Many parents say they will do anything for their kids. But that doesn’t mean you have to go out on a financial precipice. Median Price Per Child: $338,000   Kids born in the U.S. this day will cost their parents more than $338,000, on average, by the time they graduate from a public college. Send your precious […]

Many parents state they’ll do anything for their children. But that doesn’t mean you’ve to go out on a financial precipice. Median Price Per Child: $338,000  

Children born in the U.S. this day will cost their parents more than $338,000, on average, by the time they graduate from a public college. Send your precious offspring to a private university, and you can expect to shell out an additional $70,300 for tuition. Think education is your only large tab? Think again. Just keeping a roof over junior’s head will cost almost $105,000 through age 18. Food will eat up $41,400, and health care will set you back $17,400 over 18 years.

Experts state the ideal way to plan for many of the biggest expenditures, be it college, vacations, child care, summer camp, or a Bar Mitzvah, is to set aside individual reserves of cash for each goal.  Most people don’t do that. Instead, they just throw it on a credit card and worry about it later. A good plan is an automatic investment program that transfers money out of your bank account on a recurring basis. Businessweek asked financial planners and advisers for additional strategies and tips on planning and saving for some of the biggest costs of child rearing.

College: Since this is your biggest potential expenditure, begin saving as soon as possible, ideally within the first year of your child’s birth. Your best bet is probably a what’s known as a 529 college savings plan because the money accrues tax-deferred—and some says let you put away as much as $300,000. Here’s a good calculator to give you an idea why you should begin saving now.

Housing: Aside from college, one of the biggest costs associated with raising kids is providing shelter, which amounts to more than $100,000 per child over an 18-year span. The bulk of those costs go toward a mortgage, property taxes, maintenance, repairs, utilities, and furnishings. You can save money by handling some home maintenance yourself—but only tasks you’re capable of doing well.

Food: It certainly helps to shop in bulk at stores like Costco and Sam’s Club, but make sure you bring a list and stick to it. Another smart way to keep food costs in line is to learn to cook.

Activities: Extracurricular activities can get very costly, with an average cost of $35,000 over an 18-year period. While your son or daughter might play ice hockey for just five months out of the year, your best bet is to set money aside year-round to finance things like the cost of team membership, additional ice time, travel, and equipment. Though parents may want to expose kids to many different experiences, one way to limit expenses is to focus your kids on a few activities they’re passionate about.

Child and Health Care: Costs for child care and health care are significant, though they vary wildly around the country. Find out whether your employer offers a child-care or health-care flexible spending account. If you are in the 28% federal tax bracket and live in a say with a 5% tax rate, a $5,000 annual contribution saves you $1,650 in taxes.

For more visit Source:www.streetsideinvestor.com

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Filed under: India, Entrepreneurs, Housing

Mukesh Ambani is the chairman, managing director, and largest shareholder of Reliance Industries, India’s largest private sector enterprise. With its wide-ranging operations, Reliance Industries has been called India’s General Electric (NYSE: GE), and Ambani’s personal stake in Reliance Industries is around 48 percent.

Ambani’s net worth of US $20.1 billion early in the year made him the world’s 14th richest person and the second richest person in India after steel tycoon Lakshmi Mittal. However, by October, Ambani’s net worth had more than doubled, making him the richest Indian, and number four in the world, just behind Warren Buffett. In fact, a strong, temporary share price rally for Reliance at the end of October brought Ambani’s net worth to $63.2 billion, making him briefly the richest man in the world.

But that isn’t the only highlight for Ambani in 2007. Construction also began on his home, which is expected to cost US $1 billion, and be one of the tallest structures in Mumbai (formerly Bombay), the equivalent of a 60-story building. The glass tower will include a plush movie theater, a health club with a pool, gardens and terraces, and parking for 168 automobiles, as well as an in-house garage to service them. Living space for the family near the top will have a view of the Arabian Sea, and the roof will have three helipads. It will take a domestic staff of 600 to run the place, which was designed by an architecture firm from Chicago to be reminiscent of the Hanging Gardens of Babylon, one of the Seven Wonders of the Ancient World.

Yes, it’s been a very good year for Mukesh Ambani, and also for his wife, to whom he gave an Airbus 319 as a birthday gift.

Be sure to check out more Money Winners of 2007.

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Filed under: Personal finance, Housing

A CNNMoney piece looks at the rise of payday lending in Ohio, aided (or perhaps exacerbated is a better word) by the subprime debacle that has given many home owners with toxic mortgages difficulty making their payments.

While people probably aren’t using payday loans directly to pay their mortgages, that’s the net result: Soaring monthly payments are eating up a huge chunk of their paychecks, and they’re resorting to payday lending to pay for other expenses.

The problem with that is that, on an annualized basis, interest rates on payday loans can end up being well over 400%. However the lenders counter, not wrongly, that the loans are not meant to be used for a year so quoting an APR is meaningless — They charge a service fee for a short-term cash advance.

But subprime homeowners who find themselves resorting to payday loans to keep their homes are probably making a massive mistake: If you can’t afford the monthly payments on your home, you should probably give it up. And if, like many subprime borrowers, you have only a little chunk of equity, and in some cases no equity, it isn’t really your home.

Taking out high-interest toxic loans to try to stay current on a high-interest toxic mortgage is probably not intelligent in most cases. Foreclosure is probably down the road for these homeowners, and adding additional debt to postpone it only makes things worse.

Here’s something I haven’t heard anyone in Washington, which has engineered a bailout of homeowners with terrible credit scores and less than 3% equity in their homes, say: People who have no equity aren’t homeowners, and it’s probably best to just let them lose their houses, since they aren’t even theirs.

Pic from Flickr:
http://www.flickr.com/photos/ellievanhoutte/993553482/

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Filed under: Bad news, Comfort Zone Investing, Housing

Ted Allrich is the founder of The Online Investor and author of Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he offers advice to investors who are just getting started.

Subprime loans have been in the headlines, not in a good way. Lenders have lost billions. Homeowners have lost homes. It’s a real large problem. But for the lenders the problems might only be starting.

While subprime loans are defaulting, there are loans that weren’t subprime when they were made and have been paying regularly. But that might change due to their structure. These loans were made at interest rates below the current market rate, called teaser rates. These teaser rates were written for a year or two or even longer. Once those teaser rates expire, the loan then adjusts upward to current interest rates for home loans.

When the new rates adjust higher, so do the payments. Some homeowners won’t be able to afford the new payment schedule. The actual number of those is unknown until the end of each month, when the payments are due and aren’t made. While interest rates are moving downward at the moment, they might not move down far enough to help these borrowers. That means more mortgages may default over the next several months or years as the teaser rates become current. Only time will tell how many that will be. Not even the lenders know how bad this problem is since there’s no way to estimate how many borrowers will stop paying.

Another area of concern: Home equity loans. These are loans made on homes that are subordinated to the original mortgage. They carry a higher interest rate than first mortgages. Borrowers usually take money out to remodel a home, purchase a car, pay for college or simply take a nice vacation. All are worthy endeavors. Except the loan has to be paid back. Many of these home equity loans are made with the idea that a house would be sold in a short time, and the first mortgage as well as the home equity loan would be paid with the proceeds.

The difficulty arises when the home doesn’t sell or doesn’t sell for enough money to pay for both loans. Either way the lender ends up sucking wind, especially the home equity lender since that loan is paid only after the first loan is paid absolutely. While home prices were escalating every month, these home equity loans made a lot of sense. Now that fortunes have changed, everyone is scratching their collective heads and wondering how anyone could make a loan based on the assumption that home prices only go one way. Such is the nature of humans and lending money.

So there are two very pronounced possibilities for further problems for lenders: teaser rates that come current and home equity loans. Again, no one can guess the depth of these possible losses until they actually occur. That’s on a month to month basis. Each month they don’t happen is a short lived sigh of relief until the month wears on and another anxiety attack begins.

These aren’t all of the problems lenders have, but they are the ones in the forefront, right after the subprime loans. However, if interest rates continue to go lower, if lenders work with their borrowers to modify terms, and if housing prices stop going down, lenders can start breathing a lot easier. So can investors who hold their stocks.

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10 Nightmare Handshakes: Which One Are You? Handshakes have been around since the birth of civilization. In fact, they were originally a way to prove you had no weapons in your hand when meeting someone new. Nowadays, we use handshakes in meetings, greetings, offering congratulations, closing a business deal or sometimes just to say, “How’s it […]

10 Nightmare Handshakes: Which One Are You?

Handshakes have been around since the birth of civilization. In fact, they were originally a way to prove you had no weapons in your hand when meeting someone new. Nowadays, we use handshakes in meetings, greetings, offering congratulations, closing a business deal or sometimes just to say, “How’s it goin’?” No matter the basis of your handshake, it should become part of your repertoire. Handshakes are a sign of trust and help build strong relationships. Prospective employers said they’re more likely to overlook visible body piercings and tattoos than an ineffective handshake, according to a 2001 survey of human resources professionals. Plus, when you shake hands with people upon meeting, they’re two times more apt to remember you than if you didn’t shake hands. The time has come to find out if your grip is powerful, pathetic or just plain bad.

To evade making a bad first impression, losing a business deal or simply humiliating yourself, take heed of 10 terrible grips to avoid:

1. The “Macho Cowboy”… is the almost bone-crunching clasp many businessmen use to shake hands. What are they trying to prove, anyway? There’s no need to demonstrate your physical strength when shaking another person’s hand.

2. The Wimp… is usually delivered by men who are afraid to “hurt the tiny lady” when shaking women’s hands. Modern female professionals expect their male counterparts to convey the same respect they’d show their male colleagues.

3. The “Dead Fish”… conveys no power. While there’s no need to revert to the macho cowboy death grip, a firm clasp is more powerful than one that barely grabs the hand.

4. The “Four Finger”… is when the person’s hand never meets your palm, and instead clasps all four fingers, crushing them together.

5. The Cold and Clammy… feels like you’re shaking hands with a snake. Warm up your hand first before grabbing someone else’s.

6. The Sweaty Palm… is pretty self-explanatory, and pretty gross. Talcum powder to the rescue.

7. The “I’ve Got You Covered” Grip… happens when the other person covers your hand with his or her left hand as if your shake is secretive.

8. The “I Won’t Let Go”… seems to go on for eternity because the other person won’t drop his or her hand. After two or three pumps, it’s time to let go.

9. The “Southpaw”… happens when the person uses the left hand to shake because the right hand has food or a drink. Always carry your drink and plate with your left hand to keep your right one free for meet and greets.

10. The “Ringed Torture”… occurs when the person’s rings hurt your hand. Try to limit the number of rings you wear on the right hand to only one or two and be mindful of any that have massive stones.

Six Steps To An Effective Greeting:
1. Stand up
2. Step or lean forward
3. Make eye contact
4. Have a pleasant or animated face
5. Shake hands
6. Greet the other person and repeat his or her name

For more visit Source:www.streetsideinvestor.com

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If you love each other, shouldn’t you be able to live and work together, right? For many couples, this major decision is the ticket to wealth, self-actualization and happiness. For others, it can lead to severe financial and relationship stress. Such a move takes more than planning; it requires a full assessment of your personalities and […]

If you love each other, shouldn’t you be able to live and work together, right?

For many couples, this major decision is the ticket to wealth, self-actualization and happiness. For others, it can lead to severe financial and relationship stress. Such a move takes more than planning; it requires a full assessment of your personalities and your money issues to determine whether working and living side by side is right for you. Your first step should be a visit to a trusted certified financial planner. Here are some key steps to consider:

Give yourselves a timetable to startup. You might be tempted to give notice tomorrow morning, but it’s much wiser to lay out a timetable over the coming months with specific tasks, goals and objectives.

Study the viability of your business model. Speak about worst-case scenarios. Bring in trusted advisors to ask tough questions about what you’re planning to do and the viability of your idea. Convincing each other you’ll make it work isn’t enough.

Draft a business plan. Even if you don’t expect the need to seek outside financing, it is always a good idea to formalize your ideas with a business plan. Include profit and loss projections, so that you’ve a benchmark for evaluating your progress at a given point in time. Factor in both best- and worst-case scenarios, which could help with decisions down the road.

Comprehend how your tax situation will change. Depending on which business structure you select, you may need to plan for income taxes, self-employment taxes and payroll taxes. You want to make sure you’ve reserves set aside for these liabilities. 

Set a spending plan for your business and personal life. Since startups have unpredictable cash inflows, you will want to establish adequate emergency funds–both business and personal–to carry you through the startup phase.

Set boundaries. Couples who live and work together need to assess whether they want to keep their work and personal lives separate. Some people are comfortable discussing their personal lives at work, while others make it clear that during working hours, they’re at work and won’t discuss personal matters.

Make sure your legal documents are in order. If you haven’t had your estate planning documents updated in a while or don’t have them at all, this is a great time to have them drafted. Don’t forget to tell your attorney about your new business venture, which should be factored into the equation.

Plan for your children in the business. There might be good opportunities to employ children for work commensurate with their skills.

For more visit Source:www.streetsideinvestor.com

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Your Kids Can Easily Learn To Be Takers and Not Givers So many people ask how to teach their children about money, hoping they can get a 1-2-3 formula to use that will help their child become a wise caretaker of his/her money. Many parents ask this question because they are terrified that their children will […]

Your Children Can Easily Learn To Be Takers and Not Givers

So many people ask how to teach their kids about money, hoping they can get a 1-2-3 formula to use that will help their child become a wise caretaker of his/her money. Many parents ask this question because they are terrified that their kids will turn out just like themselves when it comes to spending money. They hope that the “Do as I state, not as I do” method might actually work in this case. They nearly always learn by example. They learn from your examples, dad and mom.

STEP 1 Put into practice the things that you want your kids to learn. If you anticipate a 5, 6, or 7 year old to learn to handle money wisely, surely you as a grown adult will be capable of doing it too.

STEP 2 The second step in the formula is to instruct children how to earn money before they learn how to handle it. This should seem logical and you may say, “Well of course everyone knows that!” But do they? The people we deal with on a daily basis don’t seem to know that. How many people do you know that spend money they haven’t even earned? How many dollars worth of credit card debt do you’ve? Isn’t that spending money you haven’t earned yet?

The best way to help children learn positive work ethics and give them a opportunity to earn money is through chores. There is nothing wrong with age appropriate chores and jobs. Chores help to teach kids the weights and balances of earning and spending. If you earn $10, you can spend $10. A lot of parents live with the idea that one can spend $10 and then frantically try to work to get $10 to pay for it. Another substitute that seems to be gaining popularity is to mooch off of someone like their parents or to become indebted to a credit card company.

It’s no wonder kids are getting confused.  It is because they are receiving blended messages from dad and mother. This is why it is so important for parents to get their acts together first. Whatever you do, don’t give your kids allowances when they haven’t earned them. You are doing your kids a great injustice when you do this. They learn early on that they don’t have to do a thing because mother and dad will pay for it. Twenty years later, parents find themselves with a 28-year-old man sitting on their sofa.

By giving children money and “stuff” without having to earn it, they learn to be takers and not givers. Then we wonder why, as adults, they’ve the attitude that the world owes them something for nothing. They have learned that they’ve no reason to bother to lift a finger to contribute to society. If you’re “tight with money”, kids have a very keen sense of justice. They usually know when mother and dad are not paying them because things are in “crisis” mode.

STEP 3 is to be sure and teach your child about savings. There is no better way for a child to learn to save than for that child to quickly spend all of his money at a bubble gum machine and on candy bars and then see a sibling, who has carefully saved, be able to purchase a really cool toy the next time they go shopping. Another way for children to learn about saving is, when they desire something very much, to have mom or dad tell them to save their money for it. You can’t break down and purchase it for them because you will defeat the purpose. Just wait and after a while, you’ll come to realize how exciting it is for a child to save and save and then finally reach their goal’s end.

With more money comes more responsibility. Keep the amount of money you give your kids in proportion to how responsible they’re. This will help them to learn to use their money wisely rather than to waste it because they have more than they know what to do with. Teach your kids to use a small part of their money to purchase gifts and to give to others. Remember, the whole object is to learn to be wise stewards of their money and to be givers not takers.

For more visit Source:www.streetsideinvestor.com

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Filed under: International markets, Other issues, Economic data, Housing, Federal Reserve

Once again, the ever-incisive Financial Times columnist Martin Wolf, an economist, identifies with laser-accuracy what ills the current market. The problem, Wolf argues, isn’t a lack of solvency but a lack of liquidity (i.e. ‘panic’).

Wolf does not deny that there have been bad loans (there have been) or that no companies will go out of business (some will). But the circumstance that froze credit markets, that caused quality corporate bonds to fail to price, and that leads to 100-point spreads between the LIBOR rate (what banks charge each other) and the ECB’s benchmark interest rate, is rooted more in a lack of confidence, than a lack of sound economic fundamentals or a lack of resources.

A lack of liquidity

And a lack of liquidity or ‘panic’ is something that central bankers can address. With the above in mind, the U.S. Federal Reserve’s plan, in consultation with the European Central Bank, the Bank of England, the Swiss National Bank, and the Bank of Canada, to inject $40 billion via auctions into the financial system is appropriate and prudent. (Further, in addition to reciprocal currency arrangements, the companion central banks will take related actions, including the Bank of England’s decision to accept a wider range of collateral on 3-month loans).

Will this be the last intervention by The Fed and the other major central banks? Most likely, no.

Will the intervention work? Like Wolf, other economists, including David H. Wang, believe it will, provided the problem primarily is a lack of liquidity, and not a lack of solvency.

Several consequences

However, this is not to say that there won’t be intended and unintended consequences from the central banks’ action. There will be several, and two are described here.

First, there will be the rescue of some incompetent bankers and mortgage lenders. Or, more theoretically, there is a chance that the principle of moral hazard will be violated. Briefly, that theory argues that poorly-run businesses that made wrong choices should be granted to go bankrupt, and that rescuing them would encourage more bad choices, or violate the moral hazard guiding businesses to make the right choices and earn a profit.

Second, there will be the mighty hand of the U.S. Congress. There’s a Washington, D.C. adage that goes, “Congress doesn’t act, unless not acting will bear the wrath of the American voter.” That roughly translates to, “Congress is otherwise occupied… unless there’s something to attract its attention.” And in-touch voters will attract the Congress’ attention. And that can only lead to tighter and more-effective regulations.

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Filed under: International markets, Forecasts, Other issues, China, Russia, Japan, Housing, Federal Reserve

When the typical investor talks, Wall Street listens, to a degree. When Alan Greenspan talks, Wall Street listens very closely.

Greenspan, who served as Chairman of the U.S. Federal Reserve for 18 years, said that while it’s too soon to say a U.S. recession is up ahead, “the odds are clearly rising,” National Public Radio reported. Greenspan added that U.S. economic growth is “getting close to stall speed.”

Greenspan, 81, left the Fed in January 2006 after nearly two decades as leader of the world’s most powerful central bank. When he left, the U.S. economy was growing at or near trend levels, or what economists call ’sustainable growth’ levels.

However, the increase in subprime mortgage and related asset defaults, the housing sector’s correction and persistently high energy prices, are expected to cool the current U.S. economic expansion, which began in 2001. Many economists anticipate Q4 2007 GDP growth to slow to 2.5-2.9%. Some are predicting an economic recession at the begin of 2008. The U.S. economy grew at a 4.9% rate in Q3 2007.

Refutes criticism

In the NPR interview, Greenspan rejected criticism that the U.S. Federal Reserve during his tenure fueled the housing bubble by lowering short-term interest rates for too long a period.

Greenspan stated the argument “doesn’t coincide with the facts,” adding that there are, or were, two dozen countries with housing bubbles, and that, equally significant, global forces dislodged the control central banks had on long-term interest rates.

Greenspan added that when the Fed began to raise short-term rates in 2004, the central banks expected the usual economic consequence to occur: that long-term interest rates, particularly with regard to mortgages, would rise. They did not.

“We concluded that the monetary forces that were arising in the world globally had become so overwhelming, relative to the resources of central banks, that we’d effectively lost control of long-term interest rates and the forces directing higher prices and homes,” Greenspan told NPR.

Global savings

Economists generally concur that the build-up of global savings and hard currency reserves, particularly the increase in U.S. dollar reserves in China and Japan (and to a lesser extent in Russia / Europe), and their re-investment in U.S. Treasuries, has kept long-term U.S. interest rates, including 30-year fixed rate mortgages, 1-1.5% percentage points, or more, below where they typically would be.

Greenspan told NPR that the Fed could have cut off short-term credit to ease the house bubble, “but that would have broken the back of the economy.” The current housing bubble, he said, is a part of bubble phenomenon that typically occurs during economic booms and that the process “eventually has to defuse itself.”

Economic Analysis: Former Fed Chairman Greenspan’s analysis demonstrates why assertions that the Fed is solely responsible for the housing bubble and consequent correction are simplistic at best and specious at worst. The willingness of nations to invest and hold U.S. Treasuries is a major factor in the early globalization age’s ‘mortgage interest rate discount,’ and as such, is a major factor in the U.S. housing sector’s bubble.

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Filed under: Market matters, Goldman Sachs Group (GS), Economic data, Personal finance, Housing, Federal Reserve

Stories abound about how the Goldman Sachs Group (NYSE: GS) avoided the mortgage meltdown and generated $4 billion in profits on the bet that risky home loans would fall in value. That move was made by a small trading group, according to the Wall Street Journal.[subscription required] in the firm’s mortgage department and it helped to offset the $1.5 billion to $2 billion in mortgage-related loses elsewhere in the firm. While most other financial institutions are losing big, Goldman anticipates to report a net annual income of more than $11 billion, according to today’s Journal. They made lots of money selling those risky mortgage securities to unsuspecting clients.

That’s great that Goldman called this mortgage meltdown early and I’m sure investors in Goldman’s stock are very happy. But what about all the investors who took the advice of Goldman brokers to purchase these risky mortgage-related securities? Why weren’t they warned as well when the decision was made to dump the securities? Why should Goldman gain while its clients suffer?

Clearly someone needs to open an investigation into what kind of advice Goldman was giving its clients and how that advice differed from the actual trades Goldman was making. While buying Goldman’s stock may be a good idea, it doesn’t sound like being a Goldman client works well when the financial industry is facing a meltdown.

Lita Epstein has written more than 20 books including “Trading for Dummies” and “Reading Financial Reports for Dummies.”

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