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Advertising Supplement to the Sun Journal, Lewiston, Maine, Friday, September 9, 20112 PROSPER

� 401(k) Rollover/IRA Questions or Concerns

� Sound Investment Strategies to Help Build Your Retirement Fund

� Strategies for a Comfortable Retirement

� Ways to Deal with Volatile Markets and Low Interest Rates

� Create a lifetime Income stream

� Making Sure Your Estate is Distributed The Way You Want

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By Dan Marois Feature Writer

Financing can make your dream project a reality

Do you have a home i m p r o v e m e n t project you’d l ike

to tackle in the next few months? Are you thinking of renovating a room, adding a garage or updating the overall decor of your home? Is the lack of cash in your savings account the only thing stopping you f rom ma k i ng you r home makeover come true?

If so, you are not alone as many homeowners find themselves in the same predicament. However, w i t h c a r e f u l p l a n n i n g a n d financing from your bank or credit union, you may be able to make your project come true much easier than you imagine.

According to Mark Samson, senior vice president and senior retail banking manager for Mechanics Savings Bank, there’s good news a nd bad news in t he cur rent economy. “The good news is that interest rates are at their lowest in years and financial institutions are eager to make loans to qualified applicants,” said Samson. “The bad news is that in the economic dow nt u r n home v a lues have dropped significantly and a lack of equity in your home may affect how

much you can borrow and/or the rate that you will pay.”

Ker r y Wo o d, e x e c ut i v e v ic e president at Community Credit Union, agrees that loan applicants should be cautious. “Don’t forget that the collateral that you are putting up against the loan is your own house. If you can’t make the pay ments and ma ke them on time, you could end up losing your home,” warned Wood. “You bor rowed money for t he sole purpose of improving your house and losing your house would be a disastrous situation.”

According to Matt Delameter, loan originator for Northeast Bank, there are a few important steps to take even before sitting down with a lender. “Determine what you are trying to accomplish for home improvements and obtain estimates for the work to be done,” adv ised Delameter, indicat ing that a project plan and budget are essential. “You should also gather key financial information including W-2 records, pay stubs a nd ba n k st atement s [w hen seeking financing].”

Homeowners should estimate the value of their home and see if they can qualify for a home equity loan or line of credit, two of the more popular choices available. These

choices are generally less expensive than a home improvement loan.

“You can typically borrow 80 to 85 percent of the value of your home,” noted Samson. Appraised value of the home x .85 minus first mortgage amount equals equity available to borrow. “Home improvement loans can be either secured or unsecured depending on the products offered at the financial institution.”

Typically, total debt on your home should not exceed 30 percent of your gross income. If you earn $3,000 per month, your mortgage payment,

t a x e s , i n s u r a nc e a nd home improvement loan or equity loan payment should not exceed $900.

“Consu lt your loca l lender to deter mine t he best f ina ncing p r o g r a m f o r y o u ,” a d v i s e d Delameter. “They can help you understand what monthly payment you can afford and the loan process requirements.”

A nd e v en b efore c a l l i ng or taking a trip to the bank, Samson recommends that homeowners check with their local building code officer and make sure there

are no restrictions or potential permitting problems with the home improvement they have in mind. “Find out what they will require for documentation,” said Samson. Too often, even the best of plans can be delayed if permitting or regulations about the project are not in place. A loa n referra l website w w w.homei mpr ov ement f i n a nc i ng.com, warns of five major pitfalls that homeowners encounter when considering home improvement projects. Bottom line: Plan your project wisely.

Choosing cost over quality.

Choosing cost over quality will catch up with you in the long-run, as cheaply-made materials will quickly wear out. Scale back your improvements if you have to, but use quality products.

Disregarding the present architectural style of your home.

No m a t t e r h o w g r e a t y o u r improvements are, they will look awkward and out-of-place if they don’t mesh well with your home’s current architecture.

Doing what the neighbors do.

Many people fall into the trap of select ing home improvements simply because ever yone else has them. Make improvements according to your own style and tastes, not your neighbor’s.

Throwing out the basics.

It’s easy to get swept up in home improvement f inancing to t he point where you forget about the basic functions of a home. For example, some people forget about essential issues like storage and maintenance when remodeling.

Designing your project around your fantasy life.

The things for which we’d like to use our home and those for which we actually do are sometimes very different. For example, perhaps you want to throw grand, elegant dinner parties every weekend. But, in reality, you and your family most often dine around the breakfast bar. In this case, it would make more sense to redesign or add to your kitchen than to add a lavish dining room.

Homeowners should estimate the value of their home and see if they can qualify for a home equity loan or line of credit, two of the more popular choices available.

Advertising Supplement to the Sun Journal, Lewiston, Maine, Friday, September 9, 2011 PROSPER 3

By Tresa Erickson Feature Writer

Family finances: Turn teens into savers

It’s no secret. Money burns a hole in the pockets of most teens.

The list of stuff they want is long, and they tend to spend money as fast they get it. If that is the case at your house, don’t despair. Follow these tips to get your teens to spend less and save more.

Set an example

Spend every dime you make, and your teens will follow suit. It won’t matter how much you sock away in your retirement and savings accounts if they don’t know about it. Be more open about your savings habits and spend whatever you have left over wisely.

Dole out less

Buy too much for your teens, and you will reduce their need to save. The less your teens have to pay for, the more money they will be able to save, right? Not exactly. While they could save it, most will spend it.

Financial responsibility is a part of life, and the sooner you start making your teens pay for some of their wants and needs, the less they will have to spend overall and the more they will value the dollar. Instead of spending money so freely, they will be forced to put back some of it for their “bills” and be less apt to part with the rest.

Encourage wise spending

Tr y to discuss sav ing w it hout spending, and you will teach your teens little. It’s hard to become a saver when you have lousy spending habits. Should you go shopping w ith your teens and they see something they want, suggest they wait a few days before purchasing it. They may discover they don’t need it after all.

To curb impulse purchases, suggest your teens make a list and bring just enough cash to cover what’s on their list. You can’t spend what you don’t have with you at the time.

Set up a savings account

Give your teens nowhere to put their savings, and you might as well tell them to spend it. The easier your teens’ savings are to access, the more likely they are to spend

it. Forget the piggybank and open a savings account for each of your teens. Go over the mechanics of the account with them, emphasizing the interest compounded daily. As they become more adept at saving, you can look into other options, like stocks and bonds.

Match their savings

Give your teens no incentive to save, and you might as well be talking to a brick wall. Teens need motivation, and money talks. If you can afford it, consider matching a percentage of whatever your teens save. You will help their nest egg grow faster and keep them motivated. Teaching teens to save takes time. Don’t expect to turn your spenders into savers overnight. Work with them through the process, and when they are ready, help them find a job.

How to balance work and school

Let’s be honest. In today’s teen world, l i fe ca n be ex pensive. Trendy clothes, concert tickets, car payments, cell phone bills and the latest electronic gadgets can be costly. You could pile on the work hours to afford everything. But is that smart? Do those extra hours at work put your long-term earning power at risk? One thing is clear. It pays to succeed in school (literally). We k now. We sound l ike your parents (lame). But let’s take a look at some quick facts.

Diplomas = Dollars

High school graduates earn about $7,000 more each year on average than those who don’t finish high school. After 40 years, that adds up to more than $200,000 in extra earnings! College graduates with bachelor’s degrees earn $16,000 more each year on average than those who earn a high school diploma. After 40 years, that’s a difference of $900,000. That’s almost a million bucks!

Investing that works

As you save money, you’re smart to put some in investments – they can earn more money than a regular savings account. Money you set aside to invest is money that you will not need for emergencies or everyday expenses. Investments are for the long-term – years into the future. As you learn more about each kind of investment, you’ll decide which ones might fit you best. Some are riskier than others. You could lose some or all of your

money. Some investments let you take your money out more quickly than others – that’s called liquidity. Investments offer different rates of return. You must weigh all of these

factors before put your money in any investment. It’s smart to divide your money among different kinds of investments. This is called diversif icat ion. W hen you put

your money in different places, you lessen your risk. While one investment may lose value, others may not. For more money tips for teens, visit TheMint.org.

Allowances are fine, but for real savings, teens need a source of income. Encourage them to find a way to supplement their allowance, whether by babysitting, mowing lawns or waiting on tables.

Times are tough, and most people are looking for ways to make extra money.

There are several ways to do this, but one way can net you some money and de-clutter your house all at the same time is to have a garage sale. You may not be able to pay off your credit card debt with the proceeds, but it may give you a little extra cash in your pocket.

Each year, millions of people file for bankruptcy, usually as a last resort to their financial problems. Accord i ng to one st udy, t he average age of someone declaring bankruptcy is 38; and 44 percent file as couples, the rest as singles, 30 percent women and 26 percent men. More than half have lost their job or suffered a serious illness.

There a re t wo ma in t y pes of bankruptcy: Chapter 7 and Chapter 13. In Chapter 7, the individual has exempt and non-exempt assets. Exempt asserts are what t hey are allowed to keep and usually include a certain amount of equity in their home and car, a small amount of clothing and a small amount of personal items. Any

asset considered non-exempt is turned over to the trustee and sold. The profits are then used to pay the individual’s creditors.

Under Chapter 7 proceeding, debts are considered non-dischargeable or secured. Non-dischargeable debts must be paid, even though bankruptcy has been filed. Student loans are one example. Secured debts enable creditors to retain an interest in some of the individual’s property until the debts are paid.

Credit card debt is paid only after t he secu red debts have been resolved. In some cases, non-sec u red debt s a re d ism issed due to lack of assets. Individuals should consider filing for Chapter 7 bankruptcy only if there is no hope of repaying any of their debts, there is no co-signer involved or if legal action from a creditor is imminent.

Chapter 13 bankruptcy is known as a reorganization bankruptcy. Individuals who file for this type of bankruptcy usually want to pay off their debt over a three- to f ive-year period. One of the motivators in filing for this form of bankruptcy is to keep non-exempt assets. To qualify for Chapter 13, an indiv idua l may not exceed $250,000 in unsecured debt and $750,000 in secured debt.

Reasons to consider Chapter 13 vary. Common ones include being behind on a mortgage, owing the IRS, wa nting to protect assets that would be liquidated under Chapter 7, obtaining relief from collection proceedings or leaving the option open to file for Chapter 7 at a later date.

B a n k r u p t c y d o e s n ot c o m e w it hout dow n f a l l s . Ne gat ive consequences include adversely affecting credit scores for 10 years, hindering the ability to get a job or establish a new credit line and difficulty in getting insurance.

Bankruptcy is not the only way to clear debt. Individuals may consider dealing direct ly w ith cred itors a nd work i ng out a pay ment plan. They may a lso talk to a credit counselor or debt consolidation company or get a second job.

Keeping your financial head above water in these tough economic times can be a challenge. Making ends meet is tough enough, but when you throw in job loss, illness, divorce or any number of other life-altering events, sometimes the only way out is bankruptcy.

Filing for bankruptcy is a l ife-changing decision that should be considered from every angle. Indiv idua ls should spea k to a f i na ncia l professiona l before committing to the process.

What services can a bankruptcy petition preparer provide?

Bankruptcy petit ion preparers are permitted to provide services limited to the typing of forms.

They may not advise you in any way. Their services are subject to various statutory requirements and limitations. Please note that although bankruptcy preparers are required to sign all documents prepared for filing, they are not authorized to sign any document on your behalf. Therefore, you and your spouse, and if filing a joint petition, must also sign all documents.

Copies of all prepared documents should be furnished to you by the bankruptcy petition preparer at the time they are presented to you for signature. Likewise, bankruptcy petition preparers are prohibited by law from collecting or receiving any court fees connected with the filing of your case.

Con sequent ly, a l l cou r t fees connected with the filing of your case, including the filing fee and m iscel la neous ad m in ist rat ive fee, should be paid directly by you to the court. The failure of any bankruptcy petition preparer to comply with the law should immediately be brought to the attention of any trustee appointed in your case and the local Office of the United States Trustee.

What does the Clerk’s Office do?

The Clerk’s Office provides a variety of services to the bankruptcy judges, attorneys and the public. Clerk’s Office staff provides clerical and administrative support to the court by filing and maintaining case-related papers, signing ministerial orders, col lect i ng aut hor i zed fees, sending notices, entering judgments and orders, and setting hearings. The services provided by the Clerk’s Office to attorneys

and the public include responding to re que st s for i n for m at ion and making copies of papers in bankruptcy court files. Although Clerk’s Office staff cannot give you legal advice, the U.S. Bankruptcy court is a source for many forms and local rules which you will need to file your bankruptcy petition and related documents.

How do I “file” a document with the court?

Ef fect ive Ja nua r y 1, 2004, a l l attorneys must file electronically. F o r n o n - e l e c t r o n i c f i l e r s , bankruptcy petitions, pleadings and other papers may be submitted for filing by mail or in person at the Clerk’s Office public counters.

Absent extraordina r y circum-stances, all documents must be submitted for filing by mail or at a Clerk’s Off ice public counter during business hours. W hen e x t r a o r d i n a r y, c o m p e l l i n g circumstances require delivery of a document to the Clerk’s Office after hours, an emergency filing can be arranged by contacting t he appropriate Clerk’s Off ice during business hours. The Clerk’s Office does not currently accept documents for filing by facsimile.

After completing your bankruptcy papers, mail or deliver them to the appropriate divisional Clerk’s Office accompanied by the filing fee payment or a completed application to pay fees in installments. If you want a file stamped copy of your petition, you must bring or mail a copy and the Clerk’s Office will file stamp and return it to you.

What is the creditor’s meeting?

A “meeting of creditors” is the single event t hat A LL debtors must attend in any bankruptcy proceeding. It is held outside the presence of the judge and usually occurs between 20 and 40 days from the date the original petition is filed with the court.

In chapter 7, chapter 12, a nd chapter 13 c a ses t he t r u stee assigned by the court on behalf of t he Un ited St ates Tr u stee conducts the meeting. In chapter 11 cases where the debtor is in possession a nd no t r ustee is assigned a representative of the Un ited States Tr ustee’s of f ice conducts the hearing.

T he U.S. Ba n k r uptc y Cou r t , Distric of Maine is located at Portland USBC, District of Maine, 537 Congress Street, 2nd Floor, Portland. Its website is at http://www.meb.uscourts.gov/index.html.


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Insure yourself wisely

Saving money is on everyone’s mind.

Cutt ing corners and tr y ing to get the most for your money has become a way of life. One expense that’s costly until you need it is car insurance. If you drive, you need it, but making the right decision about coverage and amounts can save you money in the long run.

First, consider your deductible. Some people pay extra for a low deductible and carry the minimum in liability coverage. Think about it this way: Is it easier to pay for a $500 deductible or a $500,000 lawsuit? Instead of taking this risk, raise your deductable and thus lower your premium. Then take the money you saved and apply it to the cost of higher liability coverage. It is simply a matter of shifting your money around to give yourself the most protection and security.

Personal injury coverage is another thing to consider. This coverage is also known as medical payments coverage. Do you already have health insurance for you and your family? If you have an accident, will that coverage pay your medical expenses? If so, you could be paying twice for the same thing.

Ta ke a look at you r l iabi l it y coverage. You may have up to $ 500,000 in l iabi l it y coverage, but the policy may state you have coverage of $100,000 per person. If someone were to file a $200,000 lawsuit, you’d be on the hook for half. Make sure your agent makes the total amount paid per accident and per person the same so that $500,000 means $500,000.

M a k e s u r e y o u r i n s u r a n c e company will pay for a rental car while your car is being repaired. A week in the body shop may not seem long to your mechanic, but try getting around a week without a car. If you don’t have another car to drive, you’ll have to rent one and that could cost hundreds of dollars.

Take the time to shop around. Start by calling for quotes and then narrow down your search. Once you have the best prices, make appointments and get down to brass tacks.

Get all of your questions answered and determine prices for the same coverage. You want to compare apples to apples, because some companies will charge more for

the same coverage that is cheaper somewhere else.

Look for every discount and take it. There are a plethora of things that qualify you for a discount. They can range from your spotless driving record to your car’s airbags. Find out what discounts are available and make sure your agent knows your qualify.

This next one takes some thought and math skills. If you drive an older car, consider dropping your collision coverage. First, determine the car’s value. Say your car is 10 years old iand s worth $2,000. If you total it, you would get $2,000.

But is it wor t h t he r isk of not having the coverage and banking the money you would have paid? If you do forgo this coverage, can you get your hands on the money it would take to buy a replacement car tomorrow?

Finally, choose the right insurance compa ny. Un for t u nately, not everyone has your best interest at hea r t . There a re plent y of companies that will take advantage of you. Make sure you go with someone you trust that will explain your policy to your satisfaction.

Important information about your life insurance policy from the Maine Bureau of Insurance

Life insurance is a critical part of a broader financial plan. There are many options available, and you have the right to shop around and seek advice from different financial advisers in order to find the option best suited to your needs.

You are encouraged to consider the following possible alternatives to [requesting a surrender of your life insurance policy, requesting accelerated death benefits under your life insurance policy, or letting your life insurance policy lapse.*]. These alternatives include, but are not limited to:

• Accelerated Death Benefit: Your policy may provide an early or accelerated discounted benefit payment if you have a terminal or chronic illness.

• Cash Surrender: Your policy may have a cash surrender value your life insurer would pay you if you cancel it.

• Gift: You may be able to gift your policy to your beneficiary, who would then assume responsibility for paying premiums.

• Life Settlement: You may be able to sell your life insurance policy to a third party for an amount greater than the cash surrender value or accelerated death benefits under your policy. You pay no further premium. The third party becomes the policyholder and receives the benefit upon the insured’s death.

• Maintain Your Policy: You may be able to maintain your l ife insurance policy in force by paying the premiums directly or using your current policy values to pay the premiums.

• Policy Changes: You may be able to reduce or eliminate future premium payments by obtaining a paid-up policy, by reducing optional coverages, or through other options available from your life insurer.

• Policy Loan: You may be able to take out a loan from your life insurance company using the cash value of your policy as collateral. Loan proceeds can be used to pay the premiums or for other purposes.

• Third-Party Loan: You may be able to get a loan from another pa r t y to pay you r pol ic y ’s premiums. In return, the lender

may require an assignment of a portion or all of the policy’s death benefits.

These options may or may not be available depending on your circumsta nces a nd t he ter ms of your l i fe insura nce pol icy. Please see your policy or contact your l i fe insura nce compa ny, financial advisor, agent or broker to determine your particular options. If you’re a Maine resident and have questions about l ife insurance and your rights, contact the Maine Bureau of Insurance at 800-300-5000, or go to www.maine.gov/pfr/insurance. Ask questions if you don’t understand your policy. Here’s a list of commonly used terms:

Accelerated deat h benef it : A benefit a l low ing terminally i l l or chronically il l life insurance pol ic yholders to receive cash advances of a l l or part of the ex pec ted deat h benef it . T he accelerated death benefit can be used for health care treatments or any other purpose.

Cash surrender value: This term is also called “cash value,” “surrender v a l u e ,” a n d “p o l i c y h o l d e r ’s equity.” The amount of cash due to a policyholder who requests the insurance company cancel their life insurance policy before it matures or death occurs.

Expected death benefit: The face amount of the policy, less any policy loan amounts, that the insurance company is expected

to pay the beneficiaries named in the life insurance policy upon the death of the insured.

Lapse: Refers to a life insurance policy ending or expiring when a pol ic yholder stops ma k i ng premium payments.

Life settlement: Refers to a contract in which the policyholder sells his or her life insurance policy to a third party for a one-time cash payment which is greater than the cash surrender value, but less than the death benefit of the policy. A life settlement includes a viatical settlement, defined below.

Policy loan: A loan issued by an insurance company using the cash value of a person’s life insurance policy as collateral.

Viatical settlement: An arrange-ment in which someone with a terminal illness sells his or her life insurance policy at an amount less than the death benefit. The ill person receives cash, and the buyer receives the full amount of the death benefit. This death benefit is payable once the former policyholder dies.

FMI, visit Maine.gov Bureau of Insurance at www.maine.gov/pfr/insurance/index.shtml

* A life insurance company should choose among these three phrases to state the appropriate phrase that fits the situation of the particular policy owner to whom the notice is being sent.

Knowing that financial markets are constantly changing, it’s often hard to gauge when the best time would be to jump in.

Trying to time your investments in this way can cause you undue stress and cost you f inancially when you try to invest by guessing when the market has hit the “top” or t he “bottom.” For tunately, h o w e v e r, t h e r e a r e s e v e r a l timeless strategies that can help you el i m i nate t he emot iona l component, and get you on the right track to successful investing.

Think long term.

While past performance is never a g ua ra ntee of f uture resu lts, t he ma rkets have h istor ica l ly performed well over the long run. Investors who have developed the discipline and patience to stay the course over the long run, de spite ma rket f luc t uat ion s, have generally experienced more favorable results.

Watch your asset allocation.

Even i f you properly diversif y your portfolio in the beginning, changing markets will affect the value of your investments and could alter your actual allocation.

Consistent reviews will help you identify when your portfolio needs to be rebalanced, helping you maintain a proper asset mix. Bear in mind that asset allocation does not protect against f luctuating prices and uncertain returns.

Patiently accept volatility.

Building on the last point, it’s important to realize that market hig hs a nd lows a re a natura l o c c u r r e n c e , a nd s h ou l d b e

considered a nor ma l pa r t of investing. Once you accept that fact, you can prepare yourself to resist the emotional urges to jump in and out of the market based solely on its current direction.

Stay in the market.

Some investors attempt to time t he ma rket . W hen it ’s dow n, they sit on the sidelines waiting for it to rally before they get in on the action. Conversely, when the market is up, they wait for a correction so they can buy at what they see as bargain rates. Moving in and out of the market by timing its ups and downs is a skill not even the most seasoned investment professiona ls have mastered. Consistent investment – in both up and down markets – shou ld produce more rel iable results over time.

Diversify.

P o s s i b l y o n e o f t h e m o s t important investment principles – a nd at t he s a me t i me most overlooked – is the need for careful asset allocation. The popular adage that tells you not to keep all your eggs in one basket is especially true when it comes to your investments.

Pay yourself first.

You may have heard this before, but it’s certainly worth repeating: Save first and then spend what you have left, rather than spending first and saving what you have left. Inevitably, if you attempt to do the latter, you’ll often find there’s nothing left to save.

Reinvest dividends.

Many quality companies have a histor y of paying dividends, regardless of overall stock market performance. Reinvesting these dividends offers you an excellent way to easily build your stock positions.

Set goals.

While this may seem like the most basic idea, it’s still one of the most important. When considering your investments, you need to have a clear idea of where you are, a goal in mind of where you want to go, and then put strategies in place to help you get there. By incorporating all of the above-mentioned ideas, you will have a guide to help you in all your important investment d e c i s ion s . T h i s a r t ic le w a s written by Wells Fargo advisors and provided courtesy of Adam Dunbar, a financial advisor. He can be reached at 774-5626 or [email protected]

Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.


Thomas M. GopsillLPL Financial Investment Officer

Jared P. RangerLPL Financial Advisor

Aaron C. KnappLPL Financial Advisor

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Disciplined investing helps keep emotions in check

A well-diversified portfolio should include complementary asset classes, so they can cushion each other against the effects of market downturns and lower your portfolio’s overall risk.

It’s no secret. W hen people get into financial trouble, they often turn to their families for help. It is much easier to get a loan from someone you know and love than from a bank. W hile occasional family loans are f ine, frequent ones can lead to big trouble, for ever yone i nvolved. Fi na ncia l experts generally advise families not to loan money to each other. This is often easier said than done, however. If you have been asked for a loan recently, proceed with caution and follow these tips.

Find out what the loan is for. You don’t want to lend a relative a large sum of money, only to discover they paid off a small debt and spent the rest on the vacation of a lifetime. Make certain the loan will be put to good use, whether to pay down debt, finish a degree, start a business or for some other reason.

Determine how much you can a f ford to g ive. Re v ie w you r finances to see how much you can realistically lend. If you cannot give any, be honest and offer to help out your relative in some other way. Perhaps you could watch their children while they work part time in the evenings. Do not go to extreme measures to find the money or overextend yourself. Give what you can, and if it isn’t enough, so be it. There’s always a chance you will not be repaid and you don’t want to put yourself into jeopardy.

Draw up a contract for the loan to be repaid. Don’t throw caution to the wind and tell your relative to pay you back whenever. Chances are they won’t. You’re loaning them your hard-earned money, so arrange for it to be repaid in a timely fashion, perhaps even with interest. Depending upon the terms of the loan and how you go about it, there might be some tax implications. Speak to a tax professional to ensure the right contract between parties. For the best results, you might want to have a third party draw up the contract and arrange for the payments to be deducted from your relative’s bank account automatically.

Loans can be tough, particularly among families. Because you’re family, you may feel obligated to help out. If you can afford to do so and you set the right terms, the loan can work out well for everyone involved. If you don’t, there could be tension around the dinner table for some time to come. Lend money to family wisely!

Shakespeare was apparently onto something when he wrote that lending money to friends often resulted in the loss of both the friend and the money. Money is an emotionally charged issue that has torn apart many a relationship. “Blood may be t h icker t ha n water, but money can be the great divider, even in a family,” said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling. “One NFCC Member A genc y repor te d a s it uat ion where a father put up his house as collateral for his son’s business. That business is now failing, and the situation has put a lot of stress on their relat ionship and may ultimately result in the loss of the home,” Cunningham continued.

The NFCC offers the following s u g g e s t i o n s w h e n d e c i d i n g whether to lend or not to lend:

Do not dip into your retirement account. Loaning money is not a good idea if it means that you have to risk your retirement savings. Protect this nest-egg as though you were the mother hen, and don’t let any of your chickens touch it.

Involve your spouse/partner in t he decision. Communicat ion could not only save you money, but could save your marriage or relationship. If you and your spouse don’t agree on making the loan, it could result in significant stress on your relationship.

Evaluate the impact the loan will have on other family members. If you loan money to one child, y ou’r e s e t t i n g a pr e c e de nt . What if other children are not as responsible, thus the risk of them repay ing a loan is greater? Be prepared to deal with the potential strife such a situation could create within the family.

Consider the reason the borrower needs the money. Do they want the loan because of an emergency like loss of job or unexpected medical bills, or because they made poor spending decisions? Will it be used for something that will improve their life, like a down payment on a home or education?

Don’t be an enabler. If the borrower is engaged in a destructive lifestyle, and is habitually in financial hot water, be emotionally supportive rather than financially supportive. A bet ter u se of you r mone y would be to pay for professional counseling to get to the root of the problem, as bailing them out of their current crisis won’t address the underlying issues.

Treat t he loa n a s a busi ness arrangement. After all, you’ve now become the banker, and bankers take things seriously. Once you have agreed on the amount of the loan, discuss the interest rate, term, payment due date, and late fees. To figure out monthly payments, including interest, consider using a loan calculator, such as the one available at www.bankrate.com.

Put all the terms of the loan in writing. Many web sites offer free promissory note forms. One such

site is Internet Legal Research Group at www.ilrg.com/forms/promisry.html, where you can find promissory note forms for each state.

Consider having the documents notarized, as this will give you more legal standing if the borrower defaults. While putting it in writing is smart because it makes the borrower more accountable, be aware that it won’t guarantee you will be repaid. It’s simply another layer of protection. Be forthcoming about any legal steps you will take

to collect an unpaid loan. Jointly reviewing a worst-case scenario in advance of the situation can go a long way to preserve a relationship if things start going south.

For free and affordable confidential advice through a reputable NFCC member, call 800-388-2227 or visit www.nfcc.org.


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Lend with caution


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Money for college

Now more than ever, a college education is essential to career success. A col lege deg ree i s something that can never be taken away and something that instills pride in those who earn it. Young or old, education is the goal of many and a financial challenge for most. A person may have the drive and desire for higher education, but no way to fund it. However, there is “free money” available. You just have to know where to look.

M i l l ion s of schola r sh ips a re awarded each year. Some of the areas in which scholarships can be obtained include athlet ics, a c a de m ic s , d i s a bi l i t y, r a c e, nationality and hardship, just to name a few. Start by researching w h ich schola r sh ips apply to your situat ion. This w i l l ta ke time and patience, but you may be surprised where you can find scholarship money.

Another way to fund your college educat ion is t hrough a grant. Again, it’s just a matter of doing y o u r h o m e w o r k . T h e r e a r e t housands of t y pes of grants ; you just have to find them. One common g ra nt is t he Federa l Pell Grant. This federal grant is norma lly awarded to students w ho h av e not yet e a r ne d a bachelor’s degree.

It is needs based and awarded based on income level. Awards ca n ra nge f rom hu nd reds to

thousands of dollars. Some grants are available based on the year you graduated high school, some are based on your year in college and many are based on financial need.

Another type of grant to research is the Institutional Grant. This grant is offered by the university you attend and is usually merit based. It can be used to cover the costs of education not funded by federal assistance money. Research this type of grant by talking to your university’s financial aid offices.

Other sources of “free money” include the Federal Work Study Program (FWS Program). This program provides jobs to students w it h f i n a nc i a l ne e d . I f y ou currently have a job, check with your company to see if they have an tutition reimbursement plan. In some case, companies will assist in paying tuition for a commitment to work for them for a determined amount of time. Money for college AND job security? Sounds like a pretty good deal.

If you don’t currently have a job, see if your parent’s employers have any tuition reimbursement programs available for employees’ children. See what your state has available. You may be eligible for money just because you live there. Check with your university and see if they will reimburse you for your skills. Can you tutor or give music lessons?

There is money available. You just have to talk to the right people and look in the right places. An education will last a lifetime and

finding a way to fund it will pay off for a lifetime.

Most col leges and universit ies of fer merit or non-need-based schola rsh ips to academ ica l ly talented students. Students should check with each school in which they're interested for the criteria for merit scholarships. The National Merit Scholarship Program awards scholarships to students based upon academic merit. The awards can be applied to any college or university to meet educational expenses at that school.

Ma ny states of fer schola rship assistance to academically talented students. Students should obtain the eligibility criteria from their state's education of f ice. Some col leges and universit ies of fer special grants or scholarships to students with particular talents. Music, journalism, and drama are a few categories for which these awards are made.

Some students choose to attend a community college for 1 or 2 years, and then transfer to a 4-year school. Tuition costs are substantial ly lower at community colleges than at 4-year institutions.

Some parents may be financially able to purchase a house while their child is in school. If other students rent rooms in the house, the income may offset monthly mor tgage pay ments. Fa m i l ies should make certain, however, that the property they purchase meets all of the requirements of rental property. If you have any questions, consult a tax professional.

Commuting is another way for students to reduce college costs. A student living at home can save

as much as $6,000 per year. Many schools provide lists of housing opportunities that provide free room and board to students in exchange for a certain number of hours of work each week.

Cooperative education programs allow students to alternate between working full time and studying full time. This type of employment prog r a m i s not ba s e d upon financial need, and students can earn as much as $7,000 per year.

Another way to reduce college costs is to take fewer credits. Students should find out their school's policy regarding the Advanced Placement P rog ra m (A PP), t he Col lege-Level Examination Program, and t he Provenience E xa minat ion Program. Under these programs, a student takes an examination in a particular subject and, if the score is high enough, receives college credit. Some colleges give credit for life experiences, thereby reducing the number of credits needed for graduation. Students should check with the college for further information. You can also write to Distance Education and Training Council at 1601 18th(eighteenth) Street, NW, Washington, DC 20009, or call (202) 234-5100.

Most schools charge one price for a specific number of credits taken in a semester. If academical ly possible, students should take the maximum number of credits allowed. This strategy reduces the amount of time needed to graduate.

In many cases, summer college courses can be taken at a less expensive school and the credits transferred to the full-time school. Students should check with their academic advisor, however, to be certain that any course taken at another school is transferable.

Most schools have placement off ices that help students f ind employ ment, a nd a l l schools have personnel offices that hire

students to work on campus. These employment programs are not based upon financial need, and working is an excellent way to meet college expenses.

Most colleges and universities offer their employees a tuition reduction plan or tuition waiver program. Under this type of arrangement, the school employee and family members can attend classes at a reduced cost or no cost at all. This type of program is based not upon financial need, but rather on college employment.

Most col leges and universit ies sponsor resident advisor programs that offer financial assistance to students in the form of reduced tuition or reduced room and board costs in exchange for work in resident halls.

One of the most obvious ways of reducing col lege costs is to attend a low-cost school, either public or private. There are many col leges and universit ies w ith affordable tuition and generous f inancia l assistance. Students should invest igate a l l schools that meet their academic and f inancial needs. Some schools offer combined degree programs or 3-year programs that a l low students to take all of the courses needed for graduation in 3 years, instead of 4, thereby eliminating 1 year's educational expenses.

Partial tuition remission for the children of alumni is a common practice. Parents and students shou ld invest igate t heir a lma mater's tuition discount policy for graduates. Some colleges and universities offer special discounts if more than one child from the same family is enrolled. Some schools offer a tuition discount to student government leaders or to the editors of college newspapers or yearbooks. For more information about saving money for college, go to Student Aid on the Web at www.ed.gov.

Money 2011

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