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Archive for April, 2008

529 Plan Series: Pennsylvania’s “PA 529 Investment Plan”

April 30th, 2008 at 06:49 am

Today, I will review Pennsylvania's 529 plan - the PA "529 Investment Plan".



This 529 program is managed by Upromise Investments and the investments are managed by Vanguard [I have reviewed Vanguard http://iwasbroke.savingadvice.com/2008/04/16/the-mutual-fund...].

What I Like About The PA 529 Investment Plan
* Investment Management By Vanguard. I really like Vanguard's performance and low expense ratios.
* Upromise Linked. You can link your Upromise qualifying purchases to this 529 which can help boost your savings.
* Tax Deduction For PA Taxpayers. From the PA 529 Investment Plan website: "For each beneficiary, PA residents may deduct up to $12,000 in contributions annually from their Pennsylvania state taxable income ($24,000 if married filing jointly, provided that each spouse has taxable income of $12,000)." If you have two children and have established two separate 529 accounts, then you can take an even larger deduction!
* Investment Options. There are three age-based options and ten individual investment portfolio options available. I like choices!

What I Would Like To See Improved
* This is a general improvement that I would like to see with all 529 plans, not just the PA 529 Investment Plan. I would like to see an option that allows one to withdraw money from the 529 plan penalty-free if one has paid for a child's college and there is no need for the college savings plan any longer. Right now, there is a 10% federal penalty tax if one pulls the money out of any 529 plan for anything other than qualified educational expenses. I would like to at least have the option to roll any extra money over to a Roth IRA - free of penalties.

Read reviews of other state 529 college savings plans http://iwasbroke.savingadvice.com/series-529-plans/.

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Money Won’t Solve All Of Life’s Problems

April 29th, 2008 at 11:14 am

Money is incredibly important. It has the ability to impact many areas of my life. Yet, I clearly understand that money will not solve all of life's problems. Friends will still get sick. Loved ones will still pass on. Friendships can get complicated. Misunderstandings will happen.

Sound money management will not solve all of life's problems, BUT it can really reduce them.

I have found that the lack of money has caused simple problems to become HUGE interruptions to my life. When I was broke, a car repair had the ability to completely derail the family finances. When I was mismanaging all of our money, a sickness would crush the family economy and introduce a pile of stress into my life.

On the other hand, I have found that having money has enabled me to help others in times of need. I have found that having money has reduced a transmission failure into a mere nuisance. I have found that it has removed a lot of fierce discussions between Jenn and me. We now just fiercely debate really cool topics like house projects!

Sound money management has not solved all of my life's problems, but it has really made me aware of just how blessed I am! I am NEVER going back to my old way of mismanaging money and running with an average bank balance of $4.13!

NEVER.

http://iwasbroke.savingadvice.com

My book, I Was Broke. Now I'm Not, which tells my story and teaches the tools I used to win financially was released in January. It is available via http://www.amazon.com/dp/1605301906?tag=wwwjosephsang-20&cam..., http://www.amazon.com/s/ref=nb_ss_bgi/103-0843693-8655025?ur..., and http://www.josephsangl.com/IWBNIN%20Book.htm. You can read the Introduction http://www.josephsangl.com/IWBNIN%20Book%20-%20Introduction%....

529 Plan Series: South Carolina Future Scholar

April 28th, 2008 at 11:49 am

In this series, I will be reviewing 529 college saving plans offered by different states.

It might be helpful to first review what a 529 plan is. A 529 plan is a tax-advantaged college savings plan that is named for the section of tax code that outlines how they may operate - Section 529.

Today's 529 Plan is South Carolina's plan - http://www.futurescholar.com/UserRelationship/UserRelationsh....



The South Carolina Future Scholar 529 College Savings Plan is managed by Columbia Management (a division of Bank of America).

What I Like About The Future Scholar Plan
* Columbia Management. I like some of the funds that are offered by Columbia Management.
* Tax Deduction. Although there are some restrictions, most South Carolina residents can deduct their Future Scholar contributions from their SC state tax return!
* Self-Directed Option. Through the "Direct Program" SC residents can manage their own investments, and if one chooses to do so the "load" (sales charge) is $0! If one chooses to invest in the Future Scholar plan with the help of an advisor, there will be a sales charge of around 5%. The sales charge should not deter someone from investing for college however! If you are really intimidated by investing and mutual funds, it would be worth the sales charge to ensure you are getting good advice!
* Learning Center. The Future Scholar plan offers a great site to help one understand and plan for education costs. It is located http://www.futurescholar.com/Learning+Center/LearningCenterA....
* Investment Options. The Future Scholar plan offers three investment options.
1. Automatic Allocation Choice - This option allows one to "set it and forget it" in regard to adjusting the portfolio. It is really aggressive when the beneficiary is very young and moves steadily to become more stable as the child approaches college time.
2. Asset Allocation Choice - This option allows one to make a more specific decision on how one's investments are allocated. This requires a more hands-on approach if one wants to adjust the portfolio.
3. Single Fund Portfolio - This option allows one to invest in specific mutual funds offered via Columbia Funds.

What I Would Like To See Improved
* Expense Ratios. I would love to see the expense ratio of the funds reduced. The average expense ratio is around 1.40% to 1.50%. This is an every year fee and erodes the growth of the investment.

My daughter's college savings is in the SC 529 Future Scholar plan. The tax benefit was the final straw for me to move the investment from another state's plan to the SC plan.

http://iwasbroke.savingadvice.com

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The Mutual Fund Series: American Funds

April 27th, 2008 at 02:26 pm

The is the latest installment in the weekly series - The Mutual Fund Series.

During each part of this weekly series, I will be looking at a specific mutual fund company.

Today's company is American Funds.



American Funds has been around since 1931 and is one of the largest mutual fund companies in the world with over $900 Billion in investments and over 40,000,000 shareholder accounts. American Funds is owned by a larger company - The Capital Group Companies.

What I Like About American Funds
* Great performance long-term. The track record of American Funds has been terrific!
* Long-Term Approach. They use a team-approach to manage their mutual funds. They manage money extremely well in down markets. They have absorbed hits like the 1987 crash and the bear market of the early 70s and have performed well.
* Experience. Their advisors have an average of 22 years of experience with American Funds. That is unheard of in today's world!
* Low Initial Investment Requirement. Most American Fund mutual fund investments can be started with just $250 and a commitment to invest at least $25/month. That is great! It allows anyone to start investing!
* Low Expense Ratios. They have low expense ratios when compared to most mutual funds. They are higher than Vanguard, but are about half of comparable mutual funds.
* Tools. They have a nice retirement planning website http://americanfundsretirement.retire.americanfunds.com/home.... I really like their "quick analysis" retirement planning calculator http://americanfundsretirement.retire.americanfunds.com/tool.... It told me good news - that they believe I can retire someday! What does it tell you? You can also check out my "retirement nest-egg required" calculator (located http://www.josephsangl.com/wp-content/uploads/Tools/Calculat...).

What I Would Like To See Improved At American Funds
* Sales Charges. To purchase American Funds directly, one has to be savvy with on-line trading websites or else one will have to work through an advisor. This means that there will be a "load" when one purchases American Fund mutual funds through a broker. If one is just starting out, it could mean that one will have to pay up to 5.75% for all new money invested. This load drops as more money is held in one's account, but the lower charges start after one achieves six figures in their account.

American Fund Mutual Funds I Own
I currently own six American Fund mutual funds.

* AMCAP Fund A [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=A...]
* Capital World Growth and Income Fund [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=C...]
* Fundamental Investors A [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=A...]
* New World Fund [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=N...]
* The Growth Fund of America [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=A...]
* The Investment Company of America [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=A...]

American Fund Mutual Funds That I Am Considering Purchasing
* The New Economy Fund [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=A...] I like the growth potential of the markets this fund will be investing in.
* EuroPacific Growth Fund [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=A...] Same as The New Economy Fund - I really like the potential of the markets this fund will be investing in.

What American Fund mutual funds do you own? Do you have any American Fund mutual funds that you really like? Any you really dislike?

http://iwasbrokesavingadvice.com

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This Is About Right!

April 24th, 2008 at 10:34 am

Someone sent this picture to me, and I thought it was very appropriate!



I am ready for gas prices to go DOWN for once!

http://iwasbroke.savingadvice.com

Life Happens: The Transmission Edition

April 23rd, 2008 at 06:51 am

You may have caught in yesterday's post that I absorbed a major expense like the transmission going on my GMC truck. Well, that happened this month.

So here is the story.

I bought this truck from my brother nearly seven years ago. He had purchased it new. Early on, I noticed that the automatic transmission would shift hard whenever I drove the truck over long distances. Once it had cooled, it would go back to shiftly nice and smooth.

So way back in 2002, I took it in to my trusted car repair guy, and he said that I should just drive it until it broke.

So I did. It took nearly seven years for it to fail. I won that gamble!

I took it in to my new trusted car repair guy, and he diagnosed it as "Dead On Arrival". Upon opening the transmission, he could not believe that I was able to even put the car in reverse.

The cost? $1,953.35. That included replacing a broken door handle, an oil change, and some other small stuff.

Man, am I glad I have a savings account for just this sort of stuff! In the old days, I would have been pulling out the credit card.

Maybe I should ask you the question. Do you have money saved up for a car repair?

I am not a prophet, but I can guarantee you that your car WILL break down. It may be today. It may be ten years from now. But something is going to break. When it does, will it crush your finances or will it just be an annoyance that you have saved for?

http://iwasbroke.savingadvice.com

My book about how Jenn and I broke free of being broke with $4.13 in the bank was released January 20. It is titled, I Was Broke. Now I'm Not, and it is available via http://www.amazon.com/dp/1605301906?tag=wwwjosephsang-20&cam..., http://www.amazon.com/s/ref=nb_ss_bgi/103-0843693-8655025?ur..., and http://www.josephsangl.com/IWBNIN%20Book.htm. You can read the Introduction http://www.josephsangl.com/IWBNIN%20Book%20-%20Introduction%....

SAVE for the UNKNOWN emergency

April 22nd, 2008 at 07:52 am

There was a day that I was completely broke and had an average bank balance of $4.13. It was awful living with no margin. Anytime an issue cropped up, we had a problem AND a money problem.

One of the best things that Jenn and I did was save money into an emergency fund. What can the money be spent on? I am not sure … I have NEVER spent the money! Seriously, in over five years of having an emergency fund, we have never spent the money.

Did I have an emergency? Well, others might have called them emergencies, but the Sangl household did not. Let me list just a few of the events that have occurred.

* Jenn had major surgery that blew up the $2,300 insurance deductible.
* Ten months later, Jenn had to have the surgery AGAIN. AND it was in another deductible year.
* Power steering went out on the car.
* Transmission went out on the truck.
* The dryer died.
* Huge leaky roof problem.
* I had hernia surgery that blew up the $3,000 insurance deductible.

The Sangl household did not use the emergency fund for ANY of the above expenses. Why? Because they are not really emergencies!!!

Think about it this way.

* Is it a surprise that humans get sick and need surgery? NOPE.
* Is it a surprise that cars break down? NOPE.
* Is it a surprise that an appliance breaks? NOPE.
* Is it a surprise that roofs will leak? NOPE.

When I really think about it, I am not sure we will ever use the emergency fund but it is incredible knowing that it is there!

I wonder if HAVING an emergency fund in place scares off emergencies?

http://iwasbroke.savingadvice.com

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Choosing To Ignore It …

April 21st, 2008 at 07:41 am

Observed today on a sticker - “I know the difference between right and wrong, but I choose to ignore it.

When it comes to finances, I have learned a lot about what is right and wrong. I hope I do not EVER choose to ignore it!

I have learned that:

* Saving money is right and that spending all of my money is wrong
* Having an emergency fund for emergencies is right and using a credit card for emergencies is wrong
* Giving to worthy causes and individuals is right and not giving at all is dead wrong
* Paying cash for purchases is right and paying on payments is wrong
* Including your spouse in the budgeting process is right and not including them is wrong
* Calling our money “ours” is right and our money “mine” and “yours” is wrong
* Working together as husband and wife toward common financial goals is right and working separately is wrong
* Having medical and life insurance is right and not having this insurance is wrong
* Dealing with one's financial situation is right and just throwing up one's hands and declaring bankruptcy is wrong
* Developing a plan and following it is right and handing one's financial mess over to rip-off credit counseling without changing one's spending behavior is wrong
* Facing one's finances is right and choosing to ignore it is plain wrong

I would love to hear some other truths you have learned as you have dealt with your finances!

http://iwasbroke.savingadvice.com

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FIRED UP!

April 17th, 2008 at 01:16 pm

I had a blast teaching the Financial Learning Experience at Oak Leaf Church last night in Cartersville, GA!



http://www.oakleafchurch.com/blog/… (You try to spell it!), pastor of Oak Leaf, was there. Lots of people were there.

I went without a microphone which allowed me to completely yell as loud as I wanted to. It was awesome!

I get so FIRED UP about teaching these classes because the stuff I teach is EXACTLY what Jenn and I used to win financially! Every single tool that is available via the "http://www.josephsangl.com/?page_id=151" page are tools that we use TO THIS DAY to manage our money. Guess what? It works!!!! And the great thing about teaching it to others is that it is so simple, that ANYONE can do this! If I could figure it out, I KNOW you can do this!

So, Cartersville crew, THANK YOU for attending the FLE last night. I can't wait to hear the stories of saved money, debt freedom, and having a written plan that works. But more than anything, I can't wait to hear your stories of being able to fire yourself from your J.O.B. and being able to go do EXACTLY what you have been put on this earth to do - regardless of the income potential!

If you have any questions, remember you can click on the "Email Joe HERE" link on the sidebar. Thanks!

COMING UP THIS WEEKEND - I will be at http://www.createfusion.com/ in Suwanee, GA THIS SUNDAY, April 20th, speaking during the morning service and then teaching the http://www.josephsangl.com/FLE%20Details.htm at 3:00PM. Childcare is provided. I would love to see you there!


PODCAST: Have you checked out the weekly podcast lately? To subscribe to the podcast via iTunes, click http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewPodcas.... If you do not have iTunes, you can download a mp3 by clicking http://feeds.feedburner.com/JSFinancialFreedom.

The Mutual Fund Series: Vanguard

April 16th, 2008 at 07:41 am

During each part of this weekly series, I will be looking at a specific mutual fund company.

Today's company is The Vanguard Group.

Vanguard is one of the largest mutual fund companies in the world. Based in Valley Forge, Pennsylvania, they currently manage $1.3 TRILLION dollars for their clients and offer 150 domestic funds and additional funds in international markets.

What I Like About Vanguard

* Target Retirement Funds. Vanguard was one of the first companies to offer target retirement funds. It is a fantastic idea to address the complete confusion that some people feel when making retirement mutual fund choices. All one has to do is select their target retirement date and Vanguard will automatically shift the mutual fund to become less risky/volatile as one approaches retirement. It really helps address the need to rebalance one's portfolio.
* Very low annual expense ratios. Vanguard is client-owned. This means that the company is owned by those who invest with the company. This results in Vanguard having the lowest management costs in the mutual fund industry. The average expense ratio for their mutual funds is 0.20% (the industry averages around 1.50%). This means that I get to keep more of the annual growth of my money.
* Lots of mutual fund options. With over 150 domestic funds and additional funds in the international markets, I have a lot of choice. I like choices.
* Full-service investment company. Vanguard offers mutual funds, IRAs, Roth IRAs, 401(k) rollovers, 529s, ESAs, and brokerage services.

What I Would Like To See Improved At Vanguard
* Lower "initial investment requirement". Most of Vanguard's funds require an initial investment of at least $3,000. This rules out a lot of beginning investors. Of course, this is not a problem when someone is investing within the bounds of their company 401(k), 403(b), or other retirement plan where minimum investment requirements are usually removed.

Vanguard Mutual Funds I Own
* I currently own one Vanguard mutual fund - Vanguard Institutional Index Fund [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=V...]. I own this mutual fund as part of a 401(k). You can see other mutual funds that I currently own by clicking http://www.josephsangl.com/?p=384.
* This mutual fund has a minimum investment requirement of $5,000,000. The reason that I am able to own shares of this mutual fund is because it is offered as part of the company 401(k) plan.
* It is a large-cap blend fund.

Vanguard Mutual Funds That I Am Considering Purchasing
* https://personal.vanguard.com/us/FundsSnapshot?FundId=0696&F... [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=V...] This fund will automatically rebalance for me as I approach retirement. I chose the 2040 fund because that is a target retirement year for me. Vanguard has Target Retirement funds for every five year period from year 2005 to 2050.
* https://personal.vanguard.com/us/funds/snapshot?FundId=0040&... [Ticker: http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=V...] This fund tracks the performance of the S&P 500. It has very low expense ratios. It does need $3,000 to begin an individual investment.

What Vanguard funds do you own? Do you have any Vanguard funds that you really like? Dislike?

http://iwasbroke.savingadvice.com

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Who I am learning about finances from right now

April 15th, 2008 at 06:53 am

It is so important to continue learning about personal finances. I thought I would share who I am learning about finances from right now.

* Clark Howard - his daily radio show
* Dave Ramsey - his daily radio show (I've read all of his books)
* CNN Money - I love the web site
* Those I counsel - I learn so much from the people I meet with!
* Mary Hunt - Her website (she has good books too!)
* Those who write in questions/comments through the website - I love helping others work through their financial decisions!

That is how I am learning right now.

Who should I be adding to the list?

http://iwasbroke.savingadvice.com

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Save Money - Student Loans

April 14th, 2008 at 05:56 am

Student loans. They are so nice to have around. NOT!

I remember inviting this gal named Sallie Mae over to my house and she did not leave for 8.5 years!

After 8.5 years, I decided that it was time to break up with Sallie Mae. She was not really pleased about it.

Anyway, about four years into the pay-off, I received a letter in the mail that said …

"Congratulations. Because you have made 48 consecutive on-time payments, your interest rate has been reduced by 2%!"

That was awesome!

If you have student loans, did you know that YOU could receive the same interest rate deduction?

In fact, I checked out several of the larger Student Loan companies to find out their current policies. Here is what I found.

* Sallie Mae - If you make your first 33 monthly payments on time, you will receive a check for 3.3% of the amount borrowed! If you opt to have the 3.3% credit applied to your loan amount (I would), it will save about 5.35% of the amount borrowed due to interest savings! Click http://www.salliemae.com/after_graduation/manage_your_loans/... for Sallie Mae's Cash Back details.
* SC Student Loan - Through their Quarterback Program, borrowers can automatically receive a 0.25% interest rate reduction for allowing monthly drafts for your payments. Through their Best Interest Program, after making 36 consecutive on time payments, borrowers will receive a 2% interest rate reduction. If you make all of your payments on time, then the last portion of your loan will be forgiven - up to $750! Read all about SC SLC's benefits http://www.scstudentloan.org/wp270.aspx.
* Wachovia Student Loan - They will provide a 1% rebate when loan repayment begins. Another 1% rebate after 12 months of consecutive on time payments. Another 1.5% rebate after making 24 on time payments! You can read about that http://www.wachovia.com/personal/page/0,,325_496_8292_8315,0....

The common thread through all of this is ON TIME PAYMENTS!!!

Have fun saving money! By the way, I love the automatic draft feature. I use automated drafts for all of my investments. It really helps me stay on the wagon (it is one of my wagon staplers!).

http://iwasbroke.savingadvice.com

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