at your income and essential living expenses, and make a plan. Who can you pay and how much can you pay? For more help with this process, visit the website Getting Through Tough Financial Times and read Talking with Creditors. Don't forget to talk to all your creditors -- credit card companies, landlords, utility companies, etc.

The key points when you talk to a creditor are:

• Be organized – know what you can pay
• Be prepared to explain why you cannot pay
• Make a plan – what you can pay now – how you will catch-up on the payment
• Document agreements in writing

What should you ask for from your creditor? It depends on your financial situation and how long you expect to be short of money. However, consider asking your creditor if you can:

• reduce the monthly payment,
• refinance to a lower interest rate,
• skip a payment,
• reduce, eliminate or only pay the interest, or
• give back an item.

Remember, once you have a plan and agreement from your creditor then you are expected to follow this new plan. So, be sure it's something that will work for you.

Do you have other tips to share with people about working with creditors? Click on my name below and let me know your ideas. I will share them in this blog.

On Monday, according to the New York Times and others, US companies announced a total of 75,000 layoffs. I'm not sure I know anyone who feels totally secure in their jobs right now.

If your job might be on the line, it would be smart to have an action plan together. It might include things to do now, and actions that would be contingent on actually getting laid off. Here are some of the things that are on my list, in case I or my husband gets the dreaded pink slip:

Do you have a retirement plan at work?

Find out whether you are vested. If your employer contributes to your retirement plan, you may have to work a certain number of years before you're vested - entitled to the company's money. If you aren't vested, how many more months would you need to get there, or to be vested in a higher percent of the company's contributions? If you get a layoff notice and need just a short time to be vested, you might try to negotiate.

Plan how you would handle that account if you get laid off. Will you employer let you leave it there? Would you roll it over to an IRA? If so, decide where you would set up that IRA account and find the paperwork you would need to open the account and transfer the money from your employer plan. Spending this money should be your absolute LAST RESORT. Why? Taxes and penalties for one thing. Sacrificing your future financial security is another. Plus, retirement plans are generally protected from creditors.

Is your health insurance through your employer?

If your employer has 20 or more employees, Federal law will require that they offer you COBRA coverage, meaning that you can pay 102% of the actual cost of your insurance and keep it for up to 18 months after being terminated.

If your spouse's employer also offers health insurance, he or she will likely be able to add you (and your kids, if you had carried them on your insurance) even though it's outside of the open enrollment period. A family member losing health insurance is what's considered a "qualifying event" that allows an employee to add other family members to their coverage. If your spouse also has a medical flexible spending account, this qualifying event may also allow him or her to enroll or to change the contribution amount. Decreasing the contribution would give you more take-home pay. But do the math. If you know you will have medical expenses greater than the contribution amount, the tax savings of paying it from an FSA might be a smart idea. Just remember, your tax rate may go down as a result of your lost wages. But see the section about Unemployment Insurance.

Where is the closest unemployment office?

Filing for unemployment should be one of the first things you do if you get laid off. Find out where to do that NOW, so that you'll be less likely to procrastinate if you get laid off. The sooner you file, the sooner the benefits will start. There is one piece of bad news about unemployment benefits: those payments are taxable income. So your tax bill may not drop as much as you'd hoped.

Can you survive on your unemployment check or your spouse's paycheck?

If you haven't been tracking your expenses, start. First, write down all the regular bills you have: rent or mortgage, car payment, utilities, cell phone, cable or satellite TV, etc. Then start tracking all the other things that take your money: groceries, clothing, haircuts, gasoline for the car, donations, gifts, subscriptions, etc. Estimate how much it costs you to live each month, and compare that with your spouse's income or your unemployment check. You'll have to cut expenses to make up the rest if you don't want to be spending down your assets or going deeper into debt.

How much cash do you have on hand?

If you can't make ends meet without dipping into your savings or selling assets, you need to know how long your cash will last if you can't find a job. What other assets might be turned into cash? There are penalties and barriers to accessing some assets, such as retirement plans and annuities. See our fact sheet for more.

These are hard decisions. Please visit Getting Through Tough Financial Times to find more tools to help you plan and survive this difficult time.

Also, click on my name below to email me and let me know how you're preparing for or dealing with a layoff. We can learn from each other.

Update: Feb. 1, 2009:

This post received an Editor's Choice rating from the Carnival of Personal Finance. View this week's Carnival hosted by Funny About Money. This week's Carnival theme is Buddy, Can Your Spare a Dime?

Now is the time of year that most Americans are preparing and filing a tax return. If you will be receiving a tax refund this year, you may be thinking about what to do with the refund. In fact, the money may already be spent. For many consumers the "extra" money is often spent on a vacation, an extra consumer item for the house or maybe to pay off last years holiday bills. Consider the ideas below as you decide what to do with your tax refund:

1. Pay off high interest debt. High interest debt for most consumers is a credit card or credit cards. While it may depress you to send your tax refund to pay only a portion of an 18% interest rate credit card balance, it can save you years of added interest payments. If you were to invest the money, you more than likely would not earn an 18% return; so paying down your debt is like receiving an 18% rate of return.

2. Open an emergency savings account, if you don't already have one. Most financial experts recommend having an emergency savings account with 3 – 6 months of living expenses. An emergency savings account will help if you experience a loss of income or have an unexpected expense.

3. Think about investing. Consider opening an individual retirement account or investing in a mutual fund or stock. There are many great options available that allow for small amounts to be invested each month. With as little as $25 you may be able to start a mutual fund.

4. Save for a child's education. There are numerous investment vehicles to help save for a child's education. You might consider a Roth education IRA, mutual funds, or state sponsored college savings plans.

5. Perhaps the best thing to do with your tax refund is to avoid receiving one. By getting a tax refund, you have given the government an interest-free loan, and are being repaid. Consider changing your withholdings so you have an extra amount in your paycheck each month. Even an extra $50 or $100 can make a big difference!

I don't usually get too excited about making New Year's Resolutions, but this year I felt that there were some changes I needed to make. Maybe you feel the same way.

If your goal is to get your financial house in order during 2009, I may have some tips that will help. I was recently invited to speak to a group who wanted to know how to manage their finances during the current economic situation. I shared with them what I think are the ten things everyone should do to protect themselves from major financial mistakes, prepare for the future, and keep things simple in the process.

You can scroll through the rules in the graphics window, above. If you'd like your own financial rulebook with more explanation, you can print out this downloadable file.

Happy New Year! And I wish you much success with living your new financial life.

Rule #1: Pay your bills on time.

Rule #2: Save something every payday.

Rule #3: Plan for surprises.

Rule #4: Keep track of expenses.

Rule #5: Make your credit card work for you...not the bank.

Rule #6: Know how much you owe, and how much you own.

Rule #7: Protect the important things.

Rule #8: Use your financial power wisely.

Rule #9: Write down your financial goals.

Rule #10: Get help when you need it.

Happy Birthday to the Plan Well, Retire Well Blog! One year ago my colleagues and I decided to try a new way to communicate with people about saving and investing money, and we started the Plan Well, Retire Well Blog. Our blog supplements the Plan Well, Retire Well: Your how-to guide website.

The past year has been a challenging year for finances, and our blog posts reflect these challenges. Last January, Karen Chan wrote Recession? Depression? Or just a volatile market? Here's help for your upset stomach. She was certainly proactive -- her tips for managing are still relevant. Little did we know a year ago what was ahead of us!

By March gas prices were soaring and Paul McNamara wrote, Higher Gas Prices and Staying the Course with Your Investment Plan.

As the economic situation became tougher for people, Karen wrote Preparing for a Layoff and I tried to stay upbeat with Step Down Your Expenses & Still Enjoy Life. Jennifer Hunt followed up with Have Fun Being a Cheapskate!

As the mortgage crisis revved up and banks started failing, Karen helped put it into perspective with Bank Failures, FDIC Insurance, and What the Media ISN"T Telling You.

In October stock markets fell around the world. Several blog posts encouraged people to not panic. Dow Down 370 Points Today, 777 Points Last Monday: My Take and A Historical (not hysterical) View of the Current Market: David Sinow brings back all the feelings of uncertainty and fear that I experienced then.

With the stock market volatile, we started to worry that people would be especially vulnerable to fraud. Investment Fraud Can Happen to Anyone and Madoff Investment Fraud: Could It Happen to You are our way of reminding everyone to be especially careful for fraud now.

While I'm looking forward to blogging in 2009, I'm hopeful that we will have different themes to write about! However, we are committed to providing timely, unbiased, and practical commentary about saving and investing no matter. Hold onto your hats -- I'm predicting that it will be an unpredictable year!

Happy Holidays! I hope everyone is enjoying time with friends and family. Amidst all the chaos and excitement of the holidays, I have been feeling like I'd like to simplify some aspects of my life. Chaos and change, in short bursts, can be invigorating. However, when it comes to finances I prefer simply and boring!

Here are my three favorite ways to simplify my finances.

1) Sort your mail everyday. I use a small, hanging file folder organizer so that as I open mail the bills go in the "Bill" folder; financial statements go in the "To Be Filed" folder, and school notes go in the "School" folder.

Of course, trash goes in the recycling bin. Sorting mail everyday keeps paper from accumulating and means I can find my bills easily when it's time to pay them. Remember approximately 60% of your credit score is whether or not you pay your bills on time – being organized can help!

2) Put your savings and investments on automatic. Decide how much you want to save each month (or paycheck) and set-up a system that will automatically take care of this for you. You may want to use payroll deduction to fund a 401(k) plan at work, or deposit money into a savings account or directly into a mutual fund. What's important is to remove the frequent decision-making -- save or not, where to put the money, etc.

3) Reduce the number of bills you receive. Too many bills mean it's easy to lose track of where you spend you money and who needs to be paid. Try using fewer credit cards. Consolidate accounts when it makes sense – for example, having one provider for services such as cable TV and Internet or combining savings accounts with relatively small balances at different financial institutions into accounts at one financial institution.

Do you have a favorite way to simplify your finances? Click on my name below to share your ideas. I'll post ideas shared to this blog so that we can all benefit.

Interested in other finance-related blogs? Check out this post and others on the Carnival of Personal Finance hosted this week at the Fraud Files Blog.

Ponzi schemes. We've heard of them before. To me, it sounded like an old idea, something that probably wasn't used much anymore. But Bernard Madoff has shown us that the Ponzi scheme is alive and well, and on a scale that is almost unimaginable.

The current economic situation is what finally brought Madoff's house of card to light. But it may also give rise to even more investment scams, as people urgently look for ways to preserve their savings and earn more than the paltry interest rates available on standard money market accounts and CDs today.

It couldn't happen to you, you're too smart, right? Well, fear and greed are a perfect prescription for being taken advantage of. You're probably worried about your money right now, and yes, you're probably greedy. That's not a comfortable label for most of us to wear, but that's what it is when you are willing to listen to someone who promises 10% yields when everyone else is paying 2 or 3%.

The National Association of Personal Financial Advisors has issued an informative news release about how to monitor your financial advisor, including what to look for in the statements and communications you get about your investments.

University of Illinois Extension also has two websites that can help you avoid investment scams. Choosing a Financial Professional will walk you through the distinctions between different types of advisers (for example, a broker versus an investment advisor), explain the various credentials they may hold, and gives you suggested questions for interviewing candidates.

A second webpage you'll want to visit is the Investment Scams section of our Plan Well, Retire Well, website (anonymous registration required). We wrote this section months ago, but the parallels between the real-life Affinity Fraud that we describe and the Madoff scam are eerily similar. Read it and see what you think.

As I was deciding what to write about this morning, I asked my 4-year old for her thoughts about the topic. She said, please, can we have a tea party Mommy? I thought how does that relate to planning for the future. Well, here are my thoughts about how it relates more than one might think.

The one thing saving for retirement and a tea party have in common is time. The earlier you start saving and the longer you have until retirement, the more your money can grow --- the principal of the time value of money. How profound that a tea party is insight into a key principle of saving money for the future.

I take a clue from my daughter about what is important, time. Start saving today. TIME for my tea party.

The question you used to be asked at the grocery store was, Paper or plastic? Now it's, Debit or credit? And I'm convinced that most people don't know what the question really means. I almost got into an argument with one person when she claimed that she could use her debit card as a credit card. NOT!!! The problem is, the question is misleading. And the cards look almost identical, since most debit cards now have a VISA or MasterCard logo on them, just like credit cards.

When these store clerks asks "Debit or Credit," what they're really asking is whether you'd like your purchase processed as an online transaction, or offline. If it's online, you'll enter your PIN. If it's offline, you'll sign. Your choice does not change your debit card into a credit card. All it does is determine whether the purchase is deducted directly from your checking account (online and almost instantaneous) or if it takes a detour through the same processing system used by credit cards before reaching your bank (offline, which could take up to 2 days).

With a debit card, your choice could make lot of difference to the retailer, to your bank, and maybe to your own pocketbook. If you choose debit, the retailer probably pays somewhere between 25 and 50 cents to process the transaction. The retailer gets some small amount back (maybe 5 cents) and the bank makes a little money on it. But if you choose credit, the retailer typically pays a lot more to process the transaction (especially large purchases) and the bank makes a lot more on the deal.

So what have some banks done? They charge you for making "debit" or PIN-based purchases, thereby pushing you to make "credit" or signature-based purchases. Or, they might use the carrot approach instead of a stick, and offer you points for making "credit" transactions.

Remember this: Credit means you borrow money; that's a credit card. You'll get a statement of how much you've borrowed. Debit means it's a subtraction - in this case, from your checking account. That's a debit card. So when that store clerk asks you, Debit or credit?, smile sweetly and tell her either PIN or signature. Since it's the holiday season, be kind and don't confuse the poor soul by answering with either "Online transaction" or "Offline transaction."

More in a later post about when it's best to use which card. But here's a hint: If you're already carrying a balance on your credit card, stick with the debit card. You'll probably spend less and you'll have a happier New Year without bigger, uglier credit card bills.

Update: This post is one of many listed in the Dec. 8 Carnival of Personal Finance, a compendium of current blog posts on many financial topics. The current edition is Don't Go Broke over the Holidays.