money really matters

Lost your job and wondering what happens to your 401k or employee sponsored savings?

Getting bombarded by calls/ads/emails from financial firms to rollover your 401K fund?

Many Americans are facing the same situation and asking similar questions as more than 4 million lost their job last year. After losing a job, you don't think about 401k for a while because you are busy hunting for the new job. With job market still in limbo land, many people are having tough time finding any job and struggling to feed their families. In this situation, they are looking for options to earn and even willing to break their nest egg to get through the current situation and worry about retirement later.

In my last post, I stressed the importance of timely action on your 401K  before it's too late whether you decide to save or take out distributions. How you handle your 401-K account can result in anywhere from zero to hefty taxes and penalties. This blog post, I plan to share few important questions and answers with my research, study and experience in rolling over 401K during the job change 2 years ago. 

First question, What are my options?

There are several options when it comes to saving your 401-K and your former employer or 401k administrator from investment company should have already provided you with information. If not, here are some important options:

1. Stay In

You can stay put with the former employer plan unless there is no restrictions and limitations.

Pros: No Paper work, Low fees, Better investment options, money grows tax deferred.

Cons: Higher fees, no contribution from employer, no flexibility, less attracive plans and importantly minimuim balance requirement. ($5000 most cases)

2. IRA Rollover

Next comes the IRA Rollover which is highly recommended and advertised in the past year by lot of brokerage and mutual fund companies. It is easy and has lot of advantages.

Pros: No penalty or Income tax when rolled over directly, tax deffered growth, more investment options, Direct control over money, great flexibility to change funds any time.

Cons: 401K security value might be down because of stock market and lose money by rollover since they need to cash the security before rolling over. Also usual IRA withdrawal rules apply.

In general all the contribution by you and vested employee portion in the 401K plan is eligible for rollover. A rollover can be paid directly to you or it can be implemented as a direct rollover.

Direct Rollover: The funds in your 401-K account are paid directly into the IRA. With a direct rollover, the 401-K administrator is not required to withhold any income tax and you do not owe a penalty. It has become easy with Internet and many companies allow internet application submisions.

Check Payment: Many 401K administrators send check directly to you if they havn't heard with 60 days. When you receive your 401-K distribution, your former employer has withheld 20% as taxes. This withholding is a requirement. It does not mean you will owe the tax. In order to avoid taxes and tax penalty you must: 1. Deposit full amount including the 20% withheld by employer with your funds into your IRA account within 60 days of receiving the funds. When you file your taxes for the year you will not owe taxes on your rollover, but will be able to include the 20% withheld as income tax paid.

If you do not pay full amount, you will owe Income taxes at your current tax rate on the amount of 401-K funds you did not rollover plus additional 10% tax penalty is due because you received retirement funds before you reached 59-1/2. 

Because of above complications direct rollover is less risky, faster, less time consuming and not as complicated as a payment made to you.

3. Rollover to New Employer 401K Plan

You can also choose to wait and roll over to your new employer 401 plan depending upon your situation. That helps to keep all your 401k money in one place. But you have to find the job on time and also you have to satisfy balance requirement to keep funds in the former 401k plan. You might endup paying higher fees during the interim period. Be aware of it and make decision.

4. Rollover Annunity

You can rollover to Insurance companies annunity option. A Rollover Annuity is a contract between you and a life insurance company that allows you to specify how you want to receive future income, and even elect a death benefit for your beneficiaries. Your money transfers to the annuity and earnings, if any, will continue to grow tax deferred until withdrawn.

Pros: No penalty or Income tax when rolled over directly, tax deffered growth, more investment options, Direct control over money, great flexibility to change funds any time and decide how your income will be paid.

Cons: If elected to get immediate withdrawal and below 59 1/2, penaly applies

5. Lumpsum Cash Out/Distribution

It is not recommended option but if you are above 59 1/2 age limit you can take out the money without any penalty and taxes implications. But when you don't find job and need to take care of the family, this has become only option for many people. SO if you cashing out 100,000 and you are in 25% tax rate, you would end up paying 25,000 + 10% penalty would be $35,000 loss. 

Pros:  Instant money from nest egg 
Cons: Need to pay Income Tax if you are younger than 59 1/2 upto your tax rate + 10% penalities.

6. Safe Harbor Hardship Withdrawals

If you don't wish to take out full amount, you can always withdraw certain portion using the hardship withdrawal requirements. In this bad economy, uncle sam allows certain withdrawals (listed below)but still might need pay income tax and 10% penalty. Also funds are limited to the elective portion of the deferral, and not any income or interest on the deferred amounts. It might help to overcome the situation and not a bad option in worse situations.

This year just started off and half of January is almost over now. Days are moving fast so you better focus on things you want to get accomplished.

Do a quick check on your goals or Resolutions for this year. Did you ever get started with any of them? If you did, how far along are you? Do you think you are moving along as planned or just dragging yourself, waiting to quit? If you never got started, you still got till 31st to do something about it so you can atleast brag that you started something new this year. If you are chucking along, good job and keep it going!!

Moving on to Money smartness, it is not only about making and saving money right. It is also about doing things which could help to manage and preserve the wealth you earned. It is about getting ready for emergency situations and planning for proper wealth distribution when you are gone. In this post, I like to share and remind few Don't and Do's which most of us take it for granted in our everyday busy life. We don't consider them serious enough until it hits us hard.

Don'ts

Don't lose your 401 (K) contributions

I called my friend who lives in East coast to wish him Happy newyear. During our conversation he was mentioning about his 401k from his previous employer. It has been almost 2 years, he still not moved his funds over to new account. He don't know where to start because his previous company had gone through few mergers after he quit and don't know how much the account worth now and where exactly the funds are held.

I strongly urged him to get on it, start working first thing otherwise he might lose his hard earned money. Many of us fail to roll over my 401 (K) when change jobs. We forget about it, while we struggle to find a new job. With some many job losses last year, I am sure money of you aren't thinking about 401K accounts yet. If you get a chance, do take time and start working on rolling over to Roth IRA account or mutual fund.

Don't be a Identify Theft/Scam/fraud Victim

Identity theft, Ponzi schemes and scams are the talks all over the internet last year. Many millions of people get affected by identify theft every year especially via phishing over Internet. Whether you use online banking to check your account or make your credit cart payment, be careful in protecting your identity by protecting your computer from getting hijacked by the hackers. There is more to avoiding a identify theft than just virus protecting your computer and will talk more about it in my later posts.

Avoid Impulse buying

Beware of persuasive or forceful sales pitches. If it seems too good to be true, it might very well be, so avoid taking action at the spur of the moment. Try to be wise by not paying more for what it's worth and always do comparison shopping. There is a reason why Milk cans are stored way back in any grocery store! Try to always compare different offers whether you are on the street shopping for car or expensive items.

DO's

Pay yourself First

That's the mantra of many Money Guru these days. First take out some money from your pay check for yourself and put it away in a saving account before it disappears. Start small and stretch it out slowly. With automatic saving with online banking, you can do it easily in minutes. By saving periodically, you are also taking advantage of time to work for you. Magic of compounding is the be8th wonder invented by Einstein..  I like to say, Saving is an habit not an hobby, so start a habit this year. Once you get started with saving, you can expand to invest the savings for future purpose like kids education or retirement.

Plan to be Debt free

Are you debt free? I would be surprised if you were. Everybody has debt in  some sort or other whether it is home mortgage or just credit card debt. But you can plan to be debt free and try to get out deep debts avoid paying high interest rates charges.  Don't let your revolving debt to shift as long time debt. That will reckon your financial wealth. If you are in deep credit card debt, try to contact national credit counseling agency and work out a plan to get out of debt and shift to revolving debt situation.

Prepare a WILL

Last but not the least item in the list, Estate planning. Do not think estate planning is only for wealthy individuals. Estate planning is all about preparing for unexpected. It is just about preparing Will/Testament or Trust for the benefit of your dependents.These paper works are very important especially if you are married and have kids. You can make a will in just few minutes using Willmaker by Quicken and execute according to your state law. It is a cost efficient solution compared to Trust but not cost saving solution if you have big estate. Consult your CFP for more details.

I hope these Do's and Don'ts help you to start thinking about few things which are important always not just in a new year. I am planning to touch upon these topic in more elaborate manner in my future posts. Please check back periodically.

20Century Fox

Avatar, the movie which has made headlines all over the globe, movie which has given another avatar to the Hollywood movie industry during this recession, and a movie which is the topic of many house hold dinning table talks. It has broken many records and making history in the world movie industry.

Before I talk about the main interest, here are some titbit's you might be interested if you are not aware of them.

1. Producers spent around $300 in production cost and more for marketing.

2. It already raked up 1 Billion from all over world in just 2.4 weeks. According to Box Office Mojo it’s current box office total stands at $$1,018,811,000  million.

3. Opening Weekend:  $77,025,481
(#1 rank, 3,452 theaters, $22,313 average)
% of Total Gross:  21.9%  
Widest Release:  3,461 theaters 
In Release:  17 days / 2.4 weeks 
 

A movie which cannot stop making money and surely a movie to watch. After hearing  rave reviews and commentaries,especially setting itself apart from ther sequels like Lord of the Rings with Sanskrit title, I was intrigued to see it. I finally watched the movie yesterday and it surely didn't fail to surprise with spectacular animation,  special effects and astonishing camera. I was totally blown away by the Himalayan effort put forth to bring this movie as a sensational entertainer with a great message for this time.

James Cameron proved himself again as the Best Director of all time by giving back to back hits. But, as an person born and bought from India, I felt that the story is old and many of my Indian friends agreed with me. I have seen similar kinda of movies when I was a kid in the Indian cinema with little special effects available at that time frame. Those movies had stories where person transfers from body to body too. I am talking about 20-30 years back. Except the special effects, graphics and animation, I  see the old story line in many aspects but with new scientific proofs which makes it believable. It has lot of connection and adaptation from Veda's(Sanskrit literature) and many other Indian literatures. Even the character visualization and makeup's can be related to many ancient Indian traditions and especially the body color can be related to Lord Krishna avatar deplicted below in the picture.

Being said all that, James Cameron not only just gave new look to the old story but a brand new planet creating a new paradigm for the many more avatars to come. As money examiner, I would say it surely money maker but do have couple of questions.

What was James Cameroon thinking?  While the nation is just recovering from recession, 300 million dollar spent in making a movie, doesn't really makes sense? At the same time, it is giving people totally new experience in a new world and also bringing them to theaters to spend money during the holiday season helping the economy.

Share your thoughts about Avatar and money spent in making the money. Is it worth spending this much money or waste?

ehealthInsurance.com, a health insurance portal which allows consumer to compare, apply and buy affordable health insurance in this high health cost days. I been using service for almost 3 years and all our health insurance are actually bought through their service.

I recently got in touch with the VP of the ehealthinsurance and had a nice chat about the company and especially about the Cobra subsidy provided by the government.

Read on the Interview with Sam Gibbs, eHealthInsurance

Vijai: Can you tell me about you role at eHealth?

Sam: I’m a Senior Vice President at eHealthInsurance.  I’ve been with the company since 2000. I’ve been involved in many parts of the business, from building our technology to working with consumers and small businesses.

Vijai: How does eHealthInsurance help people with their insurance needs?

Sam: Simply put, we show Americans their health insurance options and empower them to find the best health insurance products for their personal needs and budget.  Shoppers visit the eHealthInsurance.com website and with just a few clicks compare real-time health insurance quotes from a big selection of brand-name health insurance plans in their area.  They can read customer reviews, compare plans side by side, sort by their favorite doctors and get personal recommendations.  Then they can actually apply for coverage and buy online.  

We also have a Customer Care Center staffed with licensed agents as well as representatives who can provide help and unbiased advice by phone, email or online chat. 

eHealthInsurance sells individual and family policies, short-term coverage and small business group coverage, as well as dental and vision coverage and a number of other products.  We’re licensed to sell health insurance in all fifty states plus DC and we offer plans from over 180 health insurance companies nationwide.

Vijai: With more than a half million jobless people, what is the general situation when it comes to their insurance needs? Do you have stats showing how many people are actually using COBRA and individual insurance?

Sam: Actually, I think you’ll find there are a lot more than half a million unemployed people out there.  The October data from the Bureau of Labor Statistics put the overall unemployment rate at 10.2 percent, which works out to 15.7 million people.

Generally speaking, people out of work have three choices: 1) They can temporarily continue their employer coverage under COBRA with the help of the nine-month federal subsidy designed to make COBRA more affordable; 2) They can apply for individual or family coverage in the private market; or 3) They can go without coverage entirely and leave themselves at serious financial risk in case of an emergency.

Hewitt and Associates recently released data suggesting that there are about 14 million people currently eligible for COBRA coverage in the US.  Of those, the Hewitt study shows that about 38 percent are utilizing the 65% federal COBRA subsidy to help them make COBRA coverage more affordable.  That would put the number of Americans with COBRA coverage today at something over 5 million.

It’s difficult to say just how many of today’s unemployed are purchasing individual and family health insurance.  But according to a March 2009 US Census report, about 13 percent of the insured population in the US get coverage on their own rather than through an employer or organization.

Vijai: What can you tell us about your experience with the COBRA subsidy? Is it working and how confident are you for it being renewed again for a few more months?

Sam: The Hewitt study I mentioned indicates that thanks to the COBRA subsidy people are electing COBRA coverage at twice the rate they did before, so, yes, I think it’s working.  The point of the subsidy was to make COBRA coverage more affordable so that fewer people would be tempted to go without coverage.

When you go on COBRA coverage, you’re actually keeping your former employer’s health insurance plan, but at your own expense.  Since employers generally cover the bulk of an employee’s monthly health insurance premium, many laid off workers are surprised to find out how much COBRA is going to cost them.  The value of COBRA, however, is that it allows you to retain the coverage you’re used to, and you can’t be turned down based on your medical history.  The trouble with COBRA is that without the subsidy, it is so expensive that few people are able to actually afford it.  The federal subsidy covers 65% of the monthly COBRA health insurance premium, so it stands to reason that it would prove popular and keep more people covered through their former employer’s plan. 

Families USA recently released some interesting data showing that the national average cost of COBRA coverage for a family without the subsidy is $1,111 per month, which works out to be over 80% of the average unemployment check!  With the subsidy, however, that monthly COBRA premium comes down to a national average $389 per month.

Congress is approved the possible extension of the COBRA subsidy through the end of February, so people who are laid off in January and February will qualify. It also adds six months of subsidies, extending coverage assistance for a total of 15 months.  It was first made available in March of this year and that means that the first recipients of the subsidy faced tripling of their COBRA premium when it was about to end on the month of December. 

Vijai: Is it possible that individual insurance works out better than COBRA with the subsidy? How and when?

Sam: It may for some people.  COBRA is the best option for those with pre-existing medical conditions, since COBRA guarantees them coverage, if they can afford it.  But people who are healthy may actually find more affordable coverage by purchasing insurance on their own, even compared to their subsidized COBRA premiums.  For example, I mentioned that the national average monthly premium for subsidized COBRA coverage was $389?  Well, in a report that eHealthInsurance issued in August, we found that the national average monthly premium for family policies purchased through our website was slightly lower than that, $383.  The costs are comparable.

Once the subsidy expires and their monthly premiums triple, healthy people currently covered under COBRA may be able to save hundreds of dollars per month by purchasing an individual or family health insurance plan instead. 

Then you may have a scenario where one family member has a pre-existing medical condition while several others are healthy.  It may make sense for families in this kind of situation to continue COBRA for the one person with the medical history while purchasing affordable individual policies for the other family members.

Vijai: What is the part played by eHealthInsurance and how they are getting compensated?

Sam: eHealthInsurance is a licensed agent like your local agent down the street, but we have a bigger selection of plans and we do business online.  Since health insurance premiums are regulated by each state’s Department of Insurance, there’s no difference in health insurance prices whether you buy direct from the insurance company or through an agent.  Commissions are built into all health insurance premiums.  If you buy from the carrier, the carrier gets the commission portion of the premium.  If you buy from eHealthInsurance or a local agent, eHealthInsurance or the local agent gets it.

Vijai: What is your suggestion for people who have no other option than COBRA?  With the COBRA subsidy expiring by the Feb, what would you suggest?

Sam: I would ask first, are you sure you don’t have any other options?  Talk with a licensed agent to find out.  But don’t go without coverage in any case.  If you have a pre-existing medical condition, try to find some way to make it work.  If you have dependents who are healthy, try splitting the family up under multiple coverage options, like I suggested earlier.  But try to stay on COBRA if you have a medical condition that might prevent you from finding coverage elsewhere.  It’s a greater risk to go without coverage, since a single uninsured hospitalization could put you in bankruptcy.

If you have a pre-existing condition and unsubsidized COBRA premiums are simply too costly and there’s no way you can afford it, I’d suggest you contact the non-profit Foundation for Health Coverage Education at www.coverageforall.org to see what government-sponsored programs and high-risk pools are available in your area.

Vijai: With the Health reform bill just crossing the half way mark by passing the house, do you think it will have a great effect in many American’s lives?

Sam: That remains to be seen.  The majority of Americans currently get their coverage through employers and these people may not be very effected.  Obviously, mandating that all people have health insurance is a big change.  And for people with pre-existing medical conditions, the idea that they can never again be turned down for coverage based on their health history would be a big change too.

Vijai: Final words, what do you like to tell people about shopping for their insurance needs?

Sam: Know your options.  When it comes to health insurance, knowledge is power – and it can be savings too.  Work with a licensed agent that represents multiple companies in your area to get an idea of what’s really out there so that you can find the best match for your needs and budget.  And don’t wait for health reform.  Many provision of the health reform bill won’t phase in until 2013.  So if you’re uninsured, check into your options today.  When and if health reform does become law, you may be obliged to purchase coverage anyway.  Protect yourself in the meantime.

You can visit a special website designed to guide people who are getting out Cobra at cobralearning.com

References:

Bureau of Labor Statistics October Report on Unemployment:

http://www.bls.gov/news.release/empsit.nr0.htm

Hewitt and Associates Study on COBRA Subsidy Utilization:

http://www.hewittassociates.com/Intl/NA/en-US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=7133

Families USA:

http://www.familiesusa.org/assets/pdfs/expiration-of-cobra-subsidy.pdf

Feb 2009 eHealthInsurance data:

http://news.ehealthinsurance.com/pr/ehi/health-insurance-premiums-ehealth-102617.aspx

March 2009 US Census Data:

http://www.census.gov/hhes/www/cpstables/032009/health/h05_000.htm

Happy Newyear Everyone!!

Year 2009 has come and  gone. It surely made imprints with lot of headliners and became a part of the history book. Year 2010 just started ticking it's counter and adding a brand new decade in the 21st century. Another thing to notice about 2010 is, by doubling the last 2 digits either like "10" *2 or 1+1 0+0 makes the first 2 digits "20". I found that to be interesting because it doesn't happen often. Let's hope year 2010 doubles our happiness by doubling our wealth and keeping us healthy.

Newyear Resolution -A waste of time

"May your troubles last as long your Newyear Resolutions" - Author Unknown

I saw the above funny quote posted outside of an auto repair shop. Nowadays people are not at all really serious about newyear resolutions and studies literaly reflects the downtrend. In the recent resolution study, while 52% of participants were confident of success with their goals, only 12% actually achieved their goals despite all the best intenstions.

Whether you resolve your resolution are not, somebody is will make big buck out of you. It is most likely going to be,

1. Fitness centers and Trainers
2. Weight loss program and weight loss book sellers
3. Dieticians and Weight loss Food producers

Just be aware of it and don't get pulled by all the marketing gimmicks and TV ads. Most goal setting experts believe this is due to ignorance concerning how to set goals properly. Let me share my very own 3 Talk method which might help achieve things in all the areas of your life.

T1. Talk to yourself first

It might seem wierd but the truth is everything starts from you. You have the answers to know what will work  best for you! So, use this time make an appointment to yourself to think with an open mind, about past year’s mistakes and missed opportunities or goals. Ask yourself what type of life you would like to create for yourself in the coming year.

If you have the habit writing journal, it helps in this process. If you don't have one, I would recommend to start one today.  Try to take these steps during your own interview.

1.Check your past year goals and see how you resolved/performed. Pat your back if you scored well. Tweak them if it need to continue this year.

2. Make 3 new goals for this year whether short or long term. Just Three only, no more!

3. KISS method - Keep it simple stupid. Always set goals as simple as possible to start with.  Try to set SMART goals. These are goals that are Specific, Measurable, Achievable, Relevant, and Trackable. If you want to lose weight, start with losing 5lbs in 2 weeks and continue to maintain it for 2 more weeks.

4.  Write them down and start planning towards working on those goals. If you plan to reduce wait, look for a good and cheaper options to start instead of getting an expensive Treadmill at first. Try signing up for $10 fitness center which has mushroomed in many areas.

5.  Take action by start working out twice a week and gradually move to thrice a week. Adjust your diet accordingly and you will surely see a change in your health. Be resilient.  Don't throw towel in just a week. Try atleast 3 weeks. Ask for help is a old techique. I would say advertise your goals which will motive yourself to achieve them when your friends ask about it.  Eva

2T. Talk to your Doctor

Next an important one. Make an appointment with your family doctor to do the physical checkup during the month of January. Almost all the insurance companies cover the physical check once a year upto $300. Most physical checks including labs won't take more than $300. I try do it by end of Jan so I can see my levels on  LDL, HDL, total cholestrol, Sugar and compare from the last years. 

By doing at the beginning of the year helps to manage those levels  or work to improve on them in the coming months. Prevention is better than cure. By doing physical checkup atleast once a year, it surely helps to find any problems before ahead and gives more time take action to treat the problem in the starting stage itself.

3T. Talk to your Financial Planner/CPA

Finally, your wealth check up. You better meet with your CFP/CPA to check your current financial status. If you are your own financial Planner, try to set up a time to go over your financial condition. Check your financial goals and objectives, see it is performed last year. Make any changes to your short or long term financial goals for this year. Don't forget to check on your IRA, SEP for 2009 to get ready for the tax season. If you missed out, you still have 4months to catch up. Also plan for 2010 contributions and save more money on tax returns.

Also take time to check some important documents like WILL, Trust, Durable Power of Attorney and Living Wills. If there is any change in your family staus like new kid, new house, you surely need to make proper adjustments to the Will or Trust to reflect your current status to avoid any future problems.

By doing just these 3 simple Talks at the beginning of the year, you are setting your life boat in proper condition to sail this new year in the right direction to reach your destination.

Happy Goal setting!!

Recently, I came across United Prosperity, a organization which is similar to kiva.org guaranting loans to entrepreneurs in poor nation. I took some time to contact and talk to the founder to hear more about the organization.  Here is the snapshot of the interview.


Hello Bhalchander, Welcome to nrimoneyreallymatters.com.
 
Thank you for taking time to talk to me about your organization, United Prosperity (UP). I looked at the http://www.UnitedProsperity.org  website and it looks inviting. You made real good progress in the past few months. 

1. Before we talk about United Prosperity (UP) which is making waves in the media recently, let's get to know you. Please go ahead and introduce yourself to the readers.

Vijai, Thank you very much for giving this opportunity to talk about United Prosperity. I grew up in Pune, India and live in the SF-Bay Area. I did my Bachelors degree from IIT Bombay and after working for two years with Tata Motors did my MBA from IIM Bangalore. I subsequently worked with Wipro, Microsoft, Mphasis and most recently Infosys and led several multi-year projects in financial services and insurance. Since September 2007 I left my job with Infosys to set up United Prosperity and since then I have enjoyed seeing this idea become a reality.

2. UP is your brainchild, share with us how the idea was born and evolved? 

Having grown up in India I had noticed on numerous occasions that the poor were borrowing money from their employers, friends, shop keepers or others to meet their family needs. The amounts they borrowed used to be pretty small E.g. Rs. 500 ($12). This always puzzled me and I sometimes wondered why banks would not lend to them. 

Fast forward several years later I was consulting with an organization called PMI. PMI does mortgage guarantees. i.e. A mortgage guarantee  offered by PMI allows people who cannot put the 20 % down payment to get a mortgage and achieve the dream of home ownership. In case the borrower is unable to payback the mortgage PMI will cover the losses of the bank upto a certain extent.  So it struck me that if one can get a $500,000 mortgage with a guarantee, why cannot we make microloans available to people using a guarantee.

United Prosperity builds on the same idea. In case the microfinance institution lending to the poor entrepreneurs defaults on its loan to the bank, then the micro lenders or  guarantors on our website will cover the losses up to a certain extent. With the guarantee the bank is more open to making a loan to the microfinance institution which lends to the entrepreneurs.
I have been fortunate to get the support of my team mates Chiradeep Vittal, my wife Shubha Shankaran, Ashok Parameswaran and several dozens of volunteers who have helped us start United Prosperity. We also got great pro bono support from institutional supports including Cognizant, who built the website, Netsuite who provided us the accounting software, several law firms who did the legal research and books2taxes.com which does the accounting for us.

We became operational in the summer of 2009 and have supported more than 200 entrepreneurs so far.

3. Tell us in general about UP and its mission/vision in elaborate.

Our mission is to allow people to combat extreme global poverty and multiply the impact of their microloan through loan guarantees.

There are small entrepreneurs all over the world who cannot afford to start and grow their business alone. Expanding their business may be the only means to adequately feeding their family or sending their children to school. However, banks do not lend to them without collateral, and that’s where people like you and I come in.

We can become a compassionate social guarantor with United Prosperity by providing an interest-free cash collateral or microloan guarantee for an entrepreneur on our website. Based on our microloan guarantee, the bank makes a loan which is nearly double our contribution.  No minimum amount is required, and on loan repayment we get our money back.

4. Do you really think by helping or lending needy entrepreneur, you can abolish poverty? How is it possible? You are also just helping like any other charity organization.

Abolishing poverty is not going to happen overnight, but studies have shown that through microcredit people do improve their livelihoods and come out of poverty over a period of time. Microfinance is not the only way to end poverty but it is a highly sustainable way. It is also one of the few programs which have scaled to a good extent.

5. From outside, UP seems like a copy cat of Kiva.org, another micro finance lending institution. The model seems to be same except the way you lend to the Micro finance institutions. From your answer, it is seems to be totally new idea with a similarity to Kiva.org. If that's so, tell us the difference.

With other international lending models, the loan made by individual lenders goes to a  microfinance institution which in turn lends to the entrepreneurs. In our case, the loan made by the individual lenders serves as collateral or guarantee which is deposited with a lending bank. Based on the guarantee, the bank makes a larger loan to the microfinance institution which in turn lends to the entrepreneurs.

Our model has several advantages:
a) Doubling of impact: Since the bank makes a loan which is nearly double the guarantee amount, there is a doubling of impact for the individual microlenders.

b) Mitigates foreign exchange risk: Since the loans from Bank to Microfinance institution(MFI) and MFI to entrepreneur are in local currency, foreign exchange risk is mitigated for the MFI and the individual lenders. 

c) Local linkages: Our guarantee facilitates the creation of local linkages between domestic banks, MFIs and poor entrepreneurs. In the course of repaying the loan, both the entrepreneur and the MFIs develop credit histories that will enable them to access more funds at a later date with a lower guarantee percentage, or even without a guarantee. MFIs also get to form relationships with banks and offer other products like savings, insurance, money transfer etc. through the bank.

d) Manages risk better: We get the additional benefit of monitoring of the loan by the bank which is not available with other person to person models. We are also focused on those living in extreme poverty typically, living on less than $2/day.

6. You kept mentioning about "Guarantees". What exactly is a guarantee? How does it different from direct lending?

A loan guarantee is an agreement between a guarantor, a lender, and a borrower in which it is agreed that a guarantor will repay the loan if the borrower defaults. You can learn more about guarantees going to our website at http://www.unitedprosperity.org and clicking the about us link.

7. Your loan/entrepreneur profiles are very limited and centered towards India only. Why and any reason?

We only launched this summer and we eventually plan to roll out to other countries. We will launch in other countries once we have greater traffic to fulfill the need.

8. I see all the guarantees are going towards group of entrepreneurs? Why aren't they individually listed?
We try to reflect the local lending model as much as possible. Most of the microcredit lending is group and we reflect that.

9. Do you think you are competing against Kiva.org for loans and lenders? How you see yourself placed against Kiva.org which has grown manifolds in recent years?
Kiva  has  done a great job in popularizing online microlending. United Prosperity is focused on entrepreneurs in extreme poverty and offers greater impact for individual microlenders with mitigated foreign exchange risk.

10. KIVA is also helping people to get out of poverty and UP just jumped in the same bandwagon. Why someone has to shift their strategy from KIVA to UP? Is there any added advantages?

As I mentioned earlier, our model is totally different from Kiva. We are not
lending, we are only giving guarantees to the loans. We avoid the foreign exchange risk. May be both of our destination might be similar but the path we are taking has lot of more different and more  benefits for both sides.

11. I see many features lag in UP compared to KIVA like forming a team, communicating with other members etc., Are you plan to add them soon?

We have the groups feature on our community site : http://unitedprosperity.ning.com.  Members can form groups and communicate amongst themselves here. However, one cannot assign a guarantee to a particular team. We plan to add that feature in some time. We will be also be adding the gift certificate features by the end of this year.

12. What are you plans in getting the word around?

We have largely used social media marketing to get the word around – facebook, twitter so on. We recently got a google adwords grant and plan to use that for increasing visibility. We will be soon introducing a gift certificate feature for members to invite their friends and family. We also look forward to people like you and others writing about United Prosperity in their blogs and telling their friends.

13. Do you plan to expand your offerings to other nations? If so, anything currently on the works?

Yes, we plan to expand to countries other than India, but the expansion plans are still at a very early stage. Apart from that there is also an ample need in India. The World Bank estimates that 456 million Indians (42% of the total Indian population) now live under the global poverty line of $1.25 per day (PPP). This means that a third of the global poor now reside in India.

14. What are the ways, others can help your organization?

The easiest way is to sign up on http://www.unitedprosperity.org and start guaranteeing loans. It is very easy to sign up and one could start with even $10. Apart from that you could tell your friends, post a link to United Prosperity on Facebook or Linkedin. You could also write about United Prosperity in your blog and help spread the word. You could also choose to volunteer with us if you could spare around 8 hours per month.

Thank you again Bala. I appreciate your time and all the best for success. I know it is not an easy task to setup an organization legally of this big with a strong motive too improve their life style of poor and needy by bringing us altogether. It is a noble cause and hope you will get more support from the community.

Hope you all enjoyed my interviewer the founder of United Prosperity, Bhalchander. As a contributor and lender myself in kiva.org, I recently joined UnitedProsperity.org  few weeks ago and started making few guarantees. It was a simple process and gave me full satisfaction by providing opporunity to help needed entreprenuer directly for their growth and improved life style.  I always feel lucky to have enough to help needy and find different avenues to do so. Kiva.org and UnitedProsperity.org are doing a great job giving us these new avenues.

I strongly believe in the Chinese proverb, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” 

Go ahead and make a difference in lending your hand to others by lending your money, start with just $10 or $25. Your money is not earning these days sitting in a bank account; let it at least do some karma to you. If you have any questions about UP, please don't hesitate to comment here. I will try my best to get answers for them.

In the last blog post, we saw the essence of true giving and free tools available to find an organizations that suits your lifestyle or passion to start thinking about donating. This post, we are going to see few different ways one can give and help. Also we will look at some Tax Implications of gift giving.

There are variety of ways to contribute, donate or give. A donation doesn't have to be big and it doesn't have to be money either. It is giving heart that matters. Let's categorize charitable gift giving into two ways as Direct and Indirect.

I. Direct Donations

Cash is king whether it comes to businesses or non-profit organizations. At this tough economic juncture, it is not just the individuals and corporations which are feeling the pinch. Many non-profit organization are experiencing big hit in their donation dollars. This year Good will, Salvation Army and many other organizations has reported a decline in their donation. They need our help more than ever in this tough times. Giving Cash is a great way to show your support and it has a direct impact to the cause. Many organization now accept credit cards for donation.  But there are certain limitation to cash gifts in regard to Taxes. We will look at them later below.


II. Indirect Giving

1. Give by Gift Cards

You can buy charity gift cards at sites like http://www.tisbest.org/, www.charitygiftcertificates.org and www.JustGive.org. and give to the reciepent. He/she can spend or use the gift card and donating to their favorite society. It is a great feeling for both you. You give him the gift, he/she gifts to the favorite charity. Also there are lot of webistes which accepts unused store giftcards and donate the proceedings to charities. If you have a macy's gift card which has balance of $2 or something. Many of us just threw it away because we won't be able to buy anything using the small money left over. Instead, you can just give it away to charities by using these websites.

2. Don't donate but Lend or Loan

I don't believe in just giving  away money unless it is tipping somebody. Because the recepient will be back again to street asking more. It is better to help them find a job and make them work feed themselves. Like the chinese saying, "Don't give them fish, instead teach them how to fish".  There are few organizations like Kiva.org and UnitedProsperity.org which provides the platform to do just that. They help the donor to lend/loan money directly to aspiring Entrepreneurs in the developing countries. I started myself few months ago in both these websites and started lending and helping people.

3. Shop and Donate

It is called Cause related Marketing and are Selfish giving. Starbucks is helping to fight AIDS in Africa. Macy's is giving to the Make A Wish Foundation. And Toys "R" Us is giving to Toys For Tots Many more retailers and manufacturers are partnering today with not-for-profit organizations in cause-related marketing campaigns. On one hand, these campaigns raise awareness, support, and donations for social causes such as global hunger relief. On the other hand, they enhance corporate reputations, customer loyalty, and financial gains for companies.

An example of cause-related marketing is an effort organized by Macy's, Pfizer, and other businesses on behalf of the American Heart Association. The program has raised over $32 million in donations for the charity, while generating over 1 billion media impressions for corporate sponsors. So just buy shopping in these stores, you are indirectly benefiting some non-profit organizations. Whether you call this has selfish giving or not, it is at least benefiting somebody thats what matters. There was an article/report posted in npr about this cause related marketing. Check it out.

III. Volunteer your time

Time is precious and it has value. If you strapped with cash, you can also give your time. There are lot of local charity organization like hospitals, resale shopes which migh need help during this holiday times. You can always take time to volunteer and even claim those hours in your Tax returs. Talking of taxes, now its time to check what are the ways we can benefit from gift giving.

Tax Advantages

Giving not only satisfy our inner soul but also helps to save and get some money in return as an appreciation from Uncle Sam. Tax incentives is an added bonus encouraging many to contribute.

For charitable contributions of less than $250, you must keep a canceled check, credit card receipt or electronic funds transfer receipt. Or you must have a letter from the charity acknowledging receipt of the contribution and stating its date and amount. For charitable contributions of $250 or more, you'll also need a written receipt from the charity substantiating the amount of cash contributed and a description (but not the value) of any property -- other than cash -- contributed.

And you must disclose whether the organization provided any goods or services (such as a theater ticket or dinner) in return for the contribution.
If you donate property, such as clothing, valued at less than $250, you must keep a receipt from the charitable organization showing the charity's name, contribution date, physical location of the contribution and a detailed description of the property (but not its value).

For larger donations, you'll need even more documentation, including a description of how you acquired the property (purchase, gift, inheritance), the date you acquired the property and the original cost of that property. Donated property worth more than $5,000 requires a qualified appraisal, as do lesser-value objects that aren't in "good" condition.

Conclusion

“Giving from a full heart is one of the most joyous things you can do...",  – from the book "The Secret".

Make this holiday season special by donating your time or money in any above ways. It will surely sooth your soul and even make your pocket happy by getting some back so you can continue giving.

Happy Holidays!!

Sources: Internet website relate to charity giving
Photo source: www.oregon-crna.org

It is the time of joy and merriment. The festive season is all about fun family time, holiday parties, gift exchanges and giving gift. Gift giving has been a tradition for many decades. But how many of you really get the gifts which you really like and how many of you really know what you want to buy for your cousin this christmas.

According to Waldfogel, an economist at the Wharton School of the University of Pennsylvania,  gift giving is a Holiday waste.

He makes the case in his book, Scroogenomics: Why You Shouldn't Buy Presents for the Holidays.  He says, when you buy something for yourself, you will only spend, say, $50, if you look it over and decide it's worth at least $50 to me. When someone else sets out to spend $50 on me, they're at a real disadvantage. They don't know what I like unless they are real close to you. They don't know what I have. There's just no guarantee that what they buy will be worth at least $50 — or more — to me. So it real waste of money. And what the data show is that, on average, stuff that other people buy as gifts is worth 20 percent less per dollar than the stuff we buy for ourselves. And so, in that way, when we go out and spend money on gifts, we're destroying a lot of value.

It's not so much that people shouldn't give gifts, period. It's that you should give gifts when you have a fair shot at doing well. And so those are the people you know well and, frankly, the people you care about. He recommends, it's often better (more efficient) to simply give cash or pre-paid gift cards. You can read more about this Holiday Gift waste in his book, Scroogenomics.

At the sametime, Holiday season is not just about giving gifts to friends and family, it is also about giving the gift of hope and happiness to most needed ones. Charitable giving  is a big aspect of the holiday season. Whether you make a difference in one's life or just make one smile by showering gifts in this holiday season, it will surely piles up good karma in you.

"What you think about and thank about, we bring about” – Dr. John Martini in the book, "The Secret".

An inspiring quote from an excellent book which I recently read and strongly recommend. It just reforces the fact that "Think and Do good things, it will bring good things to you". This very thought is the prime reason for many millionairs who spend millions in philanthropy. By doing so, they continue to attract more money and become more rich while many of us are worrying about living pay check to pay check. That's the difference in mind set. 

We worked hard and devoted all our attention in making money, saving money and investing money all this year for the future. It's hard to think seriously about giving money away. It is even harder for many without job in this tough and challenging year 2009.  But the good news, the year is almost over and recession has come to an end at least in papers. That's big sign of relief. We all can only hope for the next year to bring greater perspectives in both job and economic front through outall over the world.

While we wait to welcome the New year, many of us should be lucky and grateful to have a reasonable job and a decent life. Instead of cribbing about not enough money to donate or give way, we should open our heart and show our gratitude by giving and helping others in need.

How can you contribute?

Whether it is small or big, capacity doesn't matter. What matters the most is the Charitable thought. There are lot of ways you can give especially suiting your life style, you life goals, your passion and more. If you are pet lover, you can give to Humane Society to protect animals. If you want to encourage kids education, you can donate to globalgivingeducation funds. If you care about developing nations, you can give gift to world relief. With webspace loaded with gift giving advices, you better do your research to find the right option and avenue to route your money to the right place. Here is some help to do some true gift giving.

Tools - Charity Finder

It's easy to check on a charity's business practices to make sure the bulk of your contribution is going toward the cause you select, instead of being spent on fund-raising expenses or salaries. There are web sites like www.CharityNavigator.comand www.GuideStar.org allow you to search for a charity by name or cause, as well as view and compare their annual IRS filings under Form 78, which details their expenses and costs.

 
Websites like http://www.goodsearch.com/and http://www.searchkindly.org/are search engines that donate a portion of their revenue to the charities and schools designated by its user.

We will see more about different ways of gift giving and possible Tax Implications in the next blog post.

Alright, Blackfriday is come and gone. It is time to send in the Mail-In Rebate forms(MIR). I am sure many of you bought items on sale especially with  Mail-In Rebates(MIR) hoping to get your money back and prove yourself that you really saved some money by getting up early and waiting in line for hours.

In order to be successful in getting your MIR's, you need apply properly. I always had 100% redemption rate in my Mail-In rebate claims because of proper planning and applying without giving chance for any errors  

Mail In Rebate Facts

According to wikipedia.com report, PMA, a marketing firm, estimated that in 2005 $486.5 million worth of rebates were redeemed. The redemption rates averaged only 21.1% when calculated as a percentage of total sales, and 67.6% when calculated as a percentage of incremental sales. That is not an encouraging news but MIR system has come a long way since 2005. Now you have option to apply your MIR either by mail or online to get your money faster.

Most rebates are handled under contract by rebate clearinghouses that specialize in processing rebates and contest applications. The source of their fees is not readily discernible with conflicting reports from different sides. There is always a concern about rebates being rejected and invalidated by these clearinghouses to show more savings to the company to earn more fees.

Young America, a rebate clearinghouse claims that "Young America receives the same fees whether a submission is valid or invalid," giving them no incentive to unfairly invalidate customer rebates. Whether it is true or not, we cannot verify but if you do your part right and apply correctly, they can never reject or invalidate your claim. Let's work towards that goal.


How MailIin Rebates works?

Lets say the item usually costs $100. Retailers put a tag on it for $75 with $25 Mail-in Rebate. You will pay the full $100 at time of check out and apply MIR to get back $50 via mail. In most cases, you need to apply for the rebate via mail with all the required things like original reciept and purchase proof(UPC). Nowadays you can also apply online to get it faster with any retailers like bestbuy, staples, officemax etc., It takes 4-8 weeks to process and you will eventually get your money back.

Retailers and Manufacturers play with the psychology of the buyers and try to gain by taking advantage of lazy people who forget to send rebates or don't send the required proofs. Also the retailers use this opportunity to get rid of the items which doesn't sell well as freebies and change them to money. 

Tips and Tricks for Quick Rebate Redemption

1. Before leaving the store, check whether you got all the mail-in rebate forms and seperate original reciepts to send with those forms. Some stores would give seperate reciepts but others you need to either send copy or original reciept. Check the requirement.
   
2. Unpack the item and save the package materials. Check and make sure whether the item works as expected. If not you have the option to return the material with the original package. Try it out for few days and if it is all good, then cut out the UPC code required for rebate and trash the package material. The reason, you cannot return the material without UPC code. You need the original package with the UPC to return it. If you cut it out and sent the Mail in rebate and want to return it, you will have tough time doing so.
   
3. Now sort out the reciepts to seperate out the rebate form and rebate reciept for each item which is on rebate. Read the requirements carefuly and try to do one item at a time. Some rebate might require you to send the original UPC Bar code  and some don't. They will all specify a time frame for the rebate to reach their office. If you can submit online which saves postage and time, just do it. It will also help to track the status. If not, you might have to do via mail.
   
4. Collect all the requirements for each item and  put them in a envelope. Don't paste it yet. Do rebates in batches instead of doing all together to avoid any confusion.
   
5. Use address labels on the envelopes for clarity and save time instead of writing. 
   
6. Once you are done with all the items to send, don't forget to make copies or scan (save paper) of all your documents for each rebate which is CRUCIAL! It will come handy when companies disqualify rebates for missing document. You can always reapply with the copy. So, make sure you copy everything including UPC code.
   
7. Next save the scanned copy in proper computer folder with right naming to identify later. If you copied, file them in your cabinet folder for future purpose. Also make an entry in text file or journal about the rebates like product, date rebate sent and how much is expected for future reference.
   
8. Finally, put all the document back in the envelope after cross checking the requirement last time and apply proper postage (first class) and mail it out. That completes the applying process.
   
   
9. Once you sent it out, you need wait patiently for minimum 4 weeks and see whether you hear any feedback from them via email. Nowadays many companies send out email status or directions via email to check your status online. If not you can visit the retailers website and check the status using rebate code. Track them periodically and if they are having problem, call them up and resend any proof needed. 

Hope these points will help you to make the rebate process bit easier. They work almost all the time. Final word, don't give up if they reject or disqualify your rebate. You can always reapply with your rebate copy and don't forget it is your money and you better try to get it back.  

If you have other tips to add, please don't hesitate to share it.  
 
Photo source: wikipedia.com

We been talking about Top 10 Hot Gadgets and Gizmos for this Holiday Season. Digital readers topped the listed and we did one seperate article talking about it. Last article covered the list from Top 2 -5 and this one will cover the rest in the list.

Hot Gadgets #6: Gaming Consoles

As many of you know, video games have come a long way from Pac man to PS3. If you’re a gamer, you’re spoiled for choice when it comes to Black Friday s neat deals at many stores. If you're looking to pick up a cheap console next Friday, there are actually 5 good options starting from PS3 slim for $299 to Nintendo DS for less $100. Many stores plan to carry bundles of them bundled with exotic games. You can check out the consumersearch.com for more details and also go to blackfriday.com for gaming console deals.

Hot Gadgets - #7: GPS/Portal Navigation Systems

GPS has emerged in the consumer market few years ago. The market has matured and evolved remarkably in the last couple of years. Portable navigation device or GPS, today has more features than ever to help you get from point A to point B quickly and safely--features such as audible driving directions with text-to-speech (TTS), spoken street names, real-time traffic updates, Internet connectivity for points-of-interest search, and large easy-to-read screens, to name a few. It has also become cheaper to afford starting from $50 which has all the basic things to direct your route. You can check cnet again for the best gps for today's life. Check out bfads.net for black friday deals on GPS.

Hot Gadget&Gizmos #8: Touch Screen&Smart Phones

Keeping tabs on the latest cell phone models can be a full-time job, especially given the number of cell phones announced by Apple, Palm, Nokia, and HTC (including, most recently, the BlackBerry-like T-Mobile Dash) over the past few months. Nothing beats a stylus and a touch screen for true on-the-go productivity. Check cnet for review on top 5 smart phones.

Hot Gadget&Gizmos #9: External Harddrives

A portable or external hard drive is quite a useful piece of equipment. It allows the user to back up or store important information separate from the main internal hard drive, which could become compromised by online or offline activities. Sensitive documents, large music files, DVD images, movies, disk images, and even a backup of the contents of your main internal hard drive, can all be kept securely and safely on an external hard drive. When you are online, you can even leave the external drive turned off. Check blackfriday.info for online sales.

Hot Gadget&Gizmos #10: zhu zhu Hamster

Last one a gadget/gizmo for kids. It is a most wanted Toy of this season, Zhu zhu Hampster.

It made news all over the nation and sold out in few days. It is out of stock in Toyrus website but Toysrus is promising for the first 100 shoppers in line at each store on Black friday will receive a ticket for the opportunity to purchase one of the season's hottest toys - the Zhu Zhu Pets Hamster. The $10 toys are out of stock on the retailer's Web site. But the company says thousands of additional Zhu Zhu Pets will become available in stores throughout Friday, with regular new arrivals through December.

A word of advice, don't buy things you ain't need them. It is like the saying "Don't fix it if it ain't broken".  If you do plan to buy things you need for this holiday, do proper reasearch and plan properly for the purchase. Avoid impulse buying.

sources: pcworld.com, cnet.com, inquist.com