Personal Banking E-Newsletter - April 2011

LPL Financial: Who Is Your Beneficiary?

Good planning takes into account both the expected and the unexpected. By building your nest egg, you're planning for the comfortable retirement you always hoped for. All it takes to plan for the unfortunate event that something unexpected happens on the way to retirement is to name beneficiaries for all your investments. While it may seem easy to overlook now, the effort may be greatly appreciated by your heirs.

By naming a beneficiary, you're ensuring that your money goes where you want it to go when you die. Employer-sponsored plans are unique in that they generally require that a spouse is the primary beneficiary, unless you elect otherwise and your spouse consents in writing. But other investments, such as individual retirement accounts (IRAs), may not provide this automatic feature.

You may choose to name more than one beneficiary for a particular account. However, you will need to specify the percentage each beneficiary is to receive. If you don't, your assets will be divided equally among your designees. Perhaps your spouse has already passed on, or maybe your spouse's net worth exceeds the current federal estate tax exclusion. While the estate tax exclusion was repealed for 2010 (meaning there are no limits for this tax year), it is slated to resume in 2011 at a threshold of $1,000,000. If your spouse's net worth exceeds that limit, it may be wise to select another individual — say a child, another relative, or a friend — to receive your assets upon your death.

Keep in mind, your gift may come at a price. Those who inherit your account will be assessed income tax on the amount you leave them. Of course, Uncle Sam would not hit a beneficiary in a lower federal income tax bracket as hard.

Once you name a beneficiary, you may want to review your selection from time to time, perhaps at major life changes like marriage, divorce, or the birth of a child. As your situation changes, you may find that a new beneficiary is appropriate.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

Affording Your Summer Vacation

10 ways to save up for an amazing trip

It’s been a long, cold winter. As we get closer to spring, you might be starting to think about sandy beaches, the warm sun on your face, and wearing flip flops.

If you want to take a trip this summer, but have yet to start planning, you’d better start now. Summer vacations can easily cost thousands of dollars, breaking your budget if you aren’t prepared.

Are you nervous that you might not be able to go on an amazing trip this summer due to the cost? Here are 10 tips on how to save up for your summer vacation by starting now.

1. Set Up a Separate Vacation Savings Account
It’s hard not to spend money. If you see that you have it available, you will most likely spend it. It’s an unfortunate side effect of the materialistic nature of our culture. However, if you make some of your money unavailable for spending, it will simply be that…unavailable. An easy way to do this is to create a separate savings account just for your vacation fund. Out of sight equals out of mind.

2. Utilize Automatic Transfer
So how do you get your money into a separate savings account without spending it first? Utilize your bank’s automatic transfer system. With most banks, you can automatically transfer a designated amount into your vacation savings account from your checking account each time you get paid.

Do you have direct deposit? Check to see if your employer can split your paycheck  into multiple accounts. 

3. Determine Your Vacation Costs Now
To help save the proper amount, determine your summer vacation costs now. This way you will be able to focus on a target so you won’t be short on funds when you need them. You’ll also avoid saving more than necessary and depriving yourself of money that could be put towards other things.

Remember to include costs such as travel, parking, food, and souvenirs. Then take your total cost and divide it by the number of weeks until your planned vacation dates to determine how much you need to save per week.

4. Use Last Year’s Bonus
Unless this money would be better spent paying off debt, use your annual bonus toward your summer vacation. It can save you the stress of scrambling to get money together for your trip at the last minute. The amount you receive as a bonus or raise at work will help determine the kind of vacation you can afford.

5. Use Your Tax Return
It is best to aim not to have a big tax return. However, if you do have a nice return, save the money for your summer vacation.

After receiving a tax return, see how you can adjust your withholdings so that you are not lending money, interest-free, to the government. Instead, set aside money to invest in order to earn interest on it. You will then be able to afford a more expensive vacation next summer.

6. Get A Side Job
My sister used to be a school teacher. Unfortunately, as difficult as it is to be a teacher, it doesn’t always pay the bills. In order to have vacation money, my sister became the dance team coach and an after-school care provider at her local YMCA. These part-time side jobs required minimal hours, yet earned her enough money over the school year to pay for a nice summer vacation. If you are capable, consider a side job of a few hours a week to fund your vacations. If you’re looking for ideas, here’s a list of ways to make an extra $1,000 a month.

7. Cut Out Extras
Let’s say that you need to save $50 per week in order to bank enough money for a vacation. If you get a $4 latte every day, you can cut that out by making your own coffee recipes at home and save $20 a week! If you always buy your lunch, start packing your lunch to save yourself about $5 to $10 a day. Can you also cut out desserts, dining out, and movies? What else can you live without for the next few months until vacation?

8. Save Your Change
Although you might not be able to save up for your entire vacation this way, you may be able to save up for a part of it, like gas and meals. Whenever you have some change, put it in a savings jar. Don’t just put in coins. If you have a couple dollars, put them in the jar as well. Want to kill two birds with one stone? Try the “swear jar” method for saving. Over the next few months, your change will add up significantly.

9. Sell Stuff
Do you have things around the house that you’re not using? Perhaps you have some items that you haven’t used in a long time, but are still hanging on to for no good reason. I like the philosophy, “When in doubt, throw it out,” but I think it should be changed to, “When in doubt, sell it.” Look around your house for any of these questionable items. If there is any doubt about their usefulness, sell them on eBay to fund your vacation. Chances are, if you haven’t used the items in the past year, you won’t miss them.

10. Get Motivated
Sometimes all we need is a little motivation. Place pictures of your vacation destination in strategic locations such as your computer screen, car, bathroom mirror, and wallet. If there is a type of music or a specific song that reminds you of your vacation destination, play it whenever you have the chance. Or maybe there is a type of food that will get you excited about your vacation. If you want to go to Italy, eat Italian. If you are planning a cruise that will stop in Mexico, eat Mexican. All of these things will keep your vacation plans relevant as you are saving up.

Don’t forget to combine these strategies in order to maximize your vacation fund. Also, consider ways to save money on your summer vacation, such as going all-inclusive or visiting lesser-known vacation spots.

If you don’t think you will be able to save enough for the vacation of your dreams, go on a less expensive one this year, and start saving in the fall for the following summer. The earlier you begin planning and saving, the more likely it is you will reach your goal.

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14 Inexpensive Activities for Kids

Keeping them busy when school lets out

“I’m bored!”  It’s the two words every parents dread as school lets out for summer. Fear not; we've put together two weeks worth of fun summer activities for kids to keep them busy, and their parents sane.

The list of summer activities ranges in cost from free to frugal, but each requires extra quality time with kids – something we can all afford to spend more on!

Day 1. See a “one dollar” movie at the theater.
Many theater chains around the country offer summer movie programs for kids where they offer a “one dollar” movie every day for a week, or on a particular day of the week all summer.

Day 2. Sprinkler day. 
Delay your sprinklers for one day so they come on a little later in the morning.  This way everyone can get on their bathing suits and have fun jumping through the sprinklers on a hot day.  But not for too long!  This is a good time to teach them about conserving water, reducing utility costs, etc.

Day 3. Attend “story time” at your local library. 
My kids love to check out books on all kinds of subjects.  My son currently has three library books on swimming, pirates and going to the dentist (quite a diverse reader, huh?).  Many libraries also have a story time to encourage a summer reading program.  Stories are read out loud and the kids have a chance to interact with the story-teller and answer questions about the book.

Day 4. Set up a lemonade stand.
This is probably my favorite idea because of the lessons in entrepreneurship involved. Loan your kids $10 as “seed money” for supplies, or better yet, let them use their own money from savings. This way they don’t get used to the idea that borrowing leads to prosperity. Take the kids along to the grocery store one morning and let them pick up the lemons, sugar, cups, and a couple bags of ice to keep in a cooler. Yes, Crystal Light lemonade works, too, but is less authentic and more expensive. This is a great way for neighborhood kids to work together, as they can divide into teams to man the lemonade stand, make the lemonade, handle the money, etc. Please remember that an adult needs to be with the kids at all times, both inside and outside the house, so have a neighbor help.

Day 5. Teach your kids to fly a kite.
Check your 10-day forecast and look for a windy day in the coming week.  Pick up an expensive kite for the kids.  I even recommend springing for the extra spool of kite string on a roller because the string and handles that come with the kites are lousy.

Day 6. Make homemade play-doh. 
I haven’t run a cost analysis on this recipe to determine it’s “frugalness,” but I can tell you it is a lot of fun!  I suppose the next best option would be to pick up some commercial Play-Doh on sale, but what fun would that be?

Day 7. Bake a cake. 
I remember having a ball helping my mom bake something when I was young.  And not all the fun came at the end when I got to lick the icing from the bowl!  Let your kids help bake a cake, and surprise mom or dad when they arrive home that afternoon.

Day 8. Build a “fort” in the living room. 
When my son was smaller he got the biggest kick out of playing in giant cardboard boxes.  We would color them, and cut “windows” out for him to look through.  A living room “fort” could be as simple as a few kitchen chairs gathered in a circle with a large bed sheet thrown across them and draped to the floor.  The kids can hide from mom and dad, read books, or pretend they are camping out in the living room.

Day 9. Go bowling.
My grandfather and I spent many hot, summer afternoons bowling a couple games at the local bowling alley. These days, bowling can be an expensive activity. Call the lanes ahead of time and ask if they have any summer specials (certain days may be cheaper). Also check those coupon mailer packs for coupons for free games.  To keep costs down, just let the kids bowl – you can work on your game another time.

Day 10. Declare a “bored” game day.
I learned to play chess, checkers, backgammon, and poker (my mom wasn’t thrilled with that) one summer while staying with my grandparents. Few kids today don’t realize you can play games without a computer.  Most of these old board games are inexpensive in their basic form – skip the “deluxe” edition to save even more.

Day 11. Have a water balloon fight. 
My son attended a birthday party recently and the parents had filled several dozen mini balloons with water.  The kids participated in games like a water balloon toss – they start close together, but take a step back with each toss to increase the distance. The last one to break the balloon is out.  With what is left, the kids can have an all-out water balloon battle. Lots of fun, but be sure to pick up the balloon remains, especially if you have very little ones or pets as they could be a choking hazard.

Day 12.  Create a “mini-me.”
Find a piece of large poster board, or large heavy-duty paper (such as a butcher paper) wide enough for your kids to lay down on. Use a dull pencil (less chance for boo-boos) to trace their entire body to the paper from head to toe. Now let the kids decorate their traced image to look like themselves in the same clothes they are wearing, same color eyes, hair, etc. When they are finished, help them cut out their mini-me for proud display.

Day 13. Pajama day. 
I feel like having these days as an adult!  Stay in your pajamas all day long. Make pancakes in the morning, bake a pizza for lunch, and lounge around watching movies.  Use your Netflix subscription to have a couple kid-friendly movies on hand.

Day 14. Spend a day volunteering your time.
A good way to wrap up your two-week blitz of summertime fun is to allow your kids to donate their time to a worthy cause. Contact a few local charities and find out which ones will allow kids to volunteer some time over the summer (under your supervision). 

Bonus tip: Get your kids to come up with their own shirt designs, then have a custom t-shirt printing service bring them to life. It’ll be a thrill for your kids to see their ideas put on clothing they can enjoy throughout the summer.

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When Prices Rise, But Income Doesn’t

Feeling the burdon of a fixed income

Living on a "fixed income" traditionally meant you were retired or disabled and receiving Social Security benefits and perhaps a pension. You couldn't ask for overtime or a raise to compensate for higher expenses.

Thanks to layoffs, furloughs and a dismal job market, however, today millions of other people are learning what it's like to have incomes that don't increase even as their costs do.

Rising prices for gas, food and clothing are squeezing these vulnerable folks, often after they've already trimmed expenses to the bone.

Valarie Weinhaus, a disabled single mother of three young children, long ago disconnected the cable television and cut back to a cheaper Internet plan. She buys food in bulk at a store that caters to the local Amish population -- "you can get 100 pounds of beans for $15.99," said the Kirksville, Mo., resident -- and opts for the store or generic brands when she shops elsewhere.

Weinhaus, 39, buys clothes for herself and her children at thrift stores. The kids -- who are 5, 7 and 9 -- don't participate in extracurricular school activities, because those would mean extra costs Weinhaus can't afford on her $951-a-month disability check. Now that gas prices are soaring, Weinhaus' car remains parked most of the time, and she wonders where else she could cut costs.

"I have to have my cellphone for the schools to be able to reach me in case of emergency, but I might have to let it go for the summer and have AT&T put me on an inactive line," she mused.

A 5.6% jump in gas prices last month, combined with a 1.1% increase in food prices, pushed the Consumer Price Index up 2.7% from a year earlier, the Labor Department reported last week.

And thanks to a global shortage, prices on goods made with cotton -- everything from socks to sheets -- are expected to rise 10% to 15% this summer, according to a survey by Capital Business Credit, a finance company based in New York.

Still, economists aren't heralding the return of inflation. Energy and food prices move around so much that their costs aren't considered when economists look at "core" inflation, which in March was up just 1.2% from a year earlier.

The other measures economists consult -- Treasury bond prices and consumer expectations of future price increases -- also aren't signaling much inflation ahead.

But the idea that inflation isn't a problem is a hard sell to anyone who's filled up a gas tank lately or been to a grocery store.

Faced with a shrinking budget and rising prices, people typically:

  • Use less, for example by carpooling, walking or riding the bus when gas prices rise
  • Trim other expenses, such as eating out or pay television
  • Buy for less, using sales or coupons
  • Substitute cheaper products for more-expensive ones -- hamburger on sale instead of higher-priced cuts of meat, or beans and rice instead of hamburger.

When you've cut as far as you can and prices keep going up, however, it may be time to ask for help.

One place to start:, the federal government's central clearinghouse for aid as varied as career help, veterans benefits, nutrition assistance and tax advice.

If you're a senior or concerned about someone who is, you also should check out the Eldercare Locator, another government site that connects people to local services that offer free or discounted food, home repairs and transportation, among other help.

Here are other places to go to find help:

  • Health care. Federally funded health centers offer treatment, checkups, children's immunizations, dental care and prescription drugs. You pay what you can afford, based on your income. If prescription drugs are pinching your budget, talk to your pharmacist about generics and other alternatives. (Doctors often don't know the retail prices of drugs, but pharmacists do and are aware of other options.)
  • Rental assistance. The U.S. Department of Housing and Urban Development offers subsidized housing, public housing and rental (Section 8) vouchers for low-income people, while the states provide additional resources. Start your search here. If you don't qualify for help, renting a room or sharing housing with another family could help lower your costs.
  • Energy assistance. The Low-Income Home Energy Assistance Program (LIHEAP) is another federally funded program that helps people pay home heating and cooling costs. Every state and the District of Columbia has an energy-assistance program. If you earn too much to qualify, consider an energy audit to pinpoint ways to lower your bills.
  • Nutrition help. The federal government offers two programs, the Supplemental Nutritional Assistance Program (which used to be known as the Food Stamp Program) and WIC (Women, Infants and Children). If you don't meet the requirements for either, you can still visit local food banks, which typically don't require you to document the depth of your need.

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What Not to do on Your Smart Phone

Safety tips from a professional hacker

Smart phones make it so easy to do many daily tasks -- from checking e-mail to shopping to banking. But they also make you easy prey for scammers and identity thieves. "It is very difficult to have any protection on your phone," says Dave Aitel, whose company creates penetration testing products (i.e. hacking tools).

The company, Immunity, developed a tool that can easily hack into Google Android phones, Aitel says. To be clear, it was created to test mobile security, not to be sold to people who want to tap into others' phones.

Nonetheless, the tool shows how vulnerable these phones are to hackers.Smart phone hacking works two ways. You can't pick a phone number and magically get on that phone, Aitel says. Hackers have to get the victims involved by getting them to click on a link or by tapping into their system while they're using a public Wi-Fi connection. Depending on what sort of tasks you use your phone for, one attack on it could take over your whole life, he says. With this in mind, here are his tips for staying secure while using your smart phone:

Choose your phone wisely.
Both the iPhone and Windows Phone 7 are built from the ground up to restrict what the consumers do with their phones, making them the most secure operating systems, Aitel says. BlackBerry is less secure than the iPhone and Windows Phone 7. Sorry Google fans: Android is the least secure mobile phone operating system, he says. It's accessible and easy to write applications for -- and that means less secure.

Choose your connection wisely.
Stick with your phone's 3G (or 4G) network connection if you can because it is more secure than Wi-Fi. Definitely avoid public Wi-Fi connections, which give hackers easy access to your phone.

Choose what you do on your phone wisely.
Aitel says shopping on your smart phone is okay as long as you use a credit card, which provides more consumer protections than other forms of payment.

But he says DO NOT use your phone to bank online or to deposit checks to your account. "There's no halfway here," he says. "You either want someone to take all your money or you don't." (Other security experts I've talked with aren't quite so adamant about this).

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