In his Smart Money column, Bruce Williams answers readers' questions on personal finance, covering concerns such as collecting debts, investing inherited money, starting a business and getting a loan. "Smart Money has a light touch," Williams says. "It's not meant to be professional or reproachful, but rather direct and straightforward. I'll tell people when they've made a mistake, because I've been there."
You might also like
Scott Burns
Smart Moves
The Motley Fool
Sense & SensitivityBruce Williams
You might also like
Meet the Cast of Smart Money
You might also like
You might also like
-
CREDIT BUREAUS ARE A NECESSARY EVIL
DEAR BRUCE: You asked "John" in a recent article why he expected his credit monitoring to be free. But John is right; it should be free.
These credit bureaus have a nice gimmick: They collect our private information without our consent, do not check to see if it is correct, then sell this information. To add insult to injury, they want us to pay them to check and see if what they are selling for a profit is correct. This is a joke, and when the information is wrong, it costs the innocent consumer time and money trying to prove it is wrong.
The credit bureaus are doing this on their own. The consumer did not ask them to collect this information. If the consumer did, then I could see them charging the consumer, but since the bureaus are selling the information without consent, they should pay the consumer for the privilege of using it. It's no different from any other business transaction. -- E.Z., via email
DEAR E.Z.: I agree with you that when credit bureaus make a mistake, it can be inconvenient and time-consuming to get it corrected.
You say the consumer did not ask the credit bureaus to collect the information, but that isn't exactly true. Consumers by the millions who apply to borrow money give potential lenders the right to look up this information. If this information were not available, what would you suggest the industry use?
No one is going to lend money of any consequence without getting a credit report. These agencies have to be paid -- otherwise, they wouldn't be in business. This is the system we live under; there are a lot of things we are obliged to work and live with that we don't agree with.
You can get a free credit report once a year from each of the major agencies. I don't see it as a very important thing to worry about.
DEAR BRUCE: I'm five years out from retirement and looking ahead at all my options to make that time successful. Right now, my focus is on cleaning up all debt. By this time next year, I will have everything paid off except the house mortgage ($180,000). That has me thinking about my largest monthly payment after retirement, the house payment (roughly $1,450).
When I finally roll over my 401(k), what if I take part of it and pay off my home? I know this flies in the face of all common wisdom, but is this ever a smart move? I plan to live in this house for the rest of my life, and it would be wonderful to cut monthly obligations to this degree. -- S.I., via email
DEAR S.I.: You are taking money out of one pocket and putting it into the other. Your net worth doesn't change; it's just a matter of convenience.
If you make this move, from this point forward will you be better or worse off? Among other things, you will lose a tax deduction. If your income continues to be strong, that is definitely a loss.
On the other hand, you are likely paying more in interest on the mortgage than you are earning in interest from the money that is currently invested. The big question here is how much that cheap mortgage interest is going to be worth to you if investment income increases in the next few years, as most of us expect it to do.
If you have a high interest rate on your mortgage and you can't get a cheaper rate, I would keep the mortgage in place, take the tax deduction and to some degree "gamble" that interest rates, not on the mortgage but on investments, will increase in the next few years and then you will be the beneficiary. Not a bad position to be in.
(Send questions to * HYPERLINK "mailto:bruce@brucewilliams.com" **bruce@brucewilliams.com* or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.)
(The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com.)
COPYRIGHT 2012, UNITED FEATURE SYNDICATEpublished Tuesday, May 08, 2012
STATE UNKNOWINGLY REAPS 6-CENT WINDFALLDEAR BRUCE: I recently ordered two items from the dollar menu of a national hamburger franchise. Our state sales tax in Pennsylvania is 6 percent, bringing the total to $2.12. The server then asked if I would like to contribute $1 to their charity, and I gladly agreed to do so. When he adjusted the bill, however, the total came to $3.18 rather than $3.12, meaning sales tax was added to my donation. I questioned not one, but two separate servers. Both stated that they did not know why sales tax was charged to my donation but that all the donations were processed the same way.
Is our state now charging sales tax on charitable donations, or was this a glitch in the restaurant's order-taking software? -- T.C. in Pennsylvania
DEAR T.C.: You are astute to observe the extra 6 cents you paid, and it's clear that contributions are not taxable.
When the software was put into the register, there probably was no anticipation of collecting for a charity. The likelihood is that the 6 percent goes off to the state, and that is the end of the story. I can't imagine there's any benefit to the restaurant.
If you were so inclined, you could write to the franchise and point out that transactions of this kind are being taxed and should not be, and that the software for the registers needs to be adjusted. For pity's sake, don't expect the high school kids behind the counter to even understand the question, let alone know the answer.
DEAR BRUCE: I read your column in The Sierra Vista (Ariz.) Herald. I enjoy it very much and find it generally informative. But I would like to comment on two things I've read in your column in the last few weeks.
The first point: After living outside the United States for more than 25 years, when I returned in 1983 and applied for a credit card, I was denied. The reason was that I had been declared dead by the U.S. military in 1967 (no reason to explain the whole story of why).
In any case, I went to my bank and "bought" a secured credit card for $500. I bought things and paid them off in a timely manner, and lo and behold, after a short time, I started receiving offers from every bank and its brother that suddenly wanted to issue me a credit card. Now I have more credit cards than I'll ever need, and I have a credit score of 832.
Next point: There is a truly free website where you can check your credit score every day, if you so desire. I've used it for six or seven months and have never paid a penny for the service, have never been asked for any payment and have never committed to do anything. The website is www.creditkarma.com. I recommend giving it a try. -- J.W. in Arizona
DEAR J.W.: Thank you for your informative letter. In my opinion, you handled this extremely well. The idea of being denied for no credit is even worse than having bad credit. Since you had been declared dead in 1967, I can understand why the computer would be baffled. In any event, you're off and running.
(Send questions to * HYPERLINK "mailto:bruce@brucewilliams.com" **bruce@brucewilliams.com* or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.)
(The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com.)
COPYRIGHT 2012, UNITED FEATURE SYNDICATEpublished Wednesday, May 09, 2012
TIME SHARES CAN BE INCLUDED IN A WILL -- OR NOTDEAR BRUCE: Thank you for your column on time shares. My husband and I thought we were immune to buying such a thing, but we were convinced to buy one in Mexico a couple of years ago. The ownership has some sort of corporate entity in San Diego, so it is not entirely a foreign-owned corporation. We have used it a bit, so are not too unhappy that we have it, but it lasts another 20 years or more (every-other-year occupancy).
We have three children who will share in our estate, but I wonder what will happen if they collectively refuse to pay the maintenance fees? Are heirs ever taken to court for nonpayment? We hadn't thought to mention the time share in our wills. Would mentioning it (or not mentioning it) in a will be a way to dispose of it? It is not something they will compete over! -- A.K., Beverly Hills, Fla.
DEAR A.K.: I am unhappy for you to the extent that, like a lot of people, you went to a pitch and weren't as immune as you thought. At least you've enjoyed your time share for a while.
You would find it next to impossible to sell your time share. That's just the way it is. There are companies that specialize in selling them, but most, if not all, want money upfront, which I would never agree to pay.
You can leave the time share, depending on how it is established, to someone in your will. However, if your children have no interest in it, don't leave it to them.
Even if you were to leave the time share to them, be assured that the children cannot be compelled to accept the legacy. The attorney handling the estate can show them how to decline it. You should consult your attorney about whether your estate can or would be assessed for the time-share fees after your death.
DEAR BRUCE: I am a recent reader, so I don't know if you have answered my question before.
The few articles I have read on how to invest never include gold. I have been a "gold bug" for years and finally saw an opening to get back into that market when gold was just under $300.
When I suggest to my friends that they buy gold, the usual response is that it pays no dividend. Considering the huge gains in these last years, it seems you could buy gold coins and sell them at a profit, thereby making what would be considered your "dividend" at a far greater return than is now available.
I would be interested in any comments you would care to make on this subject. -- J.G., via email
DEAR J.G.: Your friends are correct when they observe that there is no dividend, and you are correct in pointing out that gold has increased a great deal over the last few years. However, in my opinion, precious metals should not be considered an investment, but a speculation. Among other things, they show a profit only when sold. They also may incur costs in storing them safely.
I have no problem suggesting that a minor part of your investment could be in metals, with you taking possession of them. I would not be interested in the firms that store the metals for you, given that a significant number of companies that offered this service went broke.
It is completely true that the values of gold and other metals have gone up, but they also have gone down. If you were around 30 years ago, you saw the silver market hit close to $50 an ounce. When there was an accusation that a couple of people were trying to corner the market, it dropped to almost $5 an ounce.
If you are trying to be a serious investor in the metals market, there are some things you should know. Expenses are involved that you may not think of, such as assaying for gold bars. A lot of people who invest restrict themselves to numismatic value, enjoying gold coins not only for their monetary value but also as works of art.
(Send questions to * HYPERLINK "mailto:bruce@brucewilliams.com" **bruce@brucewilliams.com* or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.)
(The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com.)
COPYRIGHT 2012, UNITED FEATURE SYNDICATEpublished Thursday, May 10, 2012
Subscribe to the News Feed