South Africa interest rate rise backfires

South African rand falls after central bank moves to fight currency depreciation

The South African Reserve Bank increased its key interest rate to 5.5pc from 5pc on Wednesday.

By Denise Roland
29 Jan 2014

South Africa’s rand has tumbled as much as 3pc after the country became the latest in a line of emerging economies to raise interest rates to ease the pressure on their currencies from the Federal Reserve’s withdrawal of stimulus.

The South African Reserve Bank increased its key interest rate to 5.5pc from 5pc on Wednesday. This was its first rate rise in nearly six years.

Initially, the rand rose in response to the rate rise before falling sharply to R11.38 to the US dollar, its weakest in more than five years.

Gill Marcus, governor of the Bank, warned that the South African economy along with its emerging market peers, would face “new challenges” as the US Federal Reserve winds down its massive $85bn-per-month stimulus.

“While the Fed action signals a recovery in the US, and the UK economic outlook is also improving, it does not mean that the global financial crisis is over. Rather, we are now entering a phase of the crisis that is creating new challenges for emerging market economies,” she said in astatement.

Late on Tuesday, Turkey’s central bank shocked markets with a sharp interest rate rise to 12pc, from 7.75pc. A day earlier, the Reserve Bank of India unexpectedly increased its interest rate by 25 basis points to 8pc.

The Brazilian central bank carried out its sixth consecutive rate rise earlier this month, bringing its interest rate to 10pc, the highest in nearly two years.

Alexandre Tombini, Brazil’s central bank governor, warned on Monday that others must follow suit to combat a “vacuum cleaner” of rising interest rates in the developed world sucking capital out of emerging markets.

However analysts warn that central bank action cannot compensate for inherent weaknesses in emerging market economies, ranging from political uncertainty to large current account deficits.

Kathleen Brooks, research director at currency trader Forex.com, said it is “unlikely that these moves will have a long-term effect on the market”.

“Central bank action has not dealt with the long-term issues and they remain as risky as they were before,” she said.

Read more here http://www.telegraph.co.uk/finance/economics/10604766/South-Africa-interest-rate-rise-backfires.html

Central banks drive Africa’s recovery

Paul Wallace

Africa’s underdeveloped economies and financial sectors have proved a barrier for central banks implementing monetary policy and prudential regulation. But recent years have seen significant progress, thanks in no small part to central banks’ growing independence from governments.

Read more at http://www.thebanker.com/World/Africa/South-Africa/Central-banks-drive-Africa-s-recovery

S.Africa defends investment law overhaul, Brussels concerned

By Ed Cropley

JOHANNESBURG (Reuters) – A new South African investment law should come into force next year to replace a raft of individual, 20-year-old treaties but foreign investors will be adequately protected and have nothing to fear, trade minister Rob Davies said on Monday.

Pretoria let bilateral treaties agreed with European nations shortly before the end of apartheid lapse last month, to the concern of investors and diplomats who say the replacement law does not offer the same protections.

The draft Promotion and Protection of Investment Bill, published last week, rolls over guarantees against state seizure of assets but analysts say it narrows the definition of expropriation and attaches caveats to compensation.

It also removes the option of international arbitration in the event of a dispute with a government decision.

“If you wanted to sue, you would have to sue them in the South African domestic courts or take them to domestic arbitration,” said Peter Leon of Johannesburg-based law firm Webber Wentzel.

“International arbitration is a very important issue for investors. It gives one access to an independent forum which is not connected with the state.”

European nations affected so far include Germany, Spain, Belgium and Switzerland.

However, Davies insisted the bill was fair in balancing the interests of the public with those of investors in Africa’s biggest economy.

“The bill confirms that South Africa remains open to foreign investment. It does not impose any new obligations on investors,” he told a media briefing.

He also said the international arbitration clauses inserted in the turbulent transition from white-minority rule to democracy in 1994 were no longer necessary given the quality and probity of South Africa’s legal system.

“International arbitration was established to address situations where national court systems are weak, ineffective or biased against foreigners,” he said. “This is not the case in South Africa.”

‘GREAT CONCERN’ IN BRUSSELS

However, the fact remains that South Africa desperately needs foreign investment to power an economy plagued by persistent 25 percent unemployment and creaking infrastructure, and so can ill-afford to ward off potential partners.

In a report released ahead of next year’s 20th anniversary of democracy, Goldman Sachs said if South Africa wanted to lift its growth rate to 5 percent, it needed to attract $5-$10 billion a year in foreign direct investment from $1.9 billion over the last two decades.

“This will require a much more determined and coherent focus on improving the investment climate,” Goldman country head Colin Coleman said. “This is not a time for finger pointing.”

Although Pretoria has been pushing hard to attract capital from other big emerging markets such as China and Brazil, Europe still accounts for three-quarters of all foreign direct investment stock.

EU ambassador Roeland van de Geer, who has been a vocal critic of Pretoria’s ‘Look East’ policy if it comes at the expense of established relations with Europe, came out strongly against the ending of the investment treaties.

“It must be noted that their unilateral cancellation remains of great concern,” he said in a statement.

Courtesy Reuters

AFRICA INVESTMENT-ACTION! – South Africa draws global film makers

By Stella Mapenzauswa

Oct 16 (Reuters) – South Africa is luring a rising number of Hollywood producers and directors keen to shoot in the country and may have its first home-grown box-office success in three decades this year with a film based on icon Nelson Mandela.

Aware of the industry’s potential contribution to economic growth, the government offers rebates which, coupled with a weaker rand, make it cheaper for foreigners to shoot here than more established peer locations like Australia.

The last globally successful South African film was “The Gods Must Be Crazy”, a comedy about a bushman from the Kalahari with no knowledge of the outside world, which wowed audiences in 1980.

Thanks to Mandela, the country may be about to emerge as more than just a hot location for others to make their films but as a producer in its own right.

Four years after the release of US film director Clint Eastwood’s acclaimed “Invictus” in 2009, which chronicled how Mandela inspired the national rugby team to World Cup victory, the biographical “Mandela: Long Walk To Freedom” will hit movie screens in November.

The film chronicles Mandela’s decades-long fight against oppressive white minority rule, for which he was jailed for 27 years, and was shot at the Cape Town Film Studios, the first custom-built Hollywood-style film complex of its kind in Africa.

Set in South Africa’s tourism capital, the studio offers easy access to a wide array of locations including sandy beaches, modern cities, forest and plains, vineyards, savannah, waterfalls, safari and desert.

Since opening in 2010, it has been the location for high profile movies and TV series which have made hefty profits, including 20th Century Fox’s “Chronicle” which is set in Seattle in the U.S. but was shot primarily in Cape Town.

The film cost slightly more than $10 million to make but grossed nearly $130 million in cinema ticket sales.

Figures from South Africa’s trade and industry department show that in its first 2-1/2 years of existence, productions that used the studio employed 29,000 thousand people and directly invested 1.4 billion rand ($141 million).

This translated to an economic impact factor of 3, meaning for every rand spent on production, another 3 rand was spent in the economy.

“This industry is definitely a key driver to growth because the international films coming into the country working with our local crews and local production teams are injecting enormous amounts of money into the country,” Cape Town Film Studios CEO Nico Dekker told Reuters.

JOINT PRODUCTIONS

Other products of the studio include the $208 million grossing U.S. thriller “Safe House” in 2012, which starred Hollywood A-listers Denzel Washington and Ryan Reynolds, and new TV drama series “Black Sails” which debuts next year.

This steady output has helped spur South Africa’s film industry by 84 percent over the last six years, placing it 50 out of the 99 major sectors of Africa’s biggest economy.

South Africa also churns out a steady stream of local films similar to the “Nollywood” productions out of Nigeria.

But while a handful of these have won global accolades, like the 2004 HIV/AIDS drama “Yesterday” and “Tsotsi”, which won the 2005 Academy Award for best foreign language film, the majority have only enjoyed success with local niche audiences.

In its 2012/13 annual report, the National Film And Video Foundation (NFVF) says the industry grew 14 percent last year alone, contributing 3.5 billion rand to gross domestic product and creating more than 25,000 full time jobs.

At the launch of a new industrial policy framework earlier this year, Trade and Industry Minister Rob Davies singled out the film industry as a rising source of growth, particularly as the mainstream mining and manufacturing sectors struggle.

With that in mind, South Africa has set up eight co-production treaties with other countries, the latest being with Ireland and New Zealand last year.

“Joint productions between South Africa and other countries continue to be important vectors in boosting the status of South Africa as a filming destination and contributor of production skills and facilities,” NFVF chairperson Mmabatho Ramagoshi said in this year’s annual report.

Under the arrangements, 10 feature films and two television series were shot in South Africa over the past year at a budget of nearly 800 million rand, with foreign partners contributing more than half.

Outside the government backed deals, the trade and industry department is also luring more private sector investors with a 20 percent rebate on production costs for foreign film makers working with a budget of 12 million rand and more.

That, coupled with an 18 percent depreciation in the rand this year, has given South Africa the edge as a bargain priced location for film makers keen to keep costs contained.

“Other countries are offering even more (facilities) than we have, if you look at the States, South America, Europe, Australia. They all have big existing industries, but what attracts people to us is value for money,” said Dekker.

“If they spend 10 rand, the value of the film on the screen is often double what they spend … that’s why they come all the way to us.” ($1 = 9.9583 South African rand) (Editing by David Dolan and Ron Askew)

The Most Successful Dividend Investors of all time

Dividend investing is as sexy as watching paint dry on the wall. Defining an entry criteria that selects quality dividend stocks with rising dividends over time and then patiently reinvesting these dividends while sitting on your hands is not exciting. While active traders have a plethora of hedge fund managers on the covers of Forbes magazine there are not many well-publicized successful dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.

I did some research and uncovered several successful dividend investors, whose stories provide reassurance that the traits of successful dividend investing I outlined in a previous post are indeed accurate.

The first investor is Anne Scheiber, who turned a $5,000 investment in 1944 into $22 million by the time of her death at the age of 101 in 1995. Anne Scheiber worked as an IRS auditor for 23 years, never earning more than $3150/year. The one important lesson she learned auditing tax returns was that the surest way to become rich in America is by accumulating stocks. She accumulated stocks in brand name companies she understood and then reinvested dividends for decades. She never sold, in order to avoid paying taxes and commissions. She also never sold even during the 1972-1974 bear market as well as the 1987 market crash because she had high conviction in her stocks picks. She also held a diversified portfolio of almost 100 individual securities in brand names such as Coca-Cola (KO), PepsiCo (PEP), Bristol-Myers (BMY), Schering Plough (acquired by Pfizer in 2009). She read annual reports with the same inquisitive mind she audited tax returns during her tenure at the IRS and also attended annual shareholders meetings. Anne Scheiber did her own research on stocks, and was focusing her attention on strong franchises which have the opportunity to increase earnings and pay higher dividends over time.

In her later years she reinvested her dividends into tax free municipal bonds, which is why her portfolio had a 30% allocation to fixed income at the time of her death. At the time of her death, her portfolio was throwing off $750,000 in dividend and interest income annually. She donated her whole fortune to Yeshiva University, even though she never attended it herself.

The second investor is Grace Groner, who turned a small $180 investment in 1935 into $7 million by the time of her death in 2010. Ms Groner, who worked as a secretary at Abbott Laboratories for 43 years invested $180 in 3 shares of Abbott Laboratories (ABT) in 1935. She then simply reinvested the dividends for the next 75 years. She never sold, but just held on to her shares.

She was frugal, having grown up in the depression era, and was the classical millionaire next door type of person who was not interested in keeping up with the Joneses. Grace Groner left her entire fortune to her Alma Mater. Her $7 million donation is generating approximately $250,000 in annual dividend income.

The reason why dividend investors are not highly publicized is because dividend investing is not sexy enough to be featured in the financial mainstream media. In addition to that, it is not profitable for Wall Street to sell you into the idea that ordinary investors can invest on their own. Compare this to mutual funds, annuities and other products which generate billions in commissions for Wall Street, despite the fact that they might not be in the best interest of small investors.

The third dividend investor is Warren Buffett, the Oracle of Omaha himself. In a previous article I have outlined the reasoning behind my belief that Buffett is a closet dividend investor. He explicitly noted in his 2009 letter that “the best businesses by far for owners continue to be those that have high returns on capital and that require little incremental investment to grow”. His investment in See’s Candy is the best example of that.

Some of Buffett’s best companies/stock that he has owned such as Geico, Coca Cola , See’s Candy are exactly the types of investments mentioned above. He has mentioned that at Berkshire he tries to stick with businesses whose profit picture for decades to come seems reasonably predictable. Per Buffett the best businesses by far for owners continue to be those that have high returns on capital and that require little incremental investment to grow. In addition, his 2011 letter discussed his dividend income from all of Berkshire Hathaway investments, including his prediction that Coca Cola dividends will keep on increasing, based on the pattern of historical dividend increases.

In this article I outlined three dividend investors, who managed to turn small investments into cash machines that generated large amounts of dividends. They were able to accomplish this through identifying quality dividend growth companies at attractive valuations, patiently reinvesting distributions and in two out of three cases maintaining a diversified portfolio of stocks. These are the lessons that all investors could profit from.

Full Disclosure: Long KO, PEP, ABT

Source: http://www.dividendgrowthinvestor.com/2012/06/most-successful-dividend-investors-of.html

On the Way to a Self-Service Future, Video Banking

By Philip Ryan
Before we arrive at completely self-service banking, we need a little mediation involving human beings. One form that mediation is taking is video teller assistance in the ATM environment.

Bank of America began a test of enhanced ATMs with video banking capability — called Teller Assist — in April 2013 in Boston and Atlanta. The learnings from those 12 banking locations have been analyzed, and another set of locations is set to open in Charlotte, N.C., where the bank is headquartered.

The ATMs, produced by Diebold and NCR, also have the capacity to cash checks, perform cardless transactions, and deliver cash in denominations other than the standard $20s. Going forward, the machines will be able to split deposits between multiple accounts, accept credit card payments, and accept deposits with cash back. The machine also includes a document scanner for verifying a customer using his driver’s license or other photo ID.

Video banking is the marquee feature of the machines, however, and the focus of the bank’s testing. While transaction volumes have remained stable since the video-enabled machines were installed, the ATMs are seeing more activity beyond traditional banking hours. “We are seeing customers do more after hours,” Chris Mande,  SVP and eCommerce channel executive told Bank Innovation. The bank is also seeing more activity in the early morning, with customers stopping in on the way to work.

“We all bank in different ways,” Mande said. “It’s not a one-size fits all activity.”

Video banking was made available from 7 a.m. to 10 p.m. on weekdays, and 8 a.m. to 5 a.m. on weekends — far beyond traditional bank hours, in other words.

Though the bank did not present the machines this way, the enhanced ATMs with video capability are a half-step toward a completely unmanned banking center. It is more cost-effective to have staff available on demand at a centralized location rather than standing around a half-empty branch. The new machines appeal to a broader range of customers, including the so-called unbanked or underbanked who have need of check-cashing and cardless capabilities.

“The customer has dictated they want choice,” Mande said, and the enhanced ATMs, especially with the future features, allow customers to carry on their banking activities nearly as easily as with a full-fledged bank.

Branches will still be needed for consumers seeking loans and for business customers, but otherwise, the enhanced ATM serves that role far more efficiently.

“The advantages are operational costs and speed, it’s faster for customers,” Mande said. Video tellers step in as needed, but generally there are few differences between the way video tellers function and the way live tellers would function. Neither, for example, plays a role in evaluating the risk of a transaction. “There are systems making decisions on your behalf,” Mande said.

There is also potential for online applications. uGenius, a provider of video banking capabilities that was bought by NCR at the start of 2013, was preparing online video banking functionality in late 2012.

Mark Schwanhausser, director of omnichannel financial services at Javelin Research, believes it goes beyond the balance sheet. “Clearly there are potential cost-savings to reap from installing these souped-up ATMs, with consumers choosing to conduct more transactions through a cost-effective ATM rather than at a branch,” he told Bank Innovation. “A critic might spin this as another move by banks to reduce face-to-face service, but I see it as a key upgrade that can lead to better services. Having the video teller’s handholding at extended hours is more convenient. Being able to cash checks down to the penny, and perhaps shorten holds on funds is a plus. But I also see great potential for multilingual services that cannot be provided consistently in branches.”

He elaborated on the importance of reaching non-English speaking customers who might otherwise avoid traditional banking services. “Centralizing multilingual tellers in a customer service center would enable larger FIs to route ATM transactions to tellers who can speak Spanish (priority No. 1), Mandarin, Tagalog, Japanese, and so forth. When you consider the importance of language in building trusting relationships, this could be a huge advantage for FIs seeking to serve ethnic communities more effectively.”

Video banking is an attempt to humanize the technology that is rapidly assuming a larger role in our lives. But it may not be necessary. A Cisco study from earlier this year found that while 80% of bankers think customers want video banking capabilities, only 34% of customers actually do.

Consider it an insurance policy as banks move steadily toward a self-service banking experience entirely unmediated by human interaction from the bank side. It works out financially for the banks, and it seems to be what most customers — particularly the young completely unused to bank branches — want.

Bank of America holds assets in excess of $2.1 trillion.

Source: http://bankinnovation.net/2013/08/on-the-way-to-a-self-service-future-video-banking/

Helpful Banking Tips For 20-Somethings

by Anna Monette Roberts

I remember receiving my first paycheck postcollege – along with my first checking account fee. While you’re a student, many banks will prompt you to sign up with a free checking account, but things change when you graduate. I was startled and annoyed at this fee, but little did I know the few years preceding college, I would rack up several others. Here are five important things you should be aware of when banking in your 20s.

• Know the fees associated with your account. Ask what types of fees to expect and how you can avoid them. They creep up, and your bank might not prepare you for new fees either. For instance, large banks like Bank of America are instating monthly fees for debit card usage. While charges are between $3-$5, it’s still a pretty significant fee for debit card users.
• Your purchasing habits are stored. In the ever-connected modern day world, purchases made by debit and credit cards are stored and analyzed. This might not mean a whole lot to you in terms of your debit card usage, but companies could use the data to determine your interest rates for credit cards. Keep that in mind if you tend to make not-so responsible choices like purchasing huge items spontaneously or blowing your paycheck in a 24-hour period. Otherwise, opt to make more cash purchases.

Read more must-know banking types for 20-somethings.

• Limit the amount of transfers you make. I had a lot of savings from working during college, but I quickly drained those resources in the real world and racked up killer transfer fees. Banks obviously want you to keep your money in the bank, so budget yourself before you transfer money out of the account. This way you aren’t forced to pay more fees than necessary.
• Save, save, save! In your 20s, it’s a day-to-day financial struggle; I get it! While it’s difficult to think about the future or prepare for natural disasters, accidents, or injuries – they happen! Be adamant about setting aside a certain amount every paycheck. Shoot for 10-15 percent, but anything is better than nothing, even if it’s $20.
• Check your checks. Debit card purchases appear on your account immediately, whereas checks can take up to a week to be cashed. In that time, the lattes add up; the account is drained; and it’s a pain (and financial drain) to deal with a bounced check.
• View your account history daily. Save your receipts and double check the charges on your online banking. There’s nothing worse than a hefty overdraft fee due to negligence. Everyone makes mistakes, but you’re better off (and richer too) if you’re the one catching them.

Source: Shutterstock

Five Practical Tips That Will Help You Stay Out of Debt

Staying out of debt should be the goal of every consumer. The problem is that staying out of debt has been given the bad reputation of being no fun. Many consumers associate the concept of financial responsibility with denying themselves the things they want in life. The truth is that using practical tips to stay out of debt can help you to better understand how to have the things you want in life without damaging your financial situation.

Personal financial planning is a two-step process. The first step is to develop the spending and saving policies that will dictate how you handle your finances. Once you have your policies in place, you need to develop the dedication necessary to stay with those policies and learn from them. Rather than fighting the urge to spend money, you should be taking the time to understand how good spending policies lead to the opportunity to live the life you want without falling deep into debt.

The second step in good personal financial planning is turning those policies into habits. If you stay dedicated to making your spending and saving policies a part of your every day decision-making process, then they begin to become second nature. You start to make decisions based on what is best for your personal finances, and you begin to develop the real understanding you need to stay out of debt.

To help you get started, there are five practical tips you can use that will help you avoid debt. Some pieces of advice are not as easy to follow as others. But when you put them together, you get a plan that can help you gain control of your finances and always have your head above water.

1. Budget Your Money

Monitor your spending for two months by keeping a log and collecting receipts. Then segment your spending into expense categories such as entertainment and food. Once you have that information, you combine it with your monthly bills to get a clear picture of your monthly spending habits. Before you start to develop a budget, analyze your spending to find ways to reduce your expenses and free up more money for savings and paying off bills.

Write your bills into a checklist and compare that to your monthly income. As you pay bills or use up expenses, check it off your list. Make your savings accounts bills that you pay every month. Vacations, holiday spending and an emergency savings account should all get something put into them to make sure you have the money when you need it. Any extra money you have at the end of the month goes into the savings account or is applied to paying down the balance of a credit account.

Remember to create expense items for your weekly entertainment, food and gas for your car. Anticipate one-time bills each month and account for them in your budget. Do not deny yourself money for going to the movies each week, but rather you should keep track of it and limit your spending to make sure you have money for important bills and expenses.

2. Make More Money

Is it practical to lower your monthly food budget or put off paying credit card accounts to try and apply that money to other things? No, that is not a practical solution. If you find yourself falling short on your budget each month, then the practical approach is to take on an extra part-time job, pay your bills down and then get your finances under control.

One of the difficult things about budgeting money and being practical with your personal finances is that you need to objectively look at your situation and make hard decisions. If you put yourself in a financial hole, then develop the initiative to get yourself out of that hole by making more money. If you can spend more money, then it is practical to expect yourself to also be able to make more money.

Even if you have a balanced budget and no money problems, if you have the time, then it may not be a bad idea to get an extra part-time job anyways. You can put the money you make into your various savings account and strengthen your financial situation even further. It can be difficult to anticipate the future, and that is why it is always a good idea to take prudent financial action when you are able. Adding money to your savings accounts when you do not feel you need it will create more available funding when you do need it.

3. Credit Cards

A discussion of credit cards is part of practical financial planning because credit cards can offer several benefits that a person with good spending habits can take advantage of. When you are applying for a credit card, look for one that fits your situation. If you travel a lot, then get a card that offers discounts in travel, hotels and rental cars. Look for the card with the best cash-back feature to help you put extra money into your pocket during the course of the year.

The most practical way to use a credit card that offers rewards and cash back is for items that you know you have the cash for in the first place. For example, if you use your credit card to buy groceries, then you can get the benefits of travel miles and cash back while you pay off your entire credit card balance with the grocery money set aside in your budget. Regular expenses that you know you have covered by cash are excellent candidates for credit card spending because you will not be carrying the balance from month to month, but you will still get the rewards credits.

Credit cards are also necessary when it comes to renting a car and doing other activities while traveling or on vacation. Once again, it is practical to have the cash ready to pay the credit card bill when you get it in 30 days. But if you can continue to rack up cash-back payments for spending cash that you have on hand, then that is a good financial move. If you pay the balance within 30 days, then you reduce your interest debt to almost nothing. Learn how to use credit cards responsibly to benefit from them.

4. Save Rather Than Spend

One of the ways that retailers convince people to make large purchases is to entice consumers with low monthly payments on financing. If you know that you can easily make a monthly payment on a financed item, then you should also be able to save the money needed to buy that item in cash.

For example, if you are not in a hurry to get a new television, then you should do some research and find out how much the television you want will cost. Then you can develop a savings plan that will help you to save the money you will need to purchase the item. Look at it as making payments on a finance account for an item you do not own yet. Once you reach your goal, you can purchase the item outright without having to pay interest and finance charges.

Saving money for purchases is always preferable to opening a finance account for the practical consumer. You may have to wait a few extra months for the item but, if the item is not a critical need, then saving for it will allow you to have the things you want without putting yourself into debt.

5. Do It Yourself

Spend time learning how to do tasks that you would normally pay a contractor or professional to do. For example, you can save some money each year by changing your own oil and taking the old oil to a local auto mechanic for disposal. If you have an interest in home remodeling, then start researching ways to do projects on your own rather than paying extra for a contractor to do them.

Any time you get a chance to save money by doing something yourself, the practical approach is to take that opportunity. If you go out to a company party at a facility where there is valet parking, then look to see if you can park your vehicle yourself to save the valet charges. Wash your vehicle each week in your driveway with your own water and supplies to avoid paying for a car wash.

Do not take the “do it yourself” approach to dangerous levels. If a family member needs medical attention, then get to a doctor. But if you find practical ways to save money by doing something on your own, then you should take the chance to save money and avoid putting yourself deeper into debt.

These were our best five tips to easily stay out of debt. Of course these aren’t the only things you could do to stay financially healthy! You can find more effective tips on these links we bundled for you. They’re a great addition to our relatively small website. Good luck!

http://www.stayoutofdebttips.com/

7 Tips for a Financially Healthy 2013

As the end of another year approaches, many of us begin thinking about ways we can improve our lives for the coming year. Common goals are to lose weight or to begin an exercise program. It is equally important to take the right steps to build and maintain good financial health. Here are some basic, easy-to-follow tips to finish off 2012 right and to make your 2013 a financially successful year.

Strong Financial Finish to 2012

1. Watch Holiday Spending — It’s easy to spend more than you can afford. Low sale-prices are alluring. You don’t even have to go looking for them; you probably have been emailed “great deals” every day. Don’t focus on how much you’re “saving” when you make a purchase, but on how much you’re spending. If you choose to finance a purchase or use a credit card, be sure to factor in any interest costs you will pay. Set a holiday spending budget and stick to it.

2. Gather Tax Documents — Start getting your tax paperwork in order. Position yourself to file your taxes as soon as you receive your W-2 or 1099,s in early 2013. The earlier you file your return, the less time it takes to process your return. Early filers often have their refunds in a week’s time. Make sure that you take advantage of any tax deductions available to active-duty military members.

3. Evaluate Your Retirement Plan — Make it a yearly practice to review your retirement account. Set a goal of putting away at least 5% of every check, and have it automatically deducted from your paycheck. Check the investments you’ve selected, to make sure that you have the right balance. Take full advantage of any employer match, if you or your spouse is eligible. That is free money! Make a large year-end contribution, if necessary, to get the maximum employer match.

4. Make a Budget — A budget is the basic cornerstone of a healthy financial life. It doesn’t cost a penny to make a budget. Use one of thefree budget tools you can find online. You should know how much income is coming in and how you spend your money. A budget should account for your regular monthly expenses as well as expenses that occur from time to time (e.g., property taxes, car registration, seasonal spikes in utilities, and vacations). Military families move more often than the average Americans. If you’re going to move in 2013, make sure to budget for moving expenses. Stick with it. Keeping a budget, just like a diet or exercise, pays off when you keep working on it.

5. Rainy Day Fund — Make 2013 the year that you build up a fund to cover emergencies and unforeseen expenses. Set a goal of saving enough to cover six months of your monthly expenses. That may feel like a big goal, but don’t let the size of the goal discourage you from getting started. Ideally, you should set aside a small amount from each paycheck. Use the same strategy to build up money for other, important expenses like a vacation fund. Depositing your tax refund or a holiday work bonus is a great way to build up your fund more rapidly.

6. Pull a Free Credit Report — Maintaining good credit is an important part of your financial health. Your credit not only affects the interest rate you’ll get on a mortgage, auto loan or credit card, but it can affect your ability to find a house to rent or how much you pay for insurance. For some military positions that require a security clearance, bad credit can jeopardize your career advancement. Be sure to check your credit report regularly. You can get a free credit report atannualcreditreport.com. Check your report carefully and dispute any inaccurate information.

7. Evaluate Debt Options — Most of us are carrying some kind of debt, whether it is a mortgage, a car loan, a student loan, or some credit card debt. Whether your debt is causing you problems or not, you may be able to improve your financial health by changing how you handle your debt. Do you even know how much debt you have and how much interest you’ll pay on it? Use the new Bills.com debt consolidation calculator, to see the true cost of your debt and to learn about different strategies you can use to reduce your costs. If you’re starting 2013 struggling with debt, review all the debt relief options available and start working on a plan to resolve your debt problems and reduce your stress.  Use the resources the military makes available to help you evaluate any debt relief solution you consider, to make sure that it is both the right solution and that it won’t harm your military career.

Courtesy of Military.com

Five Tips When Comparing Health-Care Credit Cards

If you’re stuck with a medical bill that’s more than you can afford to repay in cash, a credit card that’s designed specifically for health-care expenses may help you quickly fill the gap.

Most medical credit cards offer long-term, interest-deferred financing and you can usually get instantly approved. However, before you apply for the first card you see advertised in your medical practitioner’s office, think hard about the kind of loan you are signing up for, say experts.

(See CreditCards.com’s “Health-care financing comparison chart” and “Medical credit cards: Treatment today, payment headaches tomorrow“)

“In any borrowing situation, you want to find the absolute best terms,” says Karen Carlson, director of education at the nonprofit credit counseling agency InCharge Debt Solutions. That way, you don’t wind up paying far more for a procedure than you need to.

Here are five expert tips for helping make sure you choose the best loan option for health-care financing.

1. Don’t assume it’s a good deal

If you’re like most people, the first time you learned about a particular kind of medical credit card was probably at your doctor’s office.

The receptionist may have handed you a brochure after you asked about medical financing. Or you may have noticed the brochures while waiting to be called in.

Many health-care providers — especially those who serve patients with limited health insurance coverage, such as dentists — partner exclusively with third-party creditors, such as CareCredit or Citibank, on special financing deals for patients.

The cards help doctors’ offices get repaid quickly for services while offering patients a way to finance procedures they may not otherwise be able to pay for all at once.

However, don’t be fooled by the brochure’s glossy veneer — or by the fact that your doctor’s office is recommending it, say experts. Just because your health-care provider is offering a particular card doesn’t mean that it’s the best deal out there.

Too often, “people put blinders on and look at the advertising and the kind, loving stock photos and just assume that because it’s designated as a medical credit card, it somehow has better terms than other kinds of loans,” says InCharge Debt Solution’s Carlson.

However, that’s often not the case, she says — especially if you can’t afford to repay a card’s balance by the time its promotional deal expires. “One major provider, the standard interest rate is 26.99%,” says Carlson. Unless you have truly blemished credit, you can probably get a better deal with just a plain vanilla credit card.

“People hold their doctors in very high esteem, but doctors are not trained to give financial advice,” she adds. “They’re there to provide you with high quality medical services.”

2. Read the terms

Most medical credit cards offer long-term, interest-deferred financing deals that can make signing up for the card seem like a no-brainer.

You may be able to get, for example, an interest-deferred loan on a pricey medical procedure that gives you anywhere between six and 24 months to pay it off.

But there’s a catch. With a deferred-interest credit card, if you don’t repay a card’s balance in full by the time the promotional period expires, you may be charged the card’s standard interest rate on the entire amount charged to the card — retroactive to the date of the first purchase.

“Look at the fine print,” says Mark Rukavina, founder of the health-care consulting group, Community Health Advisors. “Look long and hard to make sure if you sign up for one of these cards you’re going to be able to repay according to the terms.”

3. Do the math

After you’ve scanned the terms and conditions that are included with the application, use a loan payoff calculator to see how much you’ll have to pay each month to retire the debt before the interest-free promotional period expires. You may find that the monthly payment that is needed to wipe out the balance before interest kicks in is far more than you can afford to pay, says InCharge Debt Solution’s Carlson.

Don’t rely on the lender to calculate your monthly payment for you, adds Jill Nussinow of Santa Rosa, Calif.

Nussinow, who has a CareCredit card, says she learned the hard way. After she began using her card, she became confused by the monthly payment that was listed on her credit card statement. Nussinow assumed that the payment CareCredit listed would add up to the full amount owed by the time the promotional period expired.

However, it turns out that was just a minimum monthly payment. “What they don’t tell you when you get the card is that the payment that they ask you to make does not cover the actual payment if it were divided into equal payments for the year of free interest,” says Nussinow. “Initially, I was paying the amount that they said was the payment, [and] the balance was not changing much,” she says.

However, “once I spoke to someone and they explained that, I changed from making the $40-per-month payment that they say is due as the minimum payment to $150 so that it can actually get paid off.”

“You should really pay attention to what it is that you’re signing up for, and what it is that you’re doing,” Nussinow adds. “Very rarely is there a free ride.”

4. Consider your options  

Just because a health-care provider mentions a particular payment option doesn’t mean it’s the only loan available to you.

“There are many ways to borrow money,” says Carlson. Research your options before you apply and see if you can find better terms with a similar interest-deferred or low-interest deal, she says.

“This advice is not unique to medical credit cards,” Carlson adds. Ask yourself, ‘Are these the best terms you can get? Can you afford it?’ Then shop around.”

Don’t be afraid to ask at your doctor’s office whether it offer its own extended payment plan, says Rukavina. “Communicate with the provider and see whether they have some ideas or some sort of program in place to help,” he says. “Oftentimes people don’t ask this and they’re not made aware” of alternative payment plans.

If the health-care provider doesn’t offer an extended payment plan, it still may be willing to give you a discount, says Rukavina, or recommend another program that can help. “People just should not be reluctant to ask whether there’s any kind of financial assistance out there, or whether fees can be reduced, or whether the provider would be willing to negotiate an extended payment plan,” he says.

5. Think back on how you’ve used credit in the past

You know yourself better than anyone else, says Carlson. Before you sign up for any kind of loan, look at your past behavior. Ask yourself if you are disciplined enough to repay the debt before the promotional period expires on a medical credit card.

For example, if you’re the kind of person who pays off your credit card balance each month, then a deferred-interest loan may be a good option. However, if you’re a minimum-payment type, a deferred-interest card can be a terrible option, says Carlson.

Health-care credit cards work best if you can afford the monthly payment during the deferred-interest period and if you are financially stable and can work within a budget, she says.

But be honest with yourself about whether that description fits how you really use credit. “Don’t live in a dream world,” says Carlson.

Courtesy of Fox Bus