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How Would Obama's Free College Plan Work? Would It Work?

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Even before his State of the Union speech, President Obama was continuing to push an ambitious post-election agenda. Among his proposals is a plan to make two years of community college free for all high school graduates -- assuming that a student is able to attend on at least a half-time basis, make continual progress toward a degree and maintain a grade point average of 2.5.

In essence, Obama's plan makes a community college a two-year extension of high school, with the goal of students either transferring to four-year colleges or graduating with sufficient job training that employers are currently seeking.

"America's College Promise" is based in part on the "Tennessee Promise," a similar program aimed at Tennessee high school graduates. The national program also operates through the states, but the federal government provides 75 percent of the funding, with the states providing the rest. (Tennessee's is funded through state lottery money.)

Obama has made the point that a high-school diploma is not sufficient to acquire a better-paying job anymore, and that free community college can bridge the current skills gap between high school graduates and employers. Critics point out that a four-year degree does not guarantee success either, and that free community college is not the best use of taxpayer dollars. Let's look at a few of the important concerns about the president's plan.

  • Funding. The estimated price tag is $60 billion over 10 years. Realistically, this must be mostly taxpayer-funded, and that may be a hard sell even with a rebounding economy. Certainly, it will be a challenge to get this past a Republican Congress. States are probably not too thrilled about another federal program adding to their costs even though the federal government is picking up most of the initial bill. Remember how Medicaid expansion worked out?
  • Educational mismatch. If designed correctly, these programs should help fill a gap in mid-range skills that threatens to hold back the economy. However, success requires that schools incorporate the mentoring aspects of the Tennessee program and that programs are designed to meet the needs of the job market. Otherwise, the program just adds to the number of overeducated baristas.
  • Fairness. Currently, the program is blind with respect to affordability. Whether it should be is a point for spirited debate. One assumes poorer students would take advantage, but surely, students who are more affluent would as well. Arguably, this is one of those rare programs where the middle-class would benefit most. Pell Grants and other mechanisms exist to help the poorest students and richer students are likely to opt for four-year institutions. Some argue that it is a waste of resources to subsidize affluent students -- unless, as The Atlantic conjectured in a recent article, your goal is to integrate America's community colleges socioeconomically.
  • Responsibility. Are students going to make the most of a free opportunity, compared to the motivation driven by having paid for their education (the so-called "skin in the game")? Of course, the same could be said for scholarships.

It is hard to see this program passing through a Republican Congress in the short term. Even though it is modeled after a state Republican program, Republicans are unlikely to embrace it. Remember, Obamacare was modeled after Mitt Romney's Massachusetts program, and that didn't win any Republican favors.

In the long term, the free community college program may be viable but it would probably have to be driven by businesses insisting that such a program would help them find qualified American employees for unfilled jobs - and good jobs would have to follow.

Success is more likely to take place through state initiatives, similar to Tennessee's program, until a critical mass is reached to convince Congress to provide federal support. But let's give Obama credit for the proposal and planting the seed to take such programs nationwide.

 

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Good News and Bad News for Americans' 401(k) Savings

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The pension is dead! Long live the... 401(k)!

If that sounds a bit too cheery to those who liked the idea of leaving it to their employers to figure out how to pay for their retirement, it needn't. According to a new poll from Gallup, 401(k) plans actually seem to be doing a good job of filling the gap left when America's system of employer-provided pension plans began breaking down.

Says Gallup, where employers offer 401(k) plans as an employee benefit, 89 percent of Americans choose to participate -- and a "majority" of workers say their employers do in fact offer such retirement plans. Among 401(k) participants, 96 percent say that they are "actively" contributing to their respective plans. What's more, according to investment management specialist Vanguard, by the end of 2013, the average 401(k) account had doubled in size (from 2008 levels) to more than $100,000.

That's the good news. Now here's the bad.

Hands in the Cookie Jar

Much like famed bank robber Willie Sutton, who was said to have robbed banks because "that's where the money is," when American workers come upon hard times, they often raid their own 401(k) plans to tide them over. Gallup data suggests that of workers with 401(k) plans, 21 percent have either made early withdrawals from these retirement accounts or taken out "loans" from them.

According to the poll, 16 percent of 401(k) participants have taken out loans against their accounts, 9 percent have made early withdrawals, and 5 percent have done both.

If that sounds like a bad idea, it might be -- and it might not. In the "might not be" camp, Bankrate.com (RATE) points out that in some instances, taking out a 401(k) loan might be the least-bad option for an employee in dire straits.

Say you absolutely, positively have to have cash right now. Maybe there's been a medical emergency, or maybe you need to pay the heating bill. The interest rate charged on a 401(k) loan (generally, the prime lending rate plus a percentage point or two -- so about 5 percent today) may be much cheaper than the average interest charged on a credit card advance (now averaging 13 percent) or a payday loan (36 percent and up). In that case, taking a 401(k) loan might be an acceptable option.

Hands Off the Cookie Jar!

It's certainly a better option than making a straight early withdrawal from a 401(k) plan. That's because, when you make a 401(k) plan withdrawal before age 59½, the Internal Revenue Service charges you both income tax on the withdrawal and a 10 percent penalty on the amount withdrawn. Remember, 401(k) rules permit you to early-withdraw up to 50 percent of your total savings, up to a limit of $50,000.

Raiding your retirement piggy bank by way of a 401(k) loan is for this reason preferable to making an early withdrawal, but even here, there are downsides. For example, unlike a withdrawal, taking out a 401(k) loan may require paying a loan origination fee, administrative, maintenance, or other fees -- all of which add to the loan's cost and further drain your 401(k) balance.

Also, the IRS requires that 401(k) borrowers make regular loan repayments -- at least quarterly -- until the loan is repaid. Also, in most cases, the entire loan must be repaid within five years. Otherwise, the outstanding balance at the end of that term is deemed a withdrawal and incurs the taxes and penalties already mentioned.

Simple enough? It may be, or it may not, because circumstances outside your control may prevent you from paying back the loan or even making regular payments. Long-term illness, unemployment, or other financial difficulties may intervene, forcing the conversion of a 401(k) loan into a 401(k) withdrawal.

Your Future Is at Stake

And even in the best case, if you are able to make all the payments on your 401(k) loan, pay the interest, pay the principal, and pay it off in full and on time, all those payments must be made in after-tax dollars -- whereas your original 401(k) balance was funded with pre-tax dollars (with the exception of Roth 401(k)s). Translation: You're replacing tax-free savings with new savings that you had to pay tax on first -- but getting no additional benefit from that fact.

Long story short: Kudos, America, for taking full advantage of the availability of your 401(k) plan, and loading it up with cash. All you have to do now is make sure not to fritter it away.

Motley Fool contributor Rich Smith has never worked for an employer offering a 401(k) plan -- yet he nonetheless has a fully funded 401(k) plan of his own. He'll give you three guesses how. (Guess in the comments section below.) Also, he has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Find out our favorite high-yielding dividend stocks for any investor in our free report.​

 

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The Monster Smartphone Maker You Haven't Heard Of - Yet

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AOL
Unlike Apple (AAPL) or Samsung (SSNLF), China's Xiaomi doesn't have a brand name that's easy for Westerners to read or say. (It's basically "Show me," if the first word is pronounced like the initial syllable in "shower.")

In spite of this, and of its almost nonexistent brand recognition in this part of the world, Xiaomi is a runaway success in its home market. Its current growth rate is nothing short of astounding, and it might start to become a household name in other parts of the world if it effectively realizes its plans.

Calling on Growth

In almost no time flat, Xiaomi has become China's leading smartphone manufacturer in terms of shipments.

Founded in 2010, it pushed aggressively into the market, and in the second quarter of 2014, it overtook Samsung to become the No. 1 smartphone maker in the country, with a 14 percent market share compared to the Korean company's 12 percent. The figures from just the previous quarter: Xiaomi 11 percent, Samsung 18 percent.

All told, according to its own data, Xiaomi sold 61 million smartphones last year, more than three times the nearly 19 million in 2013. Sales, meanwhile, more than doubled to over $12 billion. Xiaomi has managed to grow as fast as it has because it knows its market -- and how to sell a lot of product to it.

The Price Is Right

A big part of this has been pricing. In China its 16 MB Mi4, unlocked, costs around $320. That's far less expensive than a comparable iPhone 6, which has a list price of $649 on Apple's e-store but typically costs much more in China. Meanwhile, Samsung's Galaxy S5 has a list price in excess of $600 online.

In spite of their low prices, Xiaomi's phones are powered by components from top manufacturers and have feature sets that stack up well against the competition's. For example, the Mi4's processor is a fast one supplied by Qualcomm (QCOM), and the 13-megapixel rear camera comes from Sony (SNE).

In terms of software, the devices run a modified version of Google's (GOOG) (GOOGL) popular Android operating system, putting Xiaomi's apps on par with models that cost significantly more.

Xiaomi can afford to sell its handsets for less, because unlike its competitors, it doesn't aim to make money from them. Rather, the idea is to break even on the hardware in order to turn a profit on the software -- the apps and services users want/need to enhance their experience with the phone or tablet.

In many ways, the company's business model is similar to Amazon.com (AMZN). The American retailer sells its Kindle tablets at cost in order to drive customers to its content, like books and videos.

International Expansion

Like many firms that have done well in their home countries, Xiaomi has ambitions to make a stronger push abroad.

The company has recently rolled out its wares in nearby Asian countries, as well as in cost-conscious lands such as India, Mexico and Turkey. If all goes well, it'll make a play for deep-pocketed locales such as the U.S. and Western Europe in the future.

But those places might be a tougher sell. First, they are hotly competitive markets dominated by companies that are much larger and richer. Xiaomi's 61 million smartphones sold last year is an impressive number, but Apple moved almost twice that many in the first nine months of the year alone.

Another potential hindrance is the design of Xiaomi's products -- its offerings are strongly reminiscent of iPhones. The narrow slot of a speaker at the top of the headset seems very Apple-y, for example, as does the "home" button on the bottom. The thin, minimalist overall look also feels quite similar to the American company's famous line.

In markets such as the U.S. that have a big iPhone customer base, that resemblance could hurt Xiaomi's chances. Smartphones are communication devices and fashion/lifestyle choices. The Chinese company's goods, then, might quickly acquire a damaging reputation as Apple knockoffs for cheapskates.

Killer Instinct

Still, Xiaomi is likely to be a tough competitor once it begins a serious expansion throughout the world. Its rapid growth indicates that it has the instinct every consumer-goods company needs for mass success: the sense for what its customers want, need, and are willing to pay for. It's managed to do well in China with that talent, so we shouldn't be surprised if the company uses it to win over legions of foreign customers, too.

Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple and Google (A and C shares), and it owns shares of Amazon.com, Apple, Google (A and C shares) and Qualcomm. Try any of our Foolish newsletter services free for 30 days. Check out our free report on the Apple Watch to learn where the real money is to be made for early investors.​

 

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You're Going to Pay for the IRS Getting Starved to Death

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By Eric Reed

Paying taxes is getting much harder. In addition to collecting revenue, the Internal Revenue Service helps Americans to navigate our complicated tax code. Up until recent years, the agency ran a robust customer service program, which combined telephone operators, walk-in centers and filing assistance. Increasingly draconian budget cuts over the past five years, however, have starved the IRS of resources and begun dismantling this support system. For taxpayers this means much less help when they need it, even at the same time as Obamacare requirements are adding a layer of complexity to tax filings.

According to Patrick Sheehan, an Illinois tax attorney and former IRS agent, this is going to be a big problem. And it's not going to be a problem for government, corporate taxpayers or the wealthy. This is a problem that will hit home for average taxpayers just trying to do their best.

"We all dislike the IRS to some degree," Sheehan said. "Some people more than others of course, but honestly the IRS is a necessary evil in today's voluntary tax compliance system. You can look at the IRS like a policeman. The policeman makes sure that everyone pays their liabilities and obeys the law, and drops the hammer on them when they break it."

Congress Cut Its Budget

When you leave the agency without enough money to do its job, he explained, "you handcuff the policeman." That's exactly what's happened as Congress has slashed the IRS's budget again and again over the past several years, totaling $1.2 billion in cuts since 2010.

The motives, Sheehan said, are largely political. Republicans in Congress are trying "punish" the IRS for recent scandals such as allegations that it targeted Tea Party groups seeking tax-exempt status. Others have theorized that opponents of Obamacare are trying to starve the agency into dismantling the law's enforcement mechanism.

Regardless of motives, the result has been a 30 percent reduction in staff, fewer audits and dramatically cut public services. Today the IRS refuses to answer any but the most basic questions on tax law. The agency has also discontinued all help for off-season requests leaving, for example, anyone who has to file quarterly estimated taxes (a relatively complicated process) on his own.

Hundred of thousands of people call the agency looking for help during tax season, according to Sheehan, and many of them are going to go underserved. "Right now, the taxpayer advocate is estimating that only half of those calls will be answered," he said.

How You Will Pay

The upshot is that all of the money that Congress saved by gutting the IRS will come back out of taxpayers' pockets. Citizens left to their own devices will have to either hire professional help or run the risk of getting their taxes wrong. Accountants can cost hundreds of dollars to hire, but making a mistake with your income tax triggers interest, fees and penalties that can add up even faster. Mistakes will compound under this system, since hiring an accountant is generally more expensive than the refund is worth. Some people will get caught and penalized. Many won't.

What about arguing that you reached out for help but couldn't get any? Turns out that's just not something the government is interested in. "Ultimately it falls up on the taxpayer to file an accurate tax return," Sheehan said. "If the taxpayer doesn't file an accurate return then certainly the taxes and the interest on the taxes is going to be their responsibility.

An IRS agent or judge might be willing to waive penalties in the face of a good faith error, but even that's not guaranteed. And if a letter goes unopened because the understaffed IRS office simply couldn't get to it in time? Once again, this becomes the taxpayer's problem. Fees, interest and penalties will all collect while that envelope sits on a shelf.

In the face of all of this, sooner or later some people will inevitably give up. Demanding that citizens keep up with increasingly byzantine tax laws while offering no support whatsoever will seem unreasonable. An overwhelmed agency won't be able to track everyone who has and hasn't paid, and tax evaders will increasingly begin to slip through the cracks.

Opting Out of the System

Law-abiding citizens will look sideways at their neighbor who no longer pays taxes and feel like fools for doing so themselves. It's a domino effect that Sheehan describes as the worst-case scenario, and one that's not necessarily all that far away. "Collapsed is a really good word," he said, "because if you can't get work done with the IRS, what's going to happen is people are going to stop filing their tax returns."

Without the "police officer" to monitor our voluntary compliance system, America could approach this breaking point where more and more people start opting out of the system. Even law-abiding citizens will eventually stop paying if they feel like chumps, and it only needs to start with a few frustrated taxpayers throwing up their hands after the second hour on hold for a simple question about the 1040.

"I think it's going to be significant numbers," Sheehan said. "What drives people to file old tax returns is a letter from the IRS. That's what drives people, because they have an innate fear of the IRS. If those letters stop coming because the IRS is simply understaffed and overwhelmed, that guy's not going to file."

"The IRS is doing the best that it can right now under really terrible circumstances, but at some point there's going to be so much momentum behind the people that stop filing their returns or people who stop paying their taxes, at some point there's going to be so much momentum that it will be hard to undo," Sheehan said.

 

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Staples Buys Office Depot in Bid to Keep Pace With Change

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Staples Buys Office Depot for $6 Billion

By MICHELLE CHAPMAN

NEW YORK -- There are few places where evolving technology has been more disruptive than in the work place, which played out again Wednesday as Staples (SPLS) announced it would spend about $6 billion to buy Office Depot (ODP).

Once one-time rivals will no longer compete in close proximity for the same customers, instead putting up a front of 4,000 stores to hold off encroachments from the likes of Walmart (WMT), Target (TGT) and Amazon.com (AMZN).

Annual sales of the new office-supply giant are expected to approach $39 billion.

This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment.

The two companies tried to combine forces before but were successfully blocked by anti-trust regulators. That was almost 20 years ago, however, and with the boards of both companies signing on unanimously to try it again, they appear confident that their landscape has changed substantially.

"This is a transformational acquisition which enables Staples to provide more value to customers, and more effectively compete in a rapidly evolving competitive environment," said Staples CEO and Chairman Ron Sargent.

Big wholesalers and office supply manufacturers that will have one less company to sell products to may see it differently, said Citi Investment Research's Kate McShane.

It was slightly more than a year ago that Office Depot merged with OfficeMax for much the same reason. And it is the nod from regulators on that $1.2 billion deal in late 2013 that may be giving the companies more confidence that they now see things from their perspective.

Sargent said Wednesday that while they don't know how the Federal Trade Commission will react, a lot has changed.

When the FTC closed its investigation into the merger of Office Depot and OfficeMax it seemed to agree, saying that the market for the sale of consumable office supplies had changed significantly.

Staples did touch on some of those monopoly issues Wednesday, saying that it's not required to close the deal with Office Depot if antitrust authorities require divestitures that deliver more than $1.25 billion of Office Depot's 2014 revenues in the U.S. or if a requirement of the antitrust authorities has a material adverse effect on Office Depot's operations outside of the U.S.

Store Closings

While Sargent said it's too early to talk about specific integration plans for the company, Staples and Office Depot each plan to close stores this year. Staples previously announced that it would close up to 225 stores by the end of 2015. Sargent said Wednesday that those plans haven't changed. Office Depot CEO Roland Smith said the chain is looking to close 135 stores this year.

In the proposed deal, Office Depot shareholders will receive $7.25 in cash and 0.2188 of a share in Staples at closing. The transaction values Office Depot at $11 per share, which is based on Staples' Monday closing stock price -- the last trading day before initial reports of a buyout began to leak. The companies put the deal's equity value at $6.3 billion.

Office Depot shareholders will own about 16 percent of the combined company.

Framingham, Massachusetts, where Staples is based, will serve as headquarters for the combined company. Sargent said that Staples will maintain a presence in Boca Raton, Florida, where Office Depot is based.

Staples expects to realize at least $1 billion in annual cost savings by the third full fiscal year after the transaction is complete.

Driving Growth

"These savings will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies," said Sargent, who will be chairman and CEO.

The companies said Wednesday that they began negotiating in September, perhaps attempting to diminish what was seen as pressure on Staples from activist investors to do just that.

Hedge fund Starboard Value disclosed a 5.1 percent stake in Staples in December and last month began publicly urging it to make a move on Office Depot.

The deal is expected to close by year's end, but still needs approval from Office Depot shareholders. Once the closing occurs, Staples board will increase from 11 to 13 members and include two Office Depot directors approved by Staples.

Staples said that it is temporarily suspending its stock buybacks so that it can concentrate on paying down debt related to the deal. It has agreed to pay a $250 million termination fee if the deal is called off due to antitrust roadblocks. There will be $1 billion in one-time costs related to the transaction.

Shares of Staples shed fell $1.39, or 7.3 percent, to $17.62 in morning trading. Office Depot's stock added 26 cents to $9.54.

 

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Mind Your B's, G's and Q's: Some 1099 Forms Can Trick You

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Beware: Some 1099 Tax Forms Can Trick You

By Kevin McCormally

Part of the blizzard of paperwork taxpayers have to deal with each year is the family of 1099 forms.

The 1099-INT reports taxable interest to you and to the IRS; the 1099-DIV reports taxable dividends; the 1099-R reports taxable retirement income from an IRA, maybe, or a pension plan; the 1099-MISC, freelance or consulting income. But not all dollars reported on 1099s should show up on your 1040 form as taxable income.

Take the 1099-G. It's used to report payments from a government, including any state tax refund you received the previous year. Sure, some taxpayers have to pay tax on what they got back. But, in fact, most of us don't. For the 70 percent or so of taxpayers who claimed the standard deduction last year, that state refund shown on the 1099 is 100 percent tax free. Even if you itemized, part of the refund can be tax-free. There's an easy worksheet in the instruction packet. TRun through it to protect yourself against an expensive mistake.

The 1099-Q is another potentially misleading form. It reports distributions from a state college saving plan or Coverdell education savings account. But, again, the odds are very, very good that the payout is completely tax-free. That's the case if the money was used to pay tuition or other qualifying costs. Tax is due only if you used the money for other purposes, and then tax is due only on earnings, not on the part that represents a return of contributions. Read the instructions carefully before you pay tax on any part of a 1099-Q distribution.

Reported by Your Brokers

And then there's the 1099-B that brokers send out. This 1099 might actually open the door to a tax-saving loss. This form reports the proceeds of the sale of a stock, mutual fund shares or other assets.

But the full amount is never taxable. You get to subtract your basis -- that's generally what you paid for the asset. If that's more than the proceeds, you have a loss that will offset other taxable income and reduce your tax bill. Sometimes, the 1099-B shows your basis in the asset that was sold; sometimes it doesn't. But in any case, make sure you subtract your basis from the proceeds, so you report only the real profit or real loss on your tax return.

Learn about other costly mistakes made by taxpayers to ensure that you pay as little in taxes as the law allows.

 

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11 Surprising Things You Can Rent

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3 Surprising Things You Can Rent

By Cameron Huddleston

Cars and tuxedos are just the tip of the iceberg when it comes to things you can rent. You name it, you can rent it. Really.

Here are 11 of the more surprising things you can rent (that are fit to print). In some of the cases below, it does make financial sense to rent rather than buy. But renting isn't always a money-saving prospect.

Chickens. If you savor the idea of gathering your own eggs for breakfast every morning, you're in luck. Chicken rental businesses are popping up around the country. For example, Rent a Coop in suburban Washington, D.C., rents a coop and two hens for four weeks for $180, plus a delivery fee. The company says you can expect to get about a dozen eggs a week from a pair of hens. Rent the Chicken in Pennsylvania charges $350 for a portable coop, two chickens and food for about seven months. Of course, the cheaper option would be to buy fresh eggs from the farmers market each week.

Goats. Why stop at chickens, right? You also can rent goats. Rent a Goat operates in 11 states, providing goats to clear land in an eco-friendly way. Rental amounts depend on the size of the property that needs to be cleared. The company estimates that it's up to 50 percent cheaper to rent goats to clear land than it is to hire workers with machinery to do the job.

Lego sets. Tired of buying your kids toys that they only play with a week or two then shove under the bed to collect dust? You can avoid the accumulation of unused toys with a rental service. Starting at $17.99 a month, Pley.com offers a subscription service that delivers Lego sets to your home. You can keep a set as long as you want, but when your kids start getting bored you can exchange it for a new one. The monthly subscription fee covers the cost of shipping. Each set is sanitized, and there is no additional charge if you return a set with a few pieces missing.

Kid couture. You can rent designer apparel for your young fashionista through Wearhop.com. Borrow new or like-new apparel for children up to age 5 for one to six months for up to 70 percent off retail price. However, keep in mind that you can usually buy gently used designer apparel for kids on eBay (EBAY) for about the same price as you can rent. By purchasing, you leave yourself the option to resell the clothing online or through a consignment shop once your kids have outgrown the outfits, assuming they are still in good condition.

Designer handbags. Perhaps you've heard the expression "fake it till you make it." Bag Borrow or Steal lets you do just that by renting designer purses for a month at a time at a fraction of the price you'd pay to buy them. Before you get too excited about the prospect of toting a genuine Prada or Louis Vuitton purse, know that renting designer handbags isn't cheap. You can find some for $45 a month, but many rent for $500 or more. You might actually pay less -- and get to keep it -- by purchasing a used handbag at an upscale consignment shop.

Wedding dresses. Brides spent $1,281, on average, on wedding gowns in 2013, according to TheKnot.com. That's a lot to pay for a dress you'll only wear once. So renting can make sense in this case. RentTheRunway.com rents dresses for as little as $30 (knee-length, fitted gowns). For more traditional full-length gowns, Borrowing Magnolia charges $99 to send you up to three dresses to try on and will credit that amount toward a rental. Most dresses cost $450 or more to rent, which is still less than half the average amount spent on a wedding gown.

Wedding cakes. Don't just save money by renting a dress. You can cut costs by renting a cake, too. CakeRental.com lets your rent a fake cake made of foam for $150 to $250. There's a small compartment where you can stash a few edible pieces for the cake cutting. And you can serve your guests inexpensive sheet cake. They'll probably never know the difference, but you'll know that you spent less than half as much as couples typically shell out for a cake -- about $550, according to TheKnot.com. In some areas, cakes can cost more than $1,000, according to Bridal Guide magazine.

Caskets. Spare your family the expense of buying you a casket when you die and tell them to rent one instead. Caskets cost $2,000 to $5,000, on average, according to Everplans, an online resource for end-of-life planning. However, many funeral homes will rent caskets to be used during a viewing or funeral service for $750 to $900, according to Cremation.com. You'll pay another $150 to $250 for a simple wooden box insert that can be used for cremation.

Christmas trees. Tree-huggers rejoice: You can get a real tree for the holidays without chopping one down. Rent a Living Christmas Tree will deliver potted evergreens to addresses in select California cities for $65 to $350, and then pick up the trees in January. However, if you have a yard it would make more sense to buy a living tree, either potted or with a root ball, and re-plant it yourself after the holidays.

Tools. If you have a home-improvement project you want to tackle on your own to save money, the last thing you should do is fork over big bucks to buy pricey power tools and other specialty equipment you might never use again. You can rent everything from pressure washers and scaffolding to concrete saws and floor sanders at home-improvement stores. For example, you can rent tools from Lowe's (LOW) for $25 to $65 a day, depending on the tool.

Crowds. Ever wonder what it would be like to be famous, with hordes of adoring fans screaming your name, taking your picture and asking for autographs? Well, you can find out, but it'll cost you. Rent groups of five to 300 from Los Angeles-based Crowds on Demand to greet you at the airport, follow you as you shop, or even cheer for you at the office so you'll be the envy of your co-workers. Price quotes available upon request.

 

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FTC Wonders: Are Dog Waste Bags Earth-Friendly?

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Makers of dog poop bags could be in deep doo-doo with the Federal Trade Commission, which doesn't want them falsely claiming that their bags are "biodegradable" or "compostable."

The FTC has sent warning letters to 20 manufacturers of dog waste bags, which pet owners use to pick up after their pets and typically throw into the trash. The letters, sent after FTC staff examined the companies' environmental claims, provide examples of potentially deceptive statements regarding the bags' environmental friendliness, their biodegradability or compostability.

The FTC said in a statement Tuesday that consumers generally believe that products labeled "biodegradable" will completely break down into its natural components within a year after disposal. "Most waste bags, however, end up in landfills where no plastic biodegrades in anywhere close to one year, if it biodegrades at all," the FTC says.

Firms Asked to Review or Remove Misleading Statements

Further, consumers believe that "compostable" means a product will safely break down at the same rate as other products added to their home compost pile, like leaves and grass clippings. However, dog feces are unsafe to add to home compost piles, and few commercial composting facilities accept them. "Therefore, compostable claims for these products are generally untrue," the statement said.

The FTC's letter advises the companies -- which it did not name -- to review their marketing claims and tell the agency how they intend to review or remove misleading statements, or explain why they won't.

"Consumers looking to buy environmentally friendly products should not have to guess whether the claims made are accurate," said Jessica Rich, director of the FTC's Bureau of Consumer Protection. "It is therefore critical for the FTC to ensure that these claims are not misleading, to protect both consumers and honest competitors."

 

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Pandora Needs to Pump Up the Volume

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The facade of the New York Stock Exchange is seen on Wednesday, June 15, 2011 decorated in honor of the Pandora IPO
Richard Levine/AlamyPandora promoted itself on Wall Street for its 2011 IPO.
Pandora (P) shareholders weren't singing a happy tune in 2014, but now it's time for a new song. The leading music streaming service reports quarterly results on Thursday afternoon, and after the stock shed a third of its value last year, there's nothing like fresh financials to turn market sentiment around.

It won't be easy. Subscriber growth has been slowing, and the competition is getting smarter. Wall Street's skeptical: The stock fell another 7 percent in January.

Analysts are holding out for a big step this time around. They see fourth-quarter revenue of $276.3 million, soaring 38 percent from the prior year's holiday quarter. Pandora's expected to crank out a profit of 18 cents a share, up sharply from the 11 cents a share it served up a year earlier.

Another encouraging sign is that it has beaten Wall Street's profit targets consistently over the past year. The stock may not have rewarded those positive surprises through 2014, but the trend seems to suggest that Pandora will earn more than 8 cents a share on Thursday.

Out of Tune

Double-digit growth on both ends of the income statement will be welcome, but that won't be enough to turn around a stock that has plunged 40 percent over the past 13 months. The biggest concern at Pandora -- its slowing subscriber growth -- needs to be addressed.

Pandora had 76.5 million active monthly users as of the end of September. That's well ahead of the competition in this country, but it's only 5 percent higher than it was a year earlier.

The news is better once you dig beneath the surface. Those 76.5 million music buffs are relying more on Pandora to fuel their daily soundtracks: It served up 4.99 billion hours during the quarter, 25 percent more than it did a year earlier. It's also seen its share of the overall U.S. radio market grow from 7.77 percent to 9.09 percent over the past year.

We're also seeing Pandora doing a better job of milking more money out of its streams. Revenue for its third quarter climbed 40 percent, in line with the 38 percent that Wall Street pros are eyeing for the fourth quarter.

Everything seems to be coming together for Pandora. Subscriber growth may be decelerating, but it's becoming a stickier app for its still-growing fan base as it coaxes marketers into spending more to reach those listeners. The problem, clearly, is that investors are concerned about where Pandora will be in the future.

A Traffic Jam Is My New Jam

It's not just Pandora gaining ground here. Spotify announced last month that it now has 60 million active users, with 15 million of them on board as paying subscribers. Pandora has a wider audience, but fewer premium members since the vast majority of its listeners put up with ads to enjoy free access to the platform.

The big names of tech are also storming the castle. Apple (AAPL) is experiencing a slide in iTunes download sales, which led to the 2013 rollout of iTunes Radio and the 2014 purchase of Beats Music. It's now a big player in streaming music. Amazon.com (AMZN) is giving its Prime members streaming access to a growing catalog of commercial-free tracks. Microsoft (MSFT) and Google (GOOG) (GOOGL) have also launched streaming music platforms, realizing that it's a big part of the mobile revolution. Google last year bought Songza as another way into the sector.

Pandora's audience will be tempted by the growing array of alternative services. The company will have to prove on Thursday that it's kicking off 2015 with momentum in its corner.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Google (A and C shares) and Pandora Media. The Motley Fool owns shares of Amazon.com, Apple, Google (A and C shares), Microsoft and Pandora Media. Try any of our Foolish newsletter services free for 30 days. Check out our free report on the Apple Watch to learn where the real money is to be made for early investors.

 

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ADP: Private Employers Post Steady Job Gains in January

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ADP
Wilfredo Lee/AP
By CHRISTOPHER S. RUGABER

WASHINGTON -- U.S. companies hired at a solid pace last month, a private survey found, the latest sign of steady improvement in the job market.

Payroll-processor ADP (ADP) said Wednesday that companies added 213,000 jobs last month, a decent increase though also the smallest in four months. The figure suggests Friday's government report will also show a solid burst of hiring. Economists surveyed by FactSet expect the government's report will show that employers added 230,000 jobs.

The ADP numbers cover only private businesses and sometimes diverge from the government's more comprehensive report, which includes government agencies.

Businesses have added 200,000 jobs or more in nine of the past 10 months, according to the ADP report.

Manufacturers added 14,000 jobs, down from 23,000 in December. Construction companies hired 18,000 more workers, down from 26,000 the previous month. But services companies ramped up hiring: A category that includes retail, transportation and utilities firms added 54,000 jobs, up from 40,000 in December.

Mark Zandi, chief economist at Moody's Analytics, which compiles the report, said that oil and gas drilling companies have started to cut back on their payrolls in response to a sharp drop in the price of oil. Yet companies that have benefited from lower oil prices have yet to step up hiring, he said.

Overall, healthy economic growth has encouraged employers to add jobs. The economy expanded at a 4.1 percent annual pace in the final nine months of last year. Consumers ramped up their spending in the fourth quarter at the fastest pace since 2006, as lower gas prices and steady job growth boosted their spending power. Most analysts expect the economy to grow this year at the fastest pace in a decade.

Employers added nearly 3 million new jobs in 2014, making it the best year for hiring since 1999. Still, the job market is not yet back to full health. There are about 6.8 million people are working part-time but would prefer full-time work, up from just 4.1 million before the downturn.

And last year's job gains have yet to push up wages much. They rose just 2.1 percent in 2014, the Labor Department said last week. That's up slightly from the previous year, but below the roughly 3.5 percent gain that is consistent with a healthy economy.

 

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There May Never Be Another Chipotle

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Once again, Chipotle Mexican Grill (CMG) is reminding us that it's the rock star in the growing realm of fast-casual eateries. The market may not have warmed up to the chain's latest quarterly results, but it's ultimately another period of healthy double-digit growth on both ends of the income statement.
The 1,783-unit chain generated $1.07 billion in revenue, up 27 percent since the prior year's holiday quarter. Expansion and a 16.1 percent spike in comparable-restaurant sales fueled the heady top-line gains. Earnings grew even faster, overcoming an uptick in food costs to deliver a profit of $3.84 a share, up 52 percent from a year earlier.

Chipotle's outlook for 2015 didn't wow the market. Chipotle expects comparable-restaurant sales to climb in the low-to-mid single digits. However, this was exactly what Chipotle said back in October when it reported its third-quarter results. One can argue that the only reason the stock is taking a hit after another quarter of strong growth is that the shares had soared nearly 20 percent since the day after it offered up its third-quarter results three months ago. That's a lot of helium, ripe for a correction if Chipotle doesn't live up to its historical tendency of boosting its guidance at most quarterly checkpoints.

Life After Chipotle

The lines at Chipotle are long, but they move pretty fast. The chain's signature assembly line and speedy checkouts keep the queues going at a steady clip. However, from time to time, the lines are too long for some hungry patrons to wait out. They walk away, only to realize that they still need to find a place to eat.

That's when they have to settle for less, and that's exactly where investors bailing on Chipotle find themselves now. They sold the stock, but it's going to be hard to find another eatery investment that has the cult-fave appeal of Chipotle. They certainly aren't going to find a publicly traded restaurant that saw the average store sell 16.1 percent more than it did a year earlier, much less a chain of its size with the confidence to open another 190 to 205 new restaurants this year.

Punch in "the next Chipotle" in an online search and you'll get an assortment of bold prognostications that failed to pan out.

Noodles & Co. (NDLS) went public at $18 two years ago, and it was billed as fast-casual's response to pasta. The fast-growing chain offering noodles in several international cuisine varieties was hot out of the gate, nearly tripling when it peaked a few days later. However, the stock has gone on to shed nearly half of its value as sluggish restaurant-level performance suggests that quality pasta isn't a scintillating draw.

Several burrito rollers have been hailed as the next Chipotle, and Qdoba -- owned by Jack in the Box (JACK) -- is one of the closest in terms of size, with 638 locations. Comps rose a respectable 6 percent at Qdoba in fiscal 2014, but that came after a mere 0.8 percent uptick in fiscal 2013. Jack in the Box sees comparable-restaurant sales at Qdoba climbing 6 percent to 8 percent in fiscal 2015. That may be better than Chipotle's own guidance, but Qdoba locations still generate lower sales. Either way, for investors, buying into Qdoba means also buying into the slower-growing Jack in the Box burger chain with more than three times as many locations as Qdoba.

Top of the Heap

Finally we have The Habit (HABT). Quality isn't a problem for the small but growing burger joint. The same Consumer Reports survey last year that found Chipotle at the top of heap for taste in the burrito category finds Habit as the leader in the burger category. The Habit Grill even beat out cult faves In-N-Out and Five Guys. It went public at $18 in November, trading as high as $44.20 a few weeks later before surrendering nearly a third of its value. With just 99 locations as of the end of 2014, it's still too early to tell if it will break through the glut of gourmet burger chains. Unlike Chipotle, it still has to vanquish the competition.

So, yes, Chipotle may have let down its investors on Tuesday, but good luck finding a better play on the fast-casual dining trend that should continue to get stronger in this improving economy.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.

 

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10 Cheapest Places Where You'll Want to Retire

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Top Tax-Friendly States

By Stacy Rapacon

Choosing a retirement destination with a low cost of living can really help stretch a fixed income. But the place you select should offer more than just affordability. Safety, livability and economic stability are equally important qualities to retirees.

Using data on 223 metropolitan areas across the U.S., we identified the places with the cheapest living costs specifically for retirees. We placed particular emphasis on reasonable price tags for the two biggest retirement budget-busters, health care and housing, and we also looked at states' tax burdens on retirees. Plus, in case you find that you want or need to go back to work to earn extra income, we sought out economically healthy areas with relatively low poverty. We favored areas with large populations of adults over 65, and because safety is paramount, we weeded out cities with above-average crime rates.

Metropolitan-area population data and poverty rates are from the U.S. Census Bureau. Retiree living costs are from the Council for Community and Economic Research. Each state's tax rating is based on Kiplinger's Retiree Tax Map, which divides states into five categories: most tax friendly, tax friendly, mixed, not tax friendly and least tax friendly. Crime rates are from the FBI.

After narrowing the field to 32 finalists, we selected the 10 affordable cities that, as a group, offer retirees diverse choices in terms of size, climate, geography and lifestyle.

1. Grand Junction, Colorado
  • Metro population: 146,562.
  • Share of population over 65: 15.1 percent (U.S.: 13.2 percent).
  • Cost of living for retirees: 4.6 percent below the U.S. average.
  • Colorado's tax rating for retirees: Friendly.
This small Colorado town offers retirees some big advantages. Residents 55 and older get a generous retirement-income exclusion from state taxes, and there is no inheritance or estate tax. Plus, living costs are comfortably below average. The city's median home value is $217,700, compared with $236,200 for the state as a whole, according to the U.S. Census Bureau.

Active retirees will especially enjoy the free amenities afforded by nature. The weather is mild, and the landscape offers plenty of opportunities for scenic hiking and biking, as well as fishing. Numerous national parks and forests are a short drive away.

Colorado Mesa University, in the heart of downtown Grand Junction, adds to the local attractions with its intellectual and cultural events. Take advantage of the Golden Scholars Program, which offers courses at the university for just $25 per credit hour (down from about $329 per hour for in-state undergrads). By auditing classes, you also gain computer and library access and receive discounts on sporting, music and theater events.

2. Pittsfield, Massachusetts
  • Metro population: 130,866.
  • Share of population over 65: 18.8 percent.
  • Cost of living for retirees: 3.5 percent above the U.S. average.
  • Massachusetts's tax rating for retirees: Not friendly.
Think Boston in the Berkshires without Beantown's high cost of living, which is 39.1 percent above the national average for retirees. Local housing is particularly affordable, at 5.5 percent below average among retired residents, compared with 81.2 percent above average in Boston. Indeed, while the median home value is $330,100 in Massachusetts, it's just $176,500 in Pittsfield.

You can use those savings to offset the state's less than favorable tax situation. The Bay State has its own estate tax, and property taxes run high. But Massachusetts does offer one tax advantage to retirees: It does not tax Social Security and most government-employee pension income.

In addition to the fall foliage, the area offers plenty of diversions throughout the year. The Pittsfield State Forest, for example, is open year-round, offering cross-country skiing in winter and camping, fishing and hiking in summer. Music lovers have the nearby Tanglewood Music Center, the summer home of the Boston Symphony Orchestra. Art fans will want to make the short drive to the Clark Art Institute, in Williamstown, and contemporary-art complex MASS MoCa, in North Adams.

3. Prescott, Arizona
  • Metro population: 211,280.
  • Share of population over 65: 24.3 percent.
  • Cost of living for retirees: 2.1 percent below the U.S. average.
  • Arizona's tax rating for retirees: One of the 10 most friendly states.
You can't talk about retirement without mentioning Arizona. Not only does it offer a warm, sunny climate and desert setting, the Grand Canyon State is also the fifth friendliest when it comes to retiree taxes. For example, the state exempts Social Security benefits from taxes, as well as up to $2,500 of some other types of retirement income. Plus you won't face an inheritance or estate tax.

Located about 100 miles north of Phoenix, the state capital, Prescott proves more popular as a retirement haven -- the 65-and-older crowd make up only 12.4 percent of the Phoenix-Scottsdale metro area's total population. And while slightly more expensive than Phoenix proper, which sports retiree living costs 3.6 percent below the national average, Prescott is much gentler on fixed incomes than Scottsdale, where costs are 12.9 percent​ above the national average for retired residents.

4. Decatur, Alabama
  • Metro population: 153,478.
  • Share of population over 65: 14.3 percent.
  • Cost of living for retirees: 9.6 percent below the U.S. average.
  • Alabama's tax rating for retirees: Friendly.
When it comes to taxes, Alabama is certainly a sweet home for retirees. The Yellowhammer State doesn't tax most retirement income, including Social Security. Also, homeowners age 65 and older are exempt from state property taxes, and exemptions from local property taxes are available based on income.

Living costs are equally favorable. The area's retiree health care and housing costs are particularly cheap, at 8.3 percent and 30.2 percent below average, respectively. While the median home value is $176,700 in the U.S., it's just $122,500 in Alabama and $120,400 in Decatur.

Situated along the Tennessee River in northern Alabama, the city stands out because of its low crime rate -- especially compared to nearby metro areas such as Florence-Muscle Shoals. So enjoy all the boating, fishing and birding the region has to offer.

5. Vero Beach, Florida
  • Metro population: 138,203.
  • Share of population over 65: 27.5 percent.
  • Cost of living for retirees: 0.7 percent above the U.S. average.
  • Florida's tax rating for retirees: One of the 10 most friendly states.
Everyone knows that retirees flock to the Sunshine State for the warm weather and beautiful beaches. Even more attractive is the tax picture. Florida has no state income tax, estate tax or inheritance tax, and it doesn't tax Social Security or retirement income. (See 10 Most Tax-Friendly States for Retirees for more on Florida's taxes.)

Many of Florida's popular and affordable retirement hot spots are clustered along the Gulf, including Fort Myers, Sarasota and Tampa. But on the Atlantic side our pick is Vero Beach, which offers peaceful beaches and is a haven for golf, water sports and fishing -- all for living costs on par with the national average. Housing costs for retirees are notably affordable, at 15.2 percent below average.

6. Pittsburgh
  • Metro population: 2.4 million.
  • Share of population over 65: 17.4 percent.
  • Cost of living for retirees: 3.7 percent below the U.S. average.
  • Pennsylvania's tax rating for retirees: Friendly.
The biggest city by far on this list still manages to be affordable. Housing costs are especially low, at 17.7 percent below the national average for retirees. Indeed, the median home value is a miniscule $89,400 in the city, compared with $164,700 for the state as a whole, according to the Census Bureau. Plus, Pennsylvania's tax laws are favorable to retirees -- Social Security benefits and distributions from 401(k)s, IRAs, deferred-compensation plans and other retirement accounts are left alone.

Despite its Rust Belt reputation, Pittsburgh offers sophisticated seniors plenty of cultural attractions, including the Andy Warhol Museum, the Pittsburgh Ballet Theatre and a vibrant jazz scene. The presence of many educational institutions -- including Duquesne, Carnegie Mellon and the University of Pittsburgh -- adds further appeal. Also, the city is among the safest on this list and has a poverty rate of just 12.1 percent (compared with 14.9 percent for the U.S.).

7. Sherman, Texas
  • Metro population: 120,641.
  • Share of population over 65: 15.6 percent.
  • Cost of living for retirees: 12.6 percent below the U.S. average.
  • Texas's tax rating for retirees: Friendly.
The smallest city on this list provides some of the biggest savings. The Sherman metro area, about an hour north of Dallas, offers the lowest overall living costs among our top 10 retirement hot spots. Housing for retirees is exceptionally cheap, at 24.7 percent​ below average. The median home value is $98,100 in Sherman proper and $79,100 in Denison (also part of the greater metro area) -- well below the state's $128,900 median. And Texas frees retirees from state income taxes.

Enjoy charming small-town amenities, such as boutique shopping, unique cafés and several community gatherings throughout the year, including an Earth Day festival and free "Shakespeare in the Grove" performances. Also explore the 12,000-acre Hagerman National Wildlife Refuge, home to about 500 different wildlife species. When you feel the urge for big-city stimulation, hop in your car and head to Dallas or Fort Worth.

8. St. George, Utah
  • Metro population: 139,484.
  • Share of population over 65: 17.3 percent.
  • Cost of living for retirees: 8.4 percent below the U.S. average.
  • Utah's tax rating for retirees: Not friendly.
Utah may not be tax-friendly for retirees, but St. George's low living costs help make up the difference. Prices on everything from groceries to health care fall below the national average. And the city's affordability isn't limited to the retired set-it also ranks as one of our Cheapest Cities You'll Want to Live In regardless of age.

Outdoorsy retirees will appreciate St. George's location just south of some state parks and conservation areas, west of Zion National Park and north of the Grand Canyon. Athletes who are age 50 and older can even participate in the Huntsman World Senior Games, an annual competition hosted in St. George. Sports include archery, basketball, golf, softball, track and field and much more. Or try your luck in Las Vegas, a two-hour drive away.

9. Roanoke, Virginia
  • Metro population: 308,238.
  • Share of population over 65: 16.4 percent.
  • Cost of living for retirees: 8.3 percent below the U.S. average.
  • Virginia's tax rating for retirees: Mixed.
You can find cities with beautiful scenery and attractive living expenses near the East Coast, too. Roanoke's cost of living for retirees is below average in every category. In fact, groceries are the most affordable of all the cities on this list, at 8.3 percent below average. Health care and housing are also very affordable -- 5.5 percent and 13.7 percent less than the U.S. average, respectively.

Nestled between the Blue Ridge and Allegheny mountains, Roanoke is a haven for those looking to hike through their retirements. You can find more than 600 miles of hiking trails in the Roanoke Valley -- including the Appalachian Trail -- ranging from easy strolls to challenging climbs. If you'd rather take in the views with less effort, try a scenic drive along the Blue Ridge Parkway, or visit nearby Smith Mountain Lake. For an even more leisurely afternoon, grab a pint at one of the many local craft breweries -- or hit up three at once by going on the Roanoke Craft Beer Tour.

10. Punta Gorda, Florida
  • Metro population: 160,380.
  • Share of population over 65: 34.5 percent.
  • Cost of living for retirees: 3.8 percent below the U.S. average.
  • Florida's tax rating for retirees: One of the 10 most friendly states.
Of the great many retirement hot spots in Florida, Punta Gorda tops our list (though it's not so great for young singles). Along with the state's favorable tax situation, credit the city's high ranking to its strong senior presence -- the 65-and-older share of the metro area's population is the greatest of all 223 places we considered.

And all those retirees have plenty to keep them busy. The city offers 18 miles of bike paths and pedestrian trails -- including the scenic Harborwalk along Charlotte Harbor -- that connect the various neighborhoods and parks. You can also enjoy boating and other water activities, as well as the charms of Fishermen's Village, a semi-open-air mall that's home to a marina, shops, seafood restaurants and free concerts.

If you prefer more bustle, try Tampa, about 100 miles north of Punta Gorda, with a total metro population of nearly 2.8 million. The big city keeps bills small with living costs that are 5.5 percent below the national average. But seniors aren't as dominant as in Punta Gorda, making up 17.4 percent of Tampa's population.

 

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IRS Says It Depends on Kennedy-Era Computing

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If dealing with federal income taxes have seemed a byzantine and painful process, there may be a reason. IRS Commissioner John Koskinen told the Senate on Tuesday the agency is woefully behind the times when it comes to computers and automation, according to a CNN Money report.

We're running applications we were running when John F. Kennedy was president.

"We're running applications we were running when John F. Kennedy was president," Koskinen said.

His statement was in response to questions from anything-but-friendly Senators who wanted to know why it took so long for victims of identity theft to get new tax identification numbers.

According to Koskinen, the IRS has computer systems that were customized in the 1950s and 1960s. More recently, the agency has been spending significant money trying to upgrade the Camelot-era systems.

The IRS budget request for fiscal year 2014, which ended last September, shows that the upgrade spending is hefty. In fiscal 2012, the IRS spent $1.8 billion on information systems. The number rose slightly for 2013 and the agency wanted $2.2 billion in 2014.

It's like driving a Model T that now has a great GPS system and wonderful sound system, [and] has a rebuilt engine," Koskinen said.

Senate Republicans weren't terribly understanding in a letter they sent Koskinen at the end of January.

Your agency spends billions of dollars every year on information technology systems -- roughly twenty percent of its entire budget. Given this extraordinary amount, we question the efficiency in which IRS IT systems are procured, and we look forward to working with you in the coming months to find ways to spend this money in a manner that provides better value to taxpayers.

Some significant part of the cost is due to new tax laws and programs that Congress has told the IRS it must administer, Koskinen testified. For example, under the Foreign Account Tax Compliance Act, the IRS must collect data from foreign-based financial institutions that have accounts held by U.S. citizens.

"We have 145,000 foreign financial institutions about to provide us data under [that act]," Koskinen said. "All of those systems had to be built and rebuilt to absorb that data."

According to National Taxpayer Advocate Nina Olson, budget constraints on the IRS have, in general, created a "devastating erosion of taxpayer service."

"Taxpayer service has reached unacceptably low levels and is getting worse, creating compliance barriers and significant inconvenience for millions of taxpayers," a report from Olson's office stated. Only half of the projected 100 million taxpayer telephone calls it receives will actually be answered.

The irony is that in 1953, when it first was using computers, the IRS had to convince the public that it was a good idea. Here's a 10-minute video the agency created to calm taxpayer distrust.

 

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McDonald's Needs More Than Hugs and a New CEO

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It's not just burgers flipping these days at McDonald's (MCD). The fast-food giant is busy trying to shake things up in 2015 after a brutal 2014 that saw its reputation sink to new lows and comparable-restaurant sales decline during all four quarters.

Last week the chain announced that a new CEO will be taking over in March. It also kicked off a two-week promotional campaign on Monday whereby select customers will get to pay for their food through random acts of kindness, following last month's emotion-tugging "Signs" campaign that was both praised and widely lampooned.

After seeing revenue and earnings decline last year for the first time in more than a decade, it's easy to see why McDonald's is trying to reposition itself. You have to go all the way back to 2009 to find the last time that the restaurant industry bellwether's profit was lower than the $4.8 billion that it scored in 2014. If a new helmsman and back-to-back months of image-sprucing promotions seem desperate to you, you wouldn't be wrong.

Meet the New Boss

Shares of McDonald's moved higher last week after it announced that Don Thompson will be retiring as president and CEO at the end of this month. He will also be stepping down from the burger behemoth's board of directors.

Steve Easterbrook will be replacing Thompson at all three posts. Easterbrook's an internal hire, and while the market often objects to a reeling company promoting from within, industry experts are generally upbeat about the incoming CEO's prospects. Easterbrook is currently heading up the chain's marketing department, and before that he was instrumental in improving the eatery's European operations.

Yes, he's an insider, but he's also seen as a turnaround expert with strong ideas about restoring the brand's image and integrity.

Ad It Up

McDonald's turned heads with an unusual commercial during Super Bowl Sunday. It announced that from Feb. 2 through Valentine's Day, it will cover the bill for randomly chosen customers after asking them to engage in acts of kindness including calling a loved one, hugging a family member or simply fist-bumping a cashier. Every restaurant will be giving away 100 of these prizes.

It's the kind of campaign that would seem daring at most chains, but with the commercial generating nearly 6 million views on YouTube alone, it could be the feel-good campaign that it needs after the brand got battered through 2014.

It's been too easy to knock the company these days. Activists have been campaigning to get McDonald's to boost its starting wage to $15 an hour. It's a move the unionization advocates have been championing on the basis of the chain's hefty profitability, but that ignores the fact that 80 percent of the chain's restaurants are owned by small franchisees that don't necessarily have that kind of cost-expanding flexibility.

The quality of the chain's food has also come under fire. Its signature burger was rated the worst in taste among 21 rival chains in a Consumer Reports survey last year of more than 30,000 fast-food buffs.

McDonald's is addressing the quality issue. It is simplifying its menu this year. Now it just needs for consumers to warm up to the brand again. A freshly crowned CEO singing a new tune and a marketing blitz that's more about community building than sandwich assembly seem to be good places to start a turnaround. However, McDonald's will still need to do more if it wants to win the war.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. Want to make 2015 a winning investment year? Check out The Motley Fool's one great stock to buy for 2015 and beyond.​

 

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Salvage Unwanted Deal Vouchers -- Savings Experiment

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Salvage Unwanted Deal Vouchers
Do you have a bunch of impulse daily deal vouchers in your inbox? If you have no plans to cash them in for a spa day with your friends, you're not alone. Luckily, there are sites out there that can help you resell those vouchers. Here's how to get your money's worth for an unused daily deal.

One great site is CoupRecoup.com, known as the "Craigslist for Groupons." CoupRecoup will help you buy and sell your vouchers for no reselling fee. Simply click on "Sell Your Coupon Now" to get started.
Choose one of two selling options, upload and wait for buyers to contact you. It's that easy.

As for expired vouchers, try contacting the merchant to see if you can swap it for a current deal of the same of the value. With these money-saving tips, you can say goodbye to buyer's remorse forever.

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Strong Truck Sales Help General Motors Beat Expectations

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Inside The 2014 North American International Auto Show (NAIAS)
Andrew Harrer/Bloomberg via Getty ImagesThe imposing Cadillac Escalade was much-improved last spring, just in time for a big surge in SUV sales. Sales of the Escalade and GM's other big SUVs have boomed, boosting GM's profits.
General Motors (GM) on Wednesday released fourth-quarter earnings that beat Wall Street expectations, as strong sales of trucks and SUVs drove a good profit in North America. GM's net profit of $1.1 billion, or $1.19 a share on an adjusted pre-tax basis, was a big increase over the 67 cents it earned in the fourth quarter of last year. Wall Street analysts surveyed by Bloomberg had expected a profit of 83 cents, on average. GM's stock rose more than 5 percent on the news.

Surge in Truck and SUV Sales Drove a Big Profit in North America

Most analysts think that lower gas prices won't have much of an impact on the types of vehicles American consumers choose, but they certainly aren't hurting sales of trucks and SUVs right now. Sales of GM's Chevrolet Silverado pickup rose 10 percent last year, as the company took advantage of production disruptions that led to short supplies of Ford's (F) rival F-Series.

Sales of GM's biggest SUVs also soared in 2015. The models, which include the Chevrolet Tahoe and Suburban, GMC Yukon and Cadillac Escalade, were improved last spring. These are among GM's most profitable products, anywhere in the world -- and strong sales drove a good result for GM's North America unit, which earned $2.2 billion before taxes in the fourth quarter.

On a full-year basis, those good truck and SUV sales also helped offset GM's costly and embarrassing recall scandal. Full-year profits for North America were $6.6 billion in 2014, down from $7.5 billion in 2013 -- but the damage could have been far worse.

Good Results in China and South America, Progress in Europe

Overseas, the news was mixed -- but GM did show improvements in its International Operations unit, which includes its huge China operation, and in South America. In China, GM earned $516 million in equity income from its joint ventures with local Chinese automakers -- despite ongoing investments in the country, where it has several new factories under construction.

South America has been a tough area for automakers recently, with inflation in Brazil and Argentina depressing new-car sales, and a difficult political situation in Venezuela making it nearly impossible for most automakers to do business there. But GM has held the line on pricing in an effort to offset inflationary pressures, and it worked: Its South America unit made $89 million in the fourth quarter, in contrast to the $187 million loss posted by Ford's South American division.

Europe continues to be a trouble spot for GM, which has lost billions in the region in recent years. An extremely difficult economic situation in Russia isn't helping, but GM Chief Financial Officer Chuck Stevens said on Wednesday that if Russia were excluded, GM Europe would have improved on last year's results.

That's not how it played out, though: GM Europe lost $393 million in the fourth quarter, a bit worse than its $365 million loss a year ago. Despite the losses, GM is making good progress in the region, where it has restructured its operations and launched some well-regarded new models. It confirmed on Wednesday that it is on track to turn a profit in Europe in 2016.

An Increase in GM's Debt, but It Still Has Plenty of Cash

GM took a one-time charge of about $800 million in the fourth quarter, a result of its decision to buy back some preferred stock from a United Auto Workers health care trust. The dividend payments on that stock were costing GM almost $350 million a year; it's a good investment for shareholders.

GM funded that buyback by selling some bonds, taking advantage of low interest rates and its improved credit rating. The result was an increase in GM's debt, to $9.4 billion as of the end of 2014.

That's a manageable amount, given that GM still had $25.2 billion in cash and another $12 billion in available credit lines. That cash hoard is a reserve intended to help GM continue new-product development through a sharp economic downturn. But it might be more than GM really needs: CEO Mary Barra said on Wednesday that GM planned to raise its dividend by 20 percent in 2015.

The Upshot: Despite the Recalls, GM Is Making Big Improvements

The recalls were a costly distraction for GM in 2014 -- but the story here is that despite the distraction, its underlying business remained on track. GM is earning good profits in North America thanks to strong new products and its conservative approach to discounting, its China operation continues to generate strong results, and it's making progress in exporting those successes to its other regional operations.

Motley Fool contributor John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.

 

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Market Wrap: Stocks Dip in Uncertain Day as Oil Plunges

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US Stocks Rise, As Oil Prices Jump
Andrew Burton/Getty Images
By MATTHEW CRAFT

NEW YORK -- The stock market ended an uncertain day mostly lower after the price of oil took another plunge. Stronger profits at Disney (DIS) pushed its stock higher, giving the Dow Jones industrial average (^DJI) a small lift.

Major indexes headed lower at the opening bell, as a drop in crude oil tugged energy stocks down. The Standard & Poor's 500 index (^GSPC) recovered its losses by midday, meandered through the afternoon, then swung from a solid gain to a slight loss in the final hour of trading.

"I think there's a sense of uneasiness and lack of conviction among investors right now," said Terry Sandven, senior equity strategist at U.S. Bank Wealth Management. "You see that in the split personality of the market."

The Standard & Poor's 500 index fell 8.52 points, or 0.4 percent, to 2,041.51. The Dow edged up 6.62 points, less than 0.1 percent, to 17,673.02 and the Nasdaq (^IXIC)sank 11.03 points, or 0.2 percent, to 4,716.70.

Over the previous six trading days, the market turned in three gains and three losses. Sandven said rising uncertainty over corporate earnings has helped drive the volatility. Falling oil prices and a stronger dollar have pinched companies' profits, forcing investors to second-guess their expectations.

Company News

Late Tuesday, Walt Disney reported that strong results from theme parks, television channels and selling merchandise tied to its "Frozen" movie drove quarterly earnings up 19 percent. Disney's profit and revenue trounced Wall Street's estimates for the quarter, and its stock surged $7.18, or 8 percent, to $101.28, an all-time high. Bob Iger, Disney's CEO, said the company was not seeing a hit to attendance from the measles outbreak linked last month to Disney's Southern California parks.

Ralph Lauren's (RL) stock lost $31.12, or 18 percent, to $139.71, after the retailer reported a drop in quarterly earnings and slashed its sales forecast for the full year. The company spent more to open new stores while revenue stayed nearly flat, held back by a stronger dollar.

Staples (SPLS) announced that it's buying Office Depot (ODP) for $6 billion in a widely anticipated merger of the two largest office supply retailers. The cash-and-stock deal comes a little more than a year after Office Depot merged with OfficeMax and still needs approval from regulators. Staples dropped $2.28, or 12 percent, to $16.73.

The fourth-quarter earnings season now looks better than it did just two weeks ago. Nearly three out of four big companies have turned in higher profits than analysts had expected, putting overall earnings on track to rise nearly 7 percent for the quarter, according to S&P Capital IQ. Two weeks ago, the expected increase was just 4 percent.

Rebound for Oil Fizzles Out

A recent rebound in oil prices fizzled out Wednesday as the benchmark contract for U.S. crude fell $4.60, or 8.7 percent, to settle at $48.45 a barrel in New York. The drop came after the U.S. government reported an increase in crude inventories last week.

Oil had rallied over the previous four days as traders speculated that low prices would force more energy companies to curtail exploration and production. Brent crude, a benchmark for international oils used by many U.S. refineries, declined $3.75, or 6.5 percent, to close at $54.16 a barrel in London.

Major markets in Europe ended mixed. France's CAC 40 rose 0.4 percent, and Germany's DAX edged up 0.2 percent. Britain's FTSE 100 closed with a loss of 0.2 percent.

Prices wavered in the market for U.S. government bonds, leaving the yield on the 10-year Treasury note at 1.79 percent, the same as late Tuesday.

In the commodity markets, gold rose $4.20 to $1,264.50 an ounce, while silver rose seven cents to $17.40 an ounce. Copper edged up a penny to $2.59 a pound. In other futures trading on the New York Mercantile Exchange:
  • Wholesale gasoline fell 12 cents to $1.482 a gallon.
  • Heating oil fell 8 cents to close at $1.767 a gallon.
  • Natural gas fell 9.2 cents to close at $2.662 per 1,000 cubic feet.
What to watch Thursday:
  • At 8:30 a.m. Eastern time, the Commerce Department releases international trade data for December, and the Labor Department releases both weekly jobless claims and fourth-quarter productivity data.
  • Freddie Mac releases weekly mortgage rates at 10 a.m.
These selected companies are scheduled to release quarterly financial results:
  • Activision Blizzard (ATVI)
  • Alliance Data Systems (ADS)
  • Astrazeneca (AZN)
  • Athenahealth (ATHN)
  • Ball (BLL)
  • Buffalo Wild Wings (BWLD)
  • Carlisle Cos. (CSL)
  • Charter Communications (CHTR)
  • Cigna (CI)
  • Delphi Automotive (DLPH)
  • Dunkin' Brands Group (DNKN)
  • Entergy (ETR)
  • Estee Lauder (EL)
  • Expedia (EXPE)
  • Gartner (IT)
  • GoPro (GPRO)
  • GrubHub (GRUB)
  • Lazard (LAZ)
  • LinkedIn (LNKD)
  • Lions Gate Entertainment (LGF)
  • Michael Kors Holdings (KORS)
  • News Corp. (NWS) (NWSA)
  • Pandora Media (P)
  • Philip Morris International (PM)
  • Sally Beauty Holdings (SBH)
  • Sirius XM (SIRI)
  • Sprint (S)
  • Tempur Sealy International (TPX)
  • Teva Pharmaceutical Industries (TEVA)
  • Twitter (TWTR)
  • Valero Energy Partners (VLP)
  • VeriSign (VRSN)
  • Vulcan Materials (VMC)
  • W.R. Grace (GRA)
  • Yelp (YELP)

 

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Gold Is the Worst Investment in History

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Gold bars
Marko Beric
Nobody wants to be the bearer of bad news. Nobody wants to crush people's dreams. But in the world of investing, cold, hard facts, not dreams, are what make you money. And the fact of the matter is, historically speaking, buying gold is the worst possible investment you can make.

I am very sensitive to the fact that what I just said has probably caused some readers to go apoplectic, and for that I apologize. I know that I will never convince the gold bugs, inflation hawks or doomsday preppers of this thesis, nor my own personal position that gold will eventually be worthless. But for the rest of you, let me lay out the case to avoid gold as an investment.

The Numbers Don't Lie

In his seminal book "Stocks for the Long Run," renowned economics professor Jeremy Siegel looked at the long-term performance of various asset classes in terms of purchasing power -- their monetary wealth adjusted for the effect of inflation.

With a $1 investment each in stocks, bonds, T-bills and gold, beginning in 1802 and ending in 2006, Siegel calculated what those assets would then be worth.

Stocks were the big winners, growing the initial dollar investment into $755,163. Bonds and T-bills trailed dramatically, returning only $1,083 and $301 respectively. But the big surprise was in how badly gold fared during that time, only growing to $1.95.

An Inefficient Investment Vehicle

In addition to its miserable historical performance, gold also has many other failings as an investment, not least of which are the cumbersome and inefficient options available to own it and the prevalence of less than reputable salespeople in the precious metals space.

Owning physical gold in the form of bullion has many drawbacks. Wide bid and ask prices on physical gold ensure that the moment you purchase it you are already underwater on your investment. In addition, shipping costs for the heavy metal will further add to your cost basis.

Once you get your gold, you then have to decide how to store it. Keeping it at home exposes it to the risk of theft, fire or natural disaster. Taking it to the bank requires the rental of a safe deposit box, the cost of which will eat into your profit as well.

Firms will store your physical gold on site, but they charge for the service, and the idea of having your yellow treasure held by someone somewhere else, commingled with that of others, is not very appealing.

Don't Look to the Stock Market for Help

So what about the various gold ETFs -- most notably the SPDR Gold Trust (GLD)? Aren't they a cheap and easy way to own gold? The short answer is "no."

The idea behind these ETFs is to give investors a way to buy and sell gold as simply as they would a stock. But the problem is that when you buy GLD or any other gold ETF, you are not buying physical gold. Instead, you own an asset -- shares of the ETF -- that are backed by gold. And where is this gold? Good question.

All the gold that backs GLD is allegedly held in HBSC (HSBC) vaults in an undisclosed location in London. How much gold is there? Nobody actually knows, and investors have to take the word of the trustee, Mellon Bank of New York (BK) that halfway across the world, enough bullion sits in these vaults to cover GLD's liability.

However, no matter how much gold it holds, there are no redemption rights by shareholders, meaning you cannot exchange your ETF shares for physical gold. In addition, the physical gold is not required to be insured, which means the trustee is not liable for loss, damage, theft, or fraud. Not too reassuring is it?

Won't Protect Against the Worst Case Scenario

Despite all the points I have outlined so far, the fail-safe that most gold enthusiasts assert is that in cases of hyperinflation or global crisis, gold will retain -- and even increase -- its value, which far outweighs its other investment risks.

But the problem with that thesis is that the U.S. government has the right, any time it wants, to confiscate gold owned by private individuals. And there is historical precedence.

In 1933, when Franklin Roosevelt came into office, he issued the Emergency Banking Act, which required all those who held gold to turn it into the government via approved banks. The citizenry was given 30 days to comply with this order and were paid the current spot rate of $20.67 per ounce.

Roosevelt allowed some exceptions, such as personal jewelry and collectables, but that was done at his discretion, and there is no guarantee that there would be any exemptions in a future confiscation. And what would be the point of having gold to protect against a catastrophic event if the government can just seize it?

Enter the Modern World

Ultimately, gold is a legacy investment vehicle from a time before mass communications, ease of global travel, and the internet. It no longer is the default store of value that it once was, and financial and technological advances have made it an investment best suited for collectors and hobbyists, but certainly not for serious investors.

Like what you read? Want more? Then sign up for my free, once weekly newsletter The Lund Loop to get exclusive insights into what I am writing, reading, and hearing about the stock market. Click here to sign up.

 

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Autopaying Bills Is Supposed to Be Simple - Only It's Not

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A0PKEW Couple Paying Bills Together
Alamy
By Geoff Williams

Missed payments can lead to a financial tsunami. Forget to pay your electric bill, and you could find yourself in a dark, Internet-less house. Miss a payment on life insurance, and you could lose your policy -- which, at worst, could catapult your family into financial jeopardy if, say, you passed away, and at best, could cost you higher rates once you apply for a new policy. Miss a credit card payment, and it can cost you more money in interest. Forget to pay your health insurance, and goodbye health insurance.

You get the idea. There's very little upside to ever missing a payment for anything, but plenty of people still forget to make them. According to a 2014 survey of 3,021 adults ages 21 and older, 36 percent of consumers had paid a bill after its due date in the last 12 months. In 70 percent of those cases, respondents racked up a late fee, and 38 percent of the late bill payers said they simply forgot when the due date was, according to the Seventh Annual Billing Household Survey conducted by Fiserv, a financial services technology company.

That helps explain why automatic bill paying is wildly popular among some consumers. There's no shortage of ways to set up automatic bill paying. Your bank probably offers the service, and if it doesn't, you could use PayTrust, Quicken Bill Pay, MyCheckFree or MintBills, just to name a few of the big names out there (not all of these are free).

The appealing part of automating bills is, as the saying goes, you set it and forget it. If you have plenty of income rolling in, and your budgeting is down to a science, really, what's not to like? But while automating bills can be a useful way to manage money, it isn't foolproof. If your intent is to automate your bills so you never miss a payment again, here are a few considerations to mull over.

Autopay Can Mask Behind-the-Scenes Mistakes

Amy Baxter is a pediatrician and CEO of Buzzy4painrelief in Atlanta. Baxter's company develops reusable, inexpensive products for personal pain control, but now she's feeling financial pain, thanks to a snafu with her cable company. She had been automating payments for her fax line, and when she moved to a new office, her cable company said it could switch the line to the new place while keeping her data plan price the same as before. All seemed fine for about three months.

"Our statement had the same amount on it, just as promised," Baxter says, noting she'd been paying $89 a month, and she continued to pay $89 a month. "Except that last week, we get a call that they're going to shut down our service, and we owe $800. For three months' service."

It turned out the company had been charging Baxter $89 for the old phone line -- through autopay -- but hadn't been charging her for the new one, which, despite what she'd been told, was now $189 a month. She also learned that she was on the hook for installation fees. But because autopay was continuing as usual with the $89 charge, Baxter had no way of knowing or suspecting that the cable company had made a mistake that would ultimately cost her.

"We thought we were paying with autopay, and instead horrific bills were racking up," says Baxter, who spent eight hours over three days communicating with 14 people at her cable company, trying to sort everything out. She says she still hasn't had the charges waived.

Autopay Works Better With Fixed Numbers

Although inflation means some of your bills won't always remain the same, many bills don't change dramatically from month to month. Your mortgage and car payment will remain stable, for example, unless you refinance or pay one of them off. Your cable bill is generally static, unless you order movies. But your electric bill may fluctuate. Your water bill, too. If you have a bill that's erratic -- low one month but surprisingly high the next -- and your bank account suggests you're living paycheck to paycheck, you'd be better off nixing autopay for those bills unless you enjoy overdraft fees. Of course, you've probably already figured this out the hard way.

Autopay Makes It Easier to Forget About Your Bills

The point of autopay is that you can forget about your bills -- but you don't want to completely forget about your bills because at some point, you're likely going to run into the same trap Marilyn Paige stepped into.

Paige, who owns a marketing firm in Denver, pays her bills through her bank's automatic bill paying system. One of those bills is a store credit card she uses frequently and pays off in full every month. Then one day Paige's bank changed bill-paying providers, and while some of her bills rolled over seamlessly, she had to re-enter payment information for certain bills. Paige dutifully did so, but didn't realize that her store credit card had, without her permission, stopped sending her paper bills. She entered a stack of paper bills into the new bill-paying system, but in the absence of paper bills from the store credit card, she forgot to re-up the automation.

Imagine her surprise when she then received a notice with a $20 late-fee charge, which she later was able to get dropped. "So frustrating," Paige says. "And my bill was only for $18." This wasn't autopay's fault, of course, but it pays to remember that autopay doesn't come without hiccups.

Credit cards Can Be a Useful Way to Autopay

If you have a healthy line of credit, you could autopay some or all of your bills with a credit card -- and then, every month, like clockwork, pay off the credit card. The pluses are that if a bill is higher than you expected, you needn't worry about cash disappearing from a bank account, another payment going through and then suddenly becoming awash in overdraft fees.

Another bonus is that if you're overcharged, you might have better luck getting the charges reversed than you would getting cash returned to your bank account; and as long as you're disciplined about paying off your credit card every month, you're helping your credit score, to boot. The only downside to this strategy -- and it's a big one -- is if you miss your credit card payment.

Don't Autopay the Bills You Want to Remember

Say you started the new year off right and joined a gym. Unless you have a particularly sharp memory, or are the type of person who checks your bank statements religiously, don't automate for at least a year. If you forget to go exercise, it stands to reason that you may also forget that you're paying for that gym membership.

You'll also want to be especially careful about automating bills that only charge you once or twice a year, especially if it's for a service you're not entirely sure you want to pay for indefinitely. In other words, even if you want to forget about your bills, it doesn't pay to have full-blown amnesia.

 

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Never Pay Another Checking Account Overdraft Fee Again

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Money going down the drain Creative image #:  78455009  License type:  Royalty-free  Photographer:  Comstock Collection:
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By Jennifer Calonia

On a hectic, errand-running weekend, it's easy to lose track of checking account transactions along the way. But racking up overdraft fees is an easy way to dig yourself deeper into the red, especially if you're living paycheck to paycheck.

Despite bank regulation changes in 2010, which prevented banks from automatically enrolling customers in overdraft protection programs, you can still be slapped with overdraft fees if you've opted in to your bank's overdraft service or have written a check with insufficient funds in a checking account. And those fees make billions for banks, according to Moebs Services, a financial research firm.

Not many depositors stop to contest overdraft fees, since they're usually the ones at fault. However, even if the blame can be solely placed on your shoulders, you don't have to suffer from these costly fees. Try these approaches.

1. Remain Polite and Patient

Even if your request to have an overdraft fee waived is initially shot down, don't lose your head. Regardless of the barricades your bank representative puts up to deny your request for a waiver, press on with kindness. No one wants to deal with an irate customer who's yelling; talk it out with the associate and remain pleasant throughout the entire exchange.

Los Angeles resident Jaime Catmull was shocked when she found she'd been charged three overdraft fees of $30 each after a quick meal at McDonald's (MCD). "All I did was call them up and ask to have the entire string of overdraft fees wiped off my bank account," she said. "I made sure to ask nicely. They didn't question me for an explanation at all, and waived every charge on the spot."

Typically, a simple phone call will suffice to get the fee waived. There's no reason to unnecessarily waste your breath with a long and grueling explanation from the onset. Your initial request can be as simple as: "Hi, I just noticed an overdraft fee on my account. I'm calling to have it waived." The representative will likely put you on hold to either review your account or seek approval from a supervisor to proceed, but with a positive approach you'll likely see equally positive results.

2. Focus on How Great You Are

If this is your first offense, or if it has been quite some time since your last overdraft incident, play up your good customer report card. Explain that it was a one-off mishap, and refer back to your sterling record. Have you never let your account slip into the negative before? Is your paycheck direct deposited into the account? If yes, you can strengthen your defense by asking for a good faith waiver.

Many checking account holders have had success at using their good rapport with an institution to get overdraft fees waived. "The last time I switched banks, I unfortunately didn't do a very good job of staying organized throughout the process," said Andrew Schrage of MoneyCrashers.com. "I switched my direct deposit into the new account, but forgot to transfer a few automatic payments from my old account. As a result, two utility bills were drawn from the old account when there weren't enough funds to cover them."

Despite secretly planning to switch banks anyway, he pursued a waiver request. "I just told them there was a problem with my direct deposit. I previously had a very good history with the bank, and had never faced an overdraft before, which helped me to get a one-time adjustment."

Loyalty also plays a major role in your ability to get overdraft fees waived. Especially after the Bank Transfer Day movement several years ago, financial institutions are wary of losing their most loyal customers due to fees. Note how many years you've been a customer with the institution and add in the number of active accounts you have with the bank to prove your point.

A response similar to this might press your stance: "I've been a loyal customer for 12 years, and have opened a number of accounts with this bank because I was always treated right. But I really would like this overdraft fee waived. What else can you do to help me with this?" If the customer service representative sounds determined to not waive your charges, you don't have to take "no" for an answer.

3. Make an Appearance

PeopleMetrics' 2010 Most Engaged Customers study found that eye contact and being able to physically see facial expressions "allow for a better understanding of mood and personality."

Visit your branch in person and speak with an associate about how to get overdraft fees waived. It's a lot harder to say no to a customer who's looking you straight in the eye. Use this one-on-one approach to your advantage by enacting both tips above. This trifecta should convince the bank teller and his supervisor that you deserve to be pardoned from the overdraft fees.

4. Opt Out

An even better safeguard against these fees is to opt out of overdraft protection for checking accounts. Sure, you won't be able to rack up purchases carefree, but at least you won't have overdraft fees looming over your head.

 

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