Happy 35th Birthday Index Funds

Image via WikipediaIt was 35 years ago that John Bogle and the Vanguard Group launched the First Index Investment Trust that tracked the popular S&P 500 index. The fund name was changed to the Vanguard 500 in the 1980s. Bogle and his company has forever changed the investing landscape.

At the time John Bogle never thought how his idea would affect the way millions of people would invest. As a manager of mutual funds he wanted to find a way to make investing easy for the common man. At the time and even today mutual fund investing still means paying high management fees. He felt there could be a better way. His idea of a mutual fund that tracked an index and would always do as good as the market was a novel idea. It was simple and easy, without a lot of hassle. To make a good idea better he pioneered low management fees so the investor would benefit and not the broker salesman.

Bogle thought it was a travesty for the industry to make a fortune in management fees and wanted those fees to stay in the pockets of investors. He knew that even a small amount of reduced management fees kept in the investors account meant for higher returns.

We need to thank John Bogle and company for giving us the index mutual fund and the beginning of passive investing. Over the years the the inexpensive management fees has kept billions in the accounts of investors where it belongs. Thank you John Bogle!

More reading about John Bogle and Index Funds:

Wall Street Journal article titled How the Index Fund Was Born

The First Index Mutual Fund: A History of Vanguard Index Trust and the Vanguard Index Strategy.

The Power of Passive Investing

Does Prepaid Car Maintenance Save Money?

Image via WikipediaNew car buyers are often asked whether or not they want to purchase a “prepaid maintenance plan.” These are not extended warranties but plans that cover routine kinds of service to your car. But are they worth the money?

A plan could cost as much as $1,500 and can be added to the cost of a lease or purchase. Reading the fine print to see what items are covered can keep you from making a big mistake. But when a neighbor of mine got a new car and a new plan for $800, she didn’t realize it only covered oil changes and no other maintenance.

They may be pretty good moneymakers for dealers but the Better Business Bureau warns consumers to crunch all the numbers and read all the fine print.

“These kinds of plans are relatively new, so we’ve received about 100 over the past couple of years, we’ve certainly seen an uptick in the numbers,” said Rodney Davis of the Better Business Bureau.

Some unhappy customers complain maintenance plans were added to their closing paperwork without their approval or they dropped their cars off for maintenance and the work was never done. Some angry customers say the required repair shops went out of business and they couldn’t get a refund. That’s why some consumer advocates say “buyer beware.”

“These prepaid maintenance plans are a source of profit for the dealership so they’re really going to try to steer you toward that,” according to Edmunds.com Ron Montoya.

Since the plans vary, experts have a few recommendations:

• Read the details carefully to see how long it lasts and what it covers, and calculate the expenses to make sure you see savings.
• Once you buy a plan, remember, you’re stuck going to that dealer or repair shop.
• If you finance the plan with your car loan that means you’re paying interest on it, costing you more.

If you’re tempted to buy a prepaid maintenance plan, here’s an inside secret to getting the best deal.

We’ve been told dealers mark them up, up to 50-percent, so you know to try out offering half the price and then they may counter the offer and you can meet somewhere in between.

Always remember to check out the plan closely and don’t be rushed into signing anything. Edmunds.com offers a maintenance cost calculator that will estimate the scheduled maintenance costs for cars.

Some high-end car makers now offer free maintenance plans in the purchase price. If you plan on moving or selling your car before the plan is up, make sure it’s transferrable.

Startup CakeHealth.com Wants To Be Your Mint.com For Managing Your Healthcare Expenses

Cake Health is an online system that helps users understand and manage their health care. They have recently opened it to the public. Cake Health provides a central place to track all your healthcare plans online. It updates your plan status so you know what’s covered, automatically categorizes your claims, tracks your out-of-pocket expenses and alerts you to possible overcharges.

“Eight out of every 10 medical bills have mistakes,” said Rebecca Woodcock, co-founder and CEO of Cake Health. “We don’t think managing your healthcare dollar should be difficult. We developed Cake Health to help subscribers regain control of their health by helping them get the most out of their healthcare spending.”

Once a consumer signs up with Cake Health, getting started is easy. The new subscriber adds their insurance login information into their account and Cake Health does the rest. The service will monitor and analyze claims, dynamically update the policy information to reflect claims, insurance payments and deductible payments and search for potential billing mistakes like mismatched medications, double entries and other common errors.

Three key features to Cake Health include:

Cake Health Money Manager: A service that pulls together insurance benefit information as well as billing information from medical providers. Subscribers will see, in an easy-to-understand method, what coverage they have, where their healthcare dollar is spent and, in many cases, identifying benefits they didn’t realize they had.

Cake Health Plan Matcher: A unique recommendation engine that identifies healthcare plans based on a subscriber’s actual healthcare spending, individual requirements and history.

Cake Health Mobile: A bill capture feature for the iPhone and available through iTunes. With Cake Health Mobile, subscribers simply take a picture of their medical bills, and Cake Health Mobile reads the image and automatically populates their account. In addition, subscribers can scan documents and forward them to Cake Health via email at docs@cakehealth.com.

The healthcare system today is run like amateurs today. Having a reliable dashboard online to monitor your claims and benefits is desperately needed. You can use you insurers website but there is a lot of things there and often are hard to navigate. CakeHealth.com takes down the wall between insurers and consumers. Here you will find cost, coverage, and procedures plainly spelled out.

Start Them Young If You Want To Raise Savers And Not Spenders

Image via WikipediaThe most common way to save for college is 529 college savings plans. Mom and Dad dutifully scrimp and save for 18 years till junior is ready for college and hopefully there is enough in the account to cover college costs. For many families money is tight and the amount saved is not as much as hoped for. We are going to be living in this reduced economy for some time to come so things have to change.

A family financial crisis or success is always a good chance to teach personal finance to your children. Why not use the saving for college as one of these lessons. Some parents feel bad if they can't provide for their kids as they wish they could but again this is a lesson, the kids of the family should learn, for their own benefit.

I have been watching locally and nationally the problems pension and retirement funds are having. Municipalities, the Post Office, and unions are having an increasingly harder time fulfilling pension payments because of reduced revenue. The only way to make these plans work is for employees to make a larger contribution out of their own pocket. This relates to the troubles families have funding college costs and saving for retirement. The recipients of the college funds, your kids, are going to have to make a larger contribution to its success.

The value to saving is a lesson lost in many families. Some families are bringing their children up in an environment of material consumption. Those days are over if you want to have a funded college savings account. Getting the kids involved is key. That means when they receive money as gifts or from working, some of that money has to go toward their college education costs. That means it has to be saved and not spent on the latest electronic gadget. A hard thing to do in todays society.

The 529 college savings plan is a good option, but there are other ways to teach the kids to save:

Roth IRAs:

You can open a custodial Roth IRA for your child no matter how old they are and only if they show some earned income, even if it's from washing cars. Even if they don't make enough to file an income tax you must still keep records. You don't get a deduction from your Roth but you do get to withdraw tax free at retirement. This year, the contribution is limited to the lesser of the individual's income from work or $5,000. it's never to early to put some money away for retirement.

Coverdells:

These accounts are similar to 529s in that they enable investors to accumulate money tax-free to pay for qualifying education expenses. Investors typically can pick from a much wider range of investments than with a 529 plan, though the annual contribution is limited to $2,000 per child. Coverdells, unlike 529s, also may be used to pay for qualifying expenses from kindergarten through high school. Some families use Coverdells to complement a 529.

UGMA/UTMA accounts:

Accounts set up under the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act involve an irrevocable gift of cash or securities made to a minor and managed by a custodian. Account earnings are taxable, and income over certain minimums may be taxed at the parents' rate rather than the child's.

Saving for the future is not something kids look at with pleasure. They have to be taught it is a part of a life long way of life. Even for me saving is a sacrifice, but it will be one that pays off in the future.

A Better Way To Save Money On Phone Service For Yourself and Business

This is a Sponsored post written by me on behalf of Net10. All opinions are 100% mine.

Trying to save money in this economy is no easy task. One of my major expenses in my business is cell phone charges. I have to supply 3 employees with cell phones and this can get very expensive. I needed to find a way to reduce costs. I have always used AT&T for my cell phone carrier. When I initially started using them, for my companies phone service, I had to sign up for a 2 year plan for each phone. Being locked into a long term plan was impractical. If an employee left, what would I do with their phone? I would have to continue to pay the phone bill on the unused phone. This actually happened when one of my employees quit for another job opportunity. I had no choice but to continue paying or be hit with termination fees.

 

I found a solution to my problem by changing my phone service to NET 10. I like Net 10 because they have no contracts. For a low monthly fee of $50  I get unlimited talk, text, and data. I don't have to worry about having a good phone because they carry all the best phones from manufacturers like LG, Motorola, Kyocera, Nokia, and Samsung. Now every month I know what my phone expense is going to be. The flexibility is also just what I need because I can add a phone if I hire another employee or stop using a phone if I have less employees. All without contracts, cancelation fees, activation fees, overage charges, or hassle.

 

 

 

 

 

Paying your bill or adding minutes is easy to do, just go to www.NET10.com, over the phone at 1-877-ten-cent, or at 70,000 retail locations. If you want to spend less than their $50 NET10 Unlimited deal, their Easy Minutes Plus Plan is $15 for 200 minutes and is  more than enough for some. 

 

Cute NET10 commercial

 

Real NET10 customer

 

Go to their NET10's website at www.NET10.com or follow them on twitter at @Net10_Wireless and Facebook at NET10Wireless

3 Ways To Teach Your Children How To Use A Credit Card

Image via WikipediaAs parents it's our job to teach our children all they need to know about life. When they are young we teach them take care of their belongings and their home. As they enter school we teach them the importance of studying. We teach them morals and respect for others. We spend years going over and over again teaching and preaching so they will become responsible well rounded adults. Overall we do a pretty good job but one thing we don't do to well is teaching them to handle money and debt.

We usually begin teaching our children about money and use cash as a tool to teach about working and being paid for it. As they get older, we have them open a checking and savings account to keep their money they receive as gifts. Later they get jobs and need to write checks. If your like me it stops there. I tell my kids a checking and savings account is all they need while they are in college. They want to get credit cards too but I say, that can wait till later. Being on a cash basis is enough for the time being.

I like them being on a cash basis because it's hard to get into to much trouble that way. But I know eventually the credit card will enter their life eventually. I would like to teach and prepare them for that inevitable day. Because it will probably happen when they are on their own and I can't be their to guide them.

Teaching them the proper way to use a credit card is the best gift you can give them. With credit cards the the ways to get into trouble are numerable. If you want to give them some hands on training with credit cards, lets try one with the training wheels on first.

Use a Parents Credit Card.

All you have to do is call your credit card company and have your student be an authorized user on your card, with all the same privileges you have. Before handing it over to them make sure you lay down all the ground rules. Designate when the card should be used and if permission is required before each use. Discuss what kinds of items or services the card is to be used for.

This will actually demonstrate to the student the mechanics of how to use the card and for what reasons are appropriate. They will learn from this experience that the card is only for a specific purpose and can not be used for just any reason. It's the safest way to get a card into their hands but not cut the apron strings just yet.

The downside is they do not see the other side to credit cards, paying them off every month when the bill comes in.

Sign up for a student credit card.

The sign up rules for student cards are a little easier when they apply because credit card companies know student have little or no income. If they can be approved for the card on their own credit rating is always better. Never co-sign for their first card or any other credit application. You would be totally responsible if the student refused to pay the bill.

Almost half of all college students have a card of their own. Only 36% of students carry a balance from month to month, says Student Monitor, a market-research firm, but the average balance this year rose 35%, to $695, from 2010. Also many cards offer a reward system which could encourage more spending. Remember interest rates for student cards are usually higher.

With the student credit card, both sides of the process are able to be experienced, the credit card use and the receiving of the monthly statement. If they are responsible, they will grow an appreciation of the interest charges and how much of their money goes to pay it. The downside is they could run the card to it's limit and pay heavy fees for not paying on time or going over the limit.

Use a prepaid card.

A prepaid card is the best of both worlds. Here the student can not over spend and get into serious debt. Only money deposited on the card can be used to charge purchases. It's the reverse of the average credit card where you charge first and then pay the bill. A prepaid card makes you pay first when you load the card and then later use the card till the money is gone. Here a secondary lesson of budgeting your money has to occur or the student will have used up all their money before it can be refilled again.

In a prepaid card you have the smart way to teach the credit card lessons, it's almost like the real credit card. It's a safe way to get the job done. It will work overall but when a unforeseen incident happens and a larger expense needs to be paid, the prepaid card will not be able to cover it immediately.

You must decide the proper use of the credit card with your child. Will it be for everyday expenses or is it for that unexpected emergency. Remember good communication throughout the process is key. Use this experience to teach the benefits and problems associated with credit cards. Most importantly teach them it's OK to not have a credit card and that they can function just fine only using cash.