Your first step is to review all the information on your credit report from ALL THREE agencies. You are allowed one free report a year. They get different information and they report different scores. Make sure there are no mistakes. Rebuilding credit depends on why it is bad in the first place. Too much debt for your income level? Late payments on consmer debt? Make it a priority to pay every bill on time. Try to systematically pay down all of your debt. Some organizations may offer free advice. Not one of the many "lower your credit" scams that you see everywhere. Some churches also offer this help. Just check around your community.
Mark, if your just looking for a low to no risk place to make the most of your cash, there are few if any good options in this interest suffocated (thanks to the Fed) savings environment. Local banks and credit unions often offer the highest CD rates but you can also check bankrate.com
And Rich, here's one from Stephen
Thanks, Debbie. Here's a question from Andrew.
Okay, I guess I have mittens on!!!! First, if you have a 13 month old son, you better invest in a new pair of sneakers, that boy will keep you running!! I like the 529 plan, unless you are maximizing the contriubtion already, it's a great place to save for college -- and keep ownership -- just in case. As you son gets older, you may want to start and alowance and have him invest some of it and if he has any real income, even it's just $250 a year, start a Roth. Jamie
Jeff, I suggest you take a look at the Utah plan which uses Vanguard funds.
K, have I missed a question? If not, serve one up.
Thanks Bobbie, Utah is my favorite plan.
Stephen, I recommend that you build up an emergency fund first, usually about 6 months worth of living expenses in cash. Put this into a money market account and keep it liquid in case something comes up. After you have this fund set up, then I would recommend a Roth IRA (if your income is low enough). This is a great savings vehicle for retirement as you do not pay taxes on any withdraws during retirement. In this account you can be more aggressive and use all stock mutual funds and let them grow.
I was thinking you needed another question, Bobbie. Here's one from Mark
Jamie, it seems that when I do this, most of the advisors agree a lot on various things. That is because we are all coming from a good place:-)
And Matt, here's one from Sharon
Jamie, you can take this one from Mike L
Debbie, here's one from Donna
Sharon, when the financial crisis hit, we overemphasized health care REITS as we were waiting for the bottom in other sectors. Now that the worst is behind us, I don't recommend emphasizing one sector or company over another. We use VNQ and VNQI for our international REIT exposure. The main points are diversifying away company specific risk and keep costs as low as possible.
Andrew, buying your first home in this environment is a terrific idea. you should have an idea of how much mortgage you can afford. For example, if you are paying $1000/month in rent and find that amount a stretch, then you should aim lower on monthly payment. Remember this is principle, interest, taxes and insurance. Once you know how much monthly payment your can afford you will know how much house you can afford. there are many calculators on bank sites that you can use. Then, I recommend you set out saving money for a downpayment. Since this is money you know you will be using in a relatively short time period, I wouldn't invest it in anything more excotic that a short term bond fund. Vanguard has several high quality, low cost ones to choose from The 20% downpayment saves you the cost of mortgage insurance, which can be high.
Mike, if I understand your question and mortgage protection insurance, no it's not a good investment, but it may be the only way you can purchase a house without 20% down -- and that makes it a good investment if that gets you into an affordable house. Ask about when and how you can get rid of the mortgage insurance, I think I just heard 5 years from a borrower -- longer than it used to be. Jamie
Thanks Matt. On to the next question from Tim
And Debbie, here's one for you from Ken.
The Vanguard REIT ETF owns 111 companies and has a distribution yield of 3.4%
Mark, if your area has not suffered much in this environment (DC or Austin perhaps?) that is a good indication that it would be a good place to invest in real estate. I was reading an answer by one of the other advisors earlier and I will piggy back on his very good thoughts. Interest rates are at such lows and even though your area has held up well, I suspect there are still some good buys out there. Those things combine to make this a pretty good time to buy. Usually, I like for clients to have a 20% downpayment. But in this case, you could go with a lower down payment. Yes, you would have to pay PMI/Private Mortgage Insurance if the down payment is less than 20%. But over time, you could gain that 20% equity by rising prices, paying extra principle on the mortgage or a combination of both. Be sure to use a loan that will let you drop the PMI when you reach 20% equity. Of course, if you don't think you will be in the area long or just like being able to call a landlord when things go kaput, rent. Yes, you will be giving up the tax savings but in my experience, most of us put that tax savings right back into a house. DO NOT buy a house just for an investment. Buy only if it fits in with your total life plan.
Tim, if the stocks passed through the estate, your in good shape. You get a step up in basis which uses the price on the date of death or up to six months later if the executor chooses an alternative date. You should owe much capital gains tax at all in this situation.
Jamie, you can take this question from Eddie
Your first step is to review all the information on your credit report from ALL THREE agencies. You are allowed one free report a year. They get different information and they report different scores. Make sure there are no mistakes. Rebuilding credit depends on why it is bad in the first place. Too much debt for your income level? Late payments on consmer debt? Make it a priority to pay every bill on time. Try to systematically pay down all of your debt. Some organizations may offer free advice. Not one of the many "lower your credit" scams that you see everywhere. Some churches also offer this help. Just check around your community.
Mark, if your just looking for a low to no risk place to make the most of your cash, there are few if any good options in this interest suffocated (thanks to the Fed) savings environment. Local banks and credit unions often offer the highest CD rates but you can also check bankrate.com
Stephen, I recommend that you build up an emergency fund first, usually about 6 months worth of living expenses in cash. Put this into a money market account and keep it liquid in case something comes up. After you have this fund set up, then I would recommend a Roth IRA (if your income is low enough). This is a great savings vehicle for retirement as you do not pay taxes on any withdraws during retirement. In this account you can be more aggressive and use all stock mutual funds and let them grow.
Sharon, we just published a column about why you need REITs, filled with guidance on picking them -- www.kiplinger.com
