Personal Banking E-Newsletter - January 2012

Financial Fitness for the New Year

It's that time of year again... time for you to make a New Year's Resolution that you'll stick with - until February, at least. According to TIME magazine, getting out of debt and/or saving money is in the top five most commonly broken New Year's resolutions. Becoming financially stable is a great resolution, but it can be especially difficult during tough economic times. The key to keeping your financial resolution is to form fiscally responsible habits.

Here are three tips to help you get your money in order in 2012. 

1. Know what you spend.  You can't begin to get a handle on your finances until you know how much money you make and how much money you spend, and on what. Take a month to chart your finances, whether it's in a fancy spreadsheet or on a piece of scrap paper. Tally every expense, and then break them down into fixed and variable expenses. Fixed expenses occur every month (rent, loan payments, etc.) and variable expense change each month (gas, groceries, etc.).

2. Create a realistic budget.  Now that you know where you're money has been going, decide where it should be going. Split your purchases into needs and wants. If things are really tight, consider filing monthly payments like cable TV and magazine subscriptions under the "wants" category. Look for unused purchases. For example, 60 percent of gym memberships go unused. So, while losing weight may also be on your New Year's resolutions list, don't buy a $30/month membership that you'll only use once or twice. Invest in some good fitness equipment like running shoes or resistance bands instead.

3. Stick to your budget.  After you've examined your finances and made a realistic budget, the hard part starts. Just like losing weight, financial fitness must become a habit. The best way to replace a bad habit with a good one is to give yourself a positive alternative. For example, if you have a bad habit of buying shoes whenever you walk past a display at the mall, give yourself a positive alternative by deliberately selecting a pair that you really love, then saving up for it. Turning down an impulse buy is easier when you mentally "spend" that money on something you want more.

Finally, keep it simple. If sticking with your financial fitness resolution requires a major money overhaul, it can feel overwhelming. Remember the most basic fact about building wealth: save more than you spend. That's the baseline for every money-saving strategy. If you think you need outside help, talk to your banker about different financial options. Most institutions have programs that can take a small amount of money out of each paycheck and put it in a savings fund. It's a quick and painless way to put money aside. Save just $25 each month and you'll have an extra $300 after a year, plus whatever interest you earn on the account. Here's to a happy and financially fit New Year!

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7 Ways to Make the Most of Gift Cards

Americans love giving gift cards during the holiday season. In fact, gift card sales are expected to reach $100 billion by 2012, according to TowerGroup, a research and advisory firm.

Yet recipients don't always remember to use them. If you receive a gift card during the holidays, don't let it collect dust. Make it easy to reach for the gift card instead of your hard-earned cash. That means you want it with you when you're likely to be shopping, not at home in your sock drawer, says Hillary Mendelsohn, author of "thepurplebook" series of online shopping guides and founder of

How else can you get the most out of the gift cards you buy or use this holiday season? Here are seven savvy tips.

Mark your calendar
The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or Credit CARD Act, limits some of the fees that gift card issuers can levy. Here's the rundown on the three major protections you need to know about if you're using gift cards:

• Funds on the cards must be good for at least five years. Money added later must also be good for at least five years.
• Issuers generally aren't allowed to charge any fees within the first year after a gift card is purchased. You can be charged a fee to purchase the card or to replace a lost or stolen card.
• After one year, an issuer is limited to one fee per month, says John Breyault, the director of the National Consumers League's Fraud Center.

Make sure you're aware of any fees associated with the cards you receive, says Michelle Jun, a senior attorney with Consumers Union.

Use gift cards within a year of when they were purchased, she adds.

One good way to remember how long you have is to mark your calendar, says Mendelsohn. That way, you won't lose your gift card's value to fees or forgetfulness.

Know the different types of gift cards
Gift cards come in two basic flavors: closed loop, or those specific to one retailer or retailer group, and open loop, or general, network-branded cards that can be used anywhere.

Each has benefits, so it pays to know which one you have or want to give, Breyault says.

With closed-loop cards, offered directly by retailers, there are usually no fees -- either at purchase or later. You'll pay $50 for a $50 gift card.

The downside: If the retailer has no locations nearby or no online shopping site, closed-loop gift cards can make shopping inconvenient. If the store goes under, the card could be worthless.

"Times are tough," Breyault says. "You never know who's going to make it and who's not."

Open-loop gift cards often carry the imprints of major card networks, such as Visa, MasterCard, Discover or American Express. They typically can be used almost anyplace that accepts that brand. The trade-off: Consumers usually pay a fee to buy the card, Breyault says. After the cards are a year old, the issuer could assess other fees.

Pair your gift card with a coupon
Retailers often don't let you combine coupons, says Mendelsohn. But you can combine gift cards with coupons to really leverage your buying power, she says.
"You have free money, and you can use a coupon," says Mendelsohn. "So take advantage of it."

Her tip: Go online and search the retailer's site for either coupons or coupon codes. If the discount doesn't specify "online only," the retailer has to honor it in the store, Mendelsohn says.

And if you have a smartphone, you can carry the online coupon there, just in case you need to show it to the clerk, she says.

Don't buy just because you have a gift card
It seems contradictory: Yes, you want to use that gift card quickly, but you don't want to buy just to buy.

If you really want to make a smart purchase, "wait for something that you actually really need or want," says Mendelsohn.

Still stuck with an aging gift card and don't know what to buy? Or maybe the card isn't to a store you love?
Either re-gift the card or use it to buy a present for someone else, Mendelsohn says. And take the money you freed up and treat yourself.

"It's a great way to not spend your own money," she says.
Gift cards also make great tools for saving money toward big purchases, says Mendelsohn, adding that her family used the cards to pay for two computers.

"Particularly with kids," it's a great way to impart the lesson of saving for a goal, she says. "Even though it's a gift card, it really teaches them -- you can accumulate and get something really meaningful."

Yes, Virginia, there are gift card thieves
It's a sad fact: If someone comes up with something cool, someone else figures out how to steal it.

One favorite trick: Scammers copy gift card numbers and check periodically to see if the cards have been activated, says Jay Foley, the principal partner for ID Theft Info Source. When they are, the thieves use the numbers to spend the money loaded on the card.

One way to fight back: Check the balance periodically before you use the card. Some gift card providers allow you to do that through their websites. While you're there, you can also find out what the policies are in cases of loss, theft or fraud.

If you see unexpected activity on your card, report it to the store or the gift card issuer. In some cases, you may also need the receipt from the person who originally paid for the card.

Another strategy: Use the card as soon as you get it, Foley says.

Saving it for something special? Put the pertinent information, plus the receipt (if you have it), in a safe place. If anything happens to the card itself, you have the data you're likely to need if the issuer will replace it.

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6 Tales of the Worst Money Advice Ever

What's the worst financial advice you've ever received? MainStreet posed this question to a group of average Americans and received a variety of colorful responses -- from investment mistakes to real-estate blunders.

To find out what can be learned from each person's story, financial planners from around the country shared their options. Interestingly, while the advisers agreed that some advice was indeed unwise, in other cases they argued that the advice could be sound in certain situations.

"A lot of financial advice is not 'one size fits all,'" says certified financial planner Helen Huntley of Holifield Huntley Financial Advisers in St. Petersburg, Fla. "Advice that's good for one person may not be at all good for another who is in different circumstances."

You should also keep in mind that while seeking professional financial advice is often the way to go, you should be wary of an adviser who is too pushy.

"When a client feels pressure from anybody to make a financial decision -- especially those taking their money -- run for the exit," says certified financial planner Phyllis Carlton of Carlton Advisors in West Linn, Ore. "A true financial professional will be able to answer any and all questions in terms the client understands. If they don't, either they do not understand the risks themselves or they don't have their client's best interests in mind."

Read on to hear the stories of six Americans, plus comments from the pros.

Name: Janet Zinn
Hometown: New York
Age: 51
Profession: Psychotherapist

Worst advice:
"About 10 years ago an old accountant advised we cash in a substantial 401k plan to pay off credit card debt, instead of instituting a plan to pay it off over time and learn how to spend and save at the same time."

What the experts say:
In general, touching your retirement plan before you reach retirement age is a no-no.

"When folks are under 59½ years of age, there is a 10% penalty (for cashing in your 401k) in addition to the current income taxes owed on whatever amount was cashed in," says certified financial planner Debra L. Morrison of Trovena in Roseland, N.J.

Morrison says a better idea is to consider taking out a loan on 401k money following "a rigid, monthly repayment schedule, which requires the participant to pay off the loan, thereby maintaining the retirement funds for their original intended use."

Of course, there are exceptions. "The advice may have been appropriate if, say, the credit card was charging 29% interest and the consumer was in the 15% bracket with a 10% penalty," says financial adviser Fred Amrein of Amrein Financial in Wynnewood, Pa. In this instance, "your cost of the 401k redemption is 25%, saving you 4%."

Always do your homework, and run the numbers before making any decisions to touch your retirement fund, Amrein adds.

Name: Gabrielle Lennon
Hometown: Sarasota, Fla.
Age: 46
Profession: Author

Worst advice:
"To buy an extra house, get a tenant and let the tenant's rent pay the mortgage and all the bills. So many people and books say this, but many tenants are horrible. I've had great (renters), nightmare (renters) and everything in between."

What the experts say:
"Books often promote becoming a landlord as the easy road to riches, but people have to understand that owning a rental property is just like any other business -- it requires a lot of time and hard work," says financial adviser Landon Loveall of Cumberland Wealth Planners in Thompson Station, Tenn.

Of course, if you're prepared to put in the work, there's no doubt that renting a property can be a promising way to build wealth, says certified financial planner Rick Kahler of Kahler Financial Group in Rapid City, S.D. "It's important that tenants pay their rent on time, and landlords must demand that and not get big-hearted," Kahler adds.

Morrison suggests that people consider becoming landlords only if they can set aside a "sinking fund" to cover the sum of a variety of expenses associated with managing a property.

"The proper preparation for owning a rental property is to assume that you will be turning over renters annually, incurring costs of painting, re-carpeting and repairing damage; that you will go vacant three months between renters on average; that your renters will consistently pay late without including the late fee; and that you may have to spend a couple months' rent to evict certain tenants," Morrison says.

Name: Ismail Humet
Hometown: Long Island, N.Y.
Age: 23
Profession: Entrepreneur

Worst advice:
"Someone told me not to invest in my own small business. My partner and I decided to ignore this advice and invested in our start-up,, anyway. It has turned into a huge success, and we are absolutely glad we did it. We've already earned our investment back many times over and are still continuing to earn on that investment."

What the experts say:
Providing advice on whether entrepreneurs should invest in their own company is a bit tricky. While Humet's business became a success, that isn't the case for all business owners. "I tell people to be very careful with this, since the majority of businesses don't make it," Kahler says.

Rather than telling entrepreneurs to steer completely clear of investing in their own business, Kahler suggests that an adviser should help the business owner think through the risks in order to make an informed decision.

Certified financial planner Laura Scharr-Bykowsky of Ascend Financial Planning in Columbia, S.C., says that it's OK to "invest prudently" in your own business to maximize growth, but she doesn't suggest investing exclusively in your business.

"You can diversify away risk by spreading your investments out among several noncorrelated asset classes," Scharr-Bykowsky says. "For instance, if your business depends on overseas sales, you might want to dial down that exposure in your financial investments."

Name: Brittany McDonough
Hometown: Boston
Age: 22
Profession: Recent college graduate

Worst advice:

"During college, I was told to open a credit card and use it to charge all my books and school fees on. The 19% or more interest on a credit card is far more than the subsidized government loan that ended up covering my school costs."

What the experts say:
Whether college students should have credit cards really boils down to whether they are able to keep on top of payments, says Kahler. "I don't think it's a good idea for college students to have a credit card if they're not going to pay off the balance each month."

Morrison adds that college students are often offered a "teaser" rate of 0% interest or close to it, but eventually the real rate kicks in, which can get young people into trouble.

Kahler says that using student loans can be a good alternative to pay for books. "If you are going to pay off the credit card monthly, that is far cheaper than paying interest (on a loan) for years," he says. "But if you are going to borrow, you typically get a lower interest rate on a student loan."

Name: Deanne Hollis
Hometown: Eastvale, Calif.
Age: 48
Profession: Public relations consultant

Worst advice:
"Around 1998, before the tech crash, my husband's grandfather passed away. He left $5,000 for each of his grandchildren and great-grandchildren. My husband's mother and father advised us to invest in mutual funds for ourselves and our children, (saying) the fund would grow exponentially and by having (the money) in a fund, it would be diversified. It never grew much at all; in fact, it lost money. I kept it in there with the philosophy of 'leave it and forget it' -- don't watch what it is doing because it will go up and down."

What the experts say:
Although Kahler doesn't advise against putting money into mutual funds, he says you should always diversify your investments among asset classes. "You want different types of bonds, commodities and real-estate investment trusts, for example," he says.

Another mistake is expecting to see immediate results. "It was probably wrong to say it would grow exponentially," says Kahler, adding that you can usually expect to see a respectable return over a longer period of time, such as 10 to 20 years.

"You can't 'set it and forget it,'" Scharr-Bykowsky notes. "We all need to be aware of what we are invested in and periodically monitor the performance. A once-a-year rebalancing or a review of the fund would have been a smart move."

Name: Aimee Brittain
Hometown: Atlanta
Age: 33
Profession: Entrepreneur

Worst advice:

"To not pay off your student loans until you're done with college. If I had started making payments in college like I had planned to do, it could have saved me thousands."

What the experts say:
Although college students often do not have the cash flow to begin paying off loans while still in school, "if one is able to pay down debt sooner, it generally does save what could be substantial interest over a period of years," says Morrison.

Huntley recommends starting student loan repayment while still in school only if the following criteria are met:

  • You are not taking out new student loans.
  • You are not carrying higher-interest debt (i.e., credit cards, car loans). "Those debts should be paid off before you start making student loan payments that you are not yet required to make," Huntley says.
  • You have adequate emergency funds. "This reduces the risk that you'll have to take out new credit card debt to meet your obligations," says Huntley.
  • Your loans are not subsidized.

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Banks Will No Longer Sell Savings Bonds in 2012

Americans who want to buy a U.S. Savings Bond in 2012 will need two things: at least $25, and an Internet connection.

The Treasury Department announced that for the first time in 76 years, paper Savings Bonds will no longer be sold at banks and credit unions. Investors who want to buy Savings Bonds will need to purchase them electronically through TreasuryDirect, a Web-based program offered by Treasury's Bureau of Public Debt.

The shift from paper to electronic Savings Bonds will save the government $70 million over the next five years, Public Debt Commissioner Van Zeck says. "That's a real economic advantage to Treasury in these times when we really need to look at the cost of government programs."

Treasury has offered Savings Bonds through TreasuryDirect since 2002, but acceptance has been slow. Of the $1.2 billion in Savings Bonds purchased from October 2010 to June 30, 2011, 11% were bought through TreasuryDirect.

Treasury hopes the phaseout of paper will give savers the nudge they need to embrace electronic Savings Bonds, Zeck says. Electronic Savings Bonds are less likely to be misplaced, he says, and are automatically redeemed when they mature. Treasury estimates that more than $16 billion in unredeemed Savings Bonds are no longer earning interest.

Still, millions of Americans don't have Internet access. Only 44% of Americans age 65-73 have broadband at home, a 2010 survey by the Pew Research Center says. For Americans 74 and older, the percentage is 20%.

The digital divide is "something we struggled with," Zeck says. "It reflects why we haven't made a decision to end paper Savings Bonds until now."

The change won't affect outstanding paper Savings Bonds, Zeck says. They'll continue to earn interest until maturity and can be redeemed at financial institutions. Investors whose paper bonds are lost or destroyed can have them reissued in paper or electronic form.

Even after Jan. 1, paper Savings Bonds won't disappear. Treasury will provide paper bonds to investors who buy them with their tax refund. For more information about electronic Savings Bonds, along with information on how to convert paper bonds to electronic form, go to

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