25 Rules For Making Upright Financial Decisions

1. For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
The return on investment on a mid-range bath modernization is 102% of its cost. Kitchens can add about 90% of their costs to the home's value.

Another home improvement that can pay off is window replacement. Not only does this job return about 90% on investment when the house is resold, it saves on energy bills every year.

As a rule, upscale improvements pay off at lower rates than mid-range or inexpensive ones. And making a house bigger and more luxurious that those of your neighbors will also cost a lot more than they'll return when the house is sold.

2. It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
There are transaction costs and fees involved in any refinancing that must be either paid out of pocket or added to the mortgage principal. Some of those costs can be considerable. Title insurance can easily run into four figures and broker fees can be expensive as well.

Like many things in life, timing is everything here. Is your job likely to relocate soon? Will you need a bigger house in the next couple of years? Unless you're planning to stay in the home for a while, the benefits of a lower monthly bill may not be worth the additional expenses that refinancing generates.

3. Spend no more than 2 1/2 times your income on a home. For a down payment, it's best to come up with at least 20%.
Many buyers in recent years have stretched the limits of affordability, and have bypassed the traditional 20% down model. But make a smaller down payment, and most lenders will require you to have private mortgage insurance (PMI), which adds a minimum 0.5% of the loan amount to your mortgage payments, about $1,000 more a year on a $200,000 principal.

4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
These guidelines include payment on all loans, such as school and auto loans and credit card debt.

Also remember to take into account other home-related expenses to judge a house's affordability. Property and school taxes, home insurance and energy costs and requirements can vary considerably around the nation.

Try to estimate future maintenance costs and work them into your budget. Some homes, especially older ones, may require more regular upkeep than homes built with more modern materials. Roofs, siding and heating, cooling, plumbing, and electric services may have to be replaced within a few years of purchase.

5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Even if these contractors aren't scam artists, they may lack licensing and insurance. If a worker gets hurt on your property it could wind up costing a lot more than you bargained for.

Instead, get contractor recommendations from friends, neighbors or relatives. Check references and get documentation of insurance coverage.

And don't put more than 10% down for the job. Mete out the payments gradually as work is done and withhold the final 25% until you're satisfied with the completed project.

6. All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
One of the keys to saving for the long run is keeping as much money as possible shielded from taxes. A 401(k) gives you that and more: You also get an immediate tax break, because contributions come out of your paycheck before taxes are withheld. And there's the possibility of a matching contribution from your employer – that's free money.

The federal limit on annual contributions has been increasing gradually, and is $15,000 in 2006. If you're 50 or older, you may contribute an additional $5,000.

With a Roth IRA, you get no immediate tax break, but withdrawals in retirement will be tax-free. You can make at least a partial contribution to a Roth if your modified adjusted gross income is less than $110,000, if you're single, or less than $160,000, if you're married and filing jointly.

7. To figure out what percentage of your money should be in stocks, subtract your age from 120.
Since 1926, stocks have returned an annual average of 10.5 percent, long-term government bonds returned 5.1 percent, and "cash," measured by Treasury bills and other short-term investments, has returned just 3.1 percent. In other words, if you're investing for the long-term, stocks are the place to be. But in the short term, the stock market can be downright dangerous, with much more severe drops than the bond market has.

That's where this rule comes in - the younger you are, the more time you have to recover from stock-market crashes. As you get older, you should gradually move money out of stocks and into bonds.

8. Invest no more than 10% of your portfolio in your company stock - or any single company's stock, for that matter.
In a bear market, it's tough to find a safe-haven – a lot of the stocks in your portfolio will be sinking too. But don't compound the risk by holding too much in any one stock.

The most recent dramatic example of just how serious this "specific-stock" risk can be is Enron, which imploded after its executives allegedly engaged in various acts of malfeasance. But a company with perfectly honest management might fall on hard times too.

And if it's your employer's stock, you're in an even worse position – not only will your portfolio be decimated, but your job could be at risk too.

9. The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
Running a mutual fund isn't free – companies have to pay for research, managers' salaries, and so on. Those costs are borne by the investors in the funds and get deducted from returns. A percentage point here and there may not sound like much, but a fund manager needs to pick a lot of great stocks to make up for those costs.

10. Aim to build a retirement nest egg that is 25 times the annual investment income you need.
So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million. This rule is based on the amount that you can safely withdraw from your nest egg in retirement.

The single most effective thing you can do to ensure that your money will last is to start out with a low withdrawal rate of 4 percent, then raise that amount annually to compensate for a cost-of-living increase or inflation.

The reason is that if a bear market hits early in retirement, an enormous loss can put such a big dent in the portfolio that it won't be able to recover in time to benefit when the market rebounds.

11. If you don't understand how an investment works, don't buy it.
There is no shortage of investment products out there. In addition to stocks and bonds, there are exotic hedge funds and insurance products.

Fortunately, you don't have to try and make sense out of them. In fact, you can construct a sensible portfolio with just two index mutual funds – one stock and one bond.

To reach your goals, you don't need to shoot for spectacular returns. Individual investors can outpace the market with moderately above-average returns in good times, as long as they don't lose too much money in bad times.

12. If you're not saving 10% of your salary, you aren't saving enough.
The earlier you start saving, the less you'll need to set aside every year to meet your goals. That's because you allow your money more time to grow -- the gains on your invested savings will build on the prior year's gains. That's the power of compounding, and it's the best way to accumulate wealth.

Saving at least 10% of your annual salary for retirement is recommended, but the older you start saving, the more you'll need to save. If you start at 50, you may need to put away 30% a year and still postpone retirement by a few years.

13. Keep three months' worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months'.
An emergency fund is a hassle to build, but you'll be glad you did next time your transmission sputters or your boss hands you a pink slip. Besides curbing spending where you can and setting aside a small amount of your pay every two weeks, there are several ways to build your cash cushion. Some sources to draw on:

* A bonus or financial gift from a relative
* Money you get back from a flexible spending account, a transportation reimbursement account or an insurance claim.
* An extra paycheck. If you're paid every two weeks, you'll get 26 paychecks a year. So in some months you'll get three instead of two. If your fixed monthly expenses don't change, you might be able to set aside one paycheck a year.

14. Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or use some of your income to help out when your child is in college.
Most parents have trouble saving enough for their retirement. But they still want to help their children pay for college.

In the struggle to feed your 401(k) and your child's 529, the 401(k) should win out. That's because there are no scholarships for retirement and your children have a lot of funding options, including financial aid, loans and a job. They also can go to an excellent, but less expensive school.

And when they're in college, if you have some extra cash after contributing to your retirement accounts, you can help them pay some of their expenses with it.

15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.
Life insurance lets surviving family members maintain something close to the standard of living they enjoyed prior to you or your spouse's death. Stay-at-home spouses also should have life insurance, since they do all sorts of things that you would need to pay someone else to do in their absence.

There are two types of policies:

* Cash-value: These cover you for your entire life and includes an investment component.
* Term: These cover you for a specific period of time and provide a death benefit only.

For most people the choice is a no-brainer - the premiums on a term policy are much lower.

16. When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.
It's the open secret of the insurance game: File a claim, your premiums go up. For that reason, it's in your interest – as much as possible – to shoulder small damages out of pocket.

For home insurance, raising your deductible from $500 to $1,000 could save you 25% on premiums, according to the Insurance Information Institute.

17. The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.
If you carry a balance, you may pay a variable interest rate as high as 19%. And if you've been late with payments or used up too much of your credit limit, you may be hit with a penalty rate, which can run north of 30%.

Credit card penalty fees, meanwhile, have been on the rise for years. The average late fee in 2005, for example, was $34, up 162% from $13 in 1995, according to the Government Accountability Office. Over-the-limit fees, meanwhile, were $31, up 138% from $13 during the same period.

So no matter how many airline miles or cash back rebates a no-fee rewards card offers you, it won't be enough to compensate you for your very expensive credit card habit.

18. The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
It also helps to pay off debt rather than moving it around because the ratio of your credit card balance to your credit limit is key.

Say you owe a total of $2,000 on four credit cards, each of which has a $2,000 limit. Your total credit limit is $8,000, of which your total balance ($2,000) accounts for 25%.

If you transfer all your balances to two cards and cancel the other two, your total credit limit is reduced to $4,000, and your $2,000 balance now accounts for 50% of that limit.

Also, don't open new accounts when applying for a loan if possible.

19. Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit card account is a scam artist.
The scam artist's goal is to steal your money, steal your identity or both. In fact, don't carry anything with your Social Security number on it, and don't offer it to anyone unless it's for tax, employment or credit purposes.

There are other ways scammers and identity thieves can get your valuable financial information – for instance, by hacking into a merchant's system and lifting your (and hundreds of other customers') debit card pin numbers.

So be sure to monitor online bank and brokerage accounts a few times a week, and if you see any suspicious withdrawals or charges, report it to your financial institution.

20. The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.
Don't believe your father's old-fashioned warnings about buying used. Buying a "pre-owned car" means you've let someone else drive those expensive early miles.

Do your research, of course, and look for a reliable model. But today's cars can generally be expected to rack up six-digit odometer numbers before experiencing major mechanical breakdowns.

Check ConsumerReports.com for detailed reliability information. Sites like Edmunds.com and Kelley Blue Book's KBB.com can help you narrow down the price you should pay.

21. Lease a new car or truck only if you plan to replace it within two or three years.
Keeping a car at the end of lease-term can cost you thousands more than it would have to simply have bought the car from the get-go.

Leasing does have its place, but it's not right for most people. If you're absolutely certain you don't want the car long-term, leasing keeps your monthly payments low. That's because the payments are based on the actual value the car loses during the time you're driving it. Instead of making payments then getting some money back when you trade the car in, as you do when you finance a purchase, with a lease you just don't pay that money out to begin with.

22. Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
As with cars, electronics cost the most for those who must be first with the latest cool thing. Let the gadget freaks get their fill, then go shopping when the market has calmed.

Also, those first-in-line buyers can have the fun of discovering the annoying bugs, disappointing features and poorly designed interfaces. You can check the user reviews on C-Net and Amazon.com later to find out for yourself without having spent the money.

23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
Airlines would love it if every passenger would reserve their seat as far in advance as possible. That way, they'd always know how many flights they actually need for each route. So they make it as attractive as possible for people to book early. To punish procrastinators, ticket prices get higher as take-off gets closer.

Up to a point, at least. In the end, the airline just wants to fill every seat. So, if there are a few seats left open at the last minute, you can sometimes find a bargain deal. If you really have to fly, though, don't count on that. Airline bean counters have gotten pretty good at knowing just how many seats they need.

24. Don't redeem frequent flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
You typically need 25,000 miles for a domestic round-trip ticket. If the ticket costs less than $250, you're probably better off paying cash.

Airlines push redeeming miles online and will charge $5 to $15 to speak to a person. But it may be worth it: the airline representative has access to additional inventory on partner airlines.

Your miles stretch further on international flights, which typically require 40,000 to 60,000 miles or more depending on the destination. You want to aim to get $2 worth of airfare for every 100 miles. In other words, for a $1,200 flight to Paris, you'd be getting your money's worth using 60,000 miles.

25. When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer.
Most electronics, like PDAs and MP3 players, have few moving parts that are prone to wear. If there's anything defective, you'll probably find out about it within the first few months.

Laptops, on the other hand, have parts like hard drives and big screens that can actually fail over time. Plus, laptops can cost thousands of dollars to replace.

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Intel Hit 19 Percent After First Quarter


AP Technology Writer

Benefiting from its rapid shift to a new chip-making process and a big tax benefit, Intel Corp.'s first-quarter profit surged 19 percent as lower production costs helped the company withstand another round in a fierce price battle with rival Advanced Micro Devices Inc.

Intel said after the market closed Tuesday that it earned $1.61 billion, or 27 cents per share, in the first three months of the year. That compares with net income of $1.36 billion, or 23 cents per share, in the same quarter last year.

The Santa Clara-based company said the latest profits include $300 million reversal of previously accrued taxes that were added back into the company's coffers. It increased the earnings per share by about 5 cents.

Intel said revenues for the quarter were $8.85 billion, down slightly from last year's $8.94 billion

Analysts surveyed by Thomson Financial were expecting the company to earn, on average, 22 cents per share on nearly $9 billion in revenue.

Intel shares gained 29 cents, or 1.4 percent, to close at $20.98 on the Nasdaq Stock Market. In extended-session trading, they gained 30 cents.

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IBM's First Quarter Earnings Forecast A Reality


AP Technology Writer

First-quarter earnings at International Business Machines Corp. rose 8 percent and matched Wall Street expectations Tuesday, as a boost from software acquisitions helped overcome only moderate growth overall.

In the first three months of this year, traditionally IBM's slowest quarter, the Armonk, N.Y.-based company earned $1.84 billion, $1.21 per share. In the comparable period last year IBM showed profits of $1.71 billion, or $1.08 per share.

Analysts surveyed by Thomson Financial were expecting $1.21 a share for the first quarter.

IBM's revenue rose 7 percent to $22.0 billion, slightly ahead of the analyst forecast of $21.9 billion.

But the real growth in sales was more moderate — 4 percent, if not for weakness in the dollar. Downdrafts in the U.S. currency can inflate the dollar value of deals done in other currencies.

The first quarter's results followed a well-established pattern at IBM, which has used cost cuts and measures such as stock buybacks to squeeze out earnings gains that have exceeded revenue increases. Last year, profits jumped 20 percent to $9.5 billion despite virtually flat revenue, and investors pushed the stock up 18 percent.

But this year the shares have treaded water, as investors are scanning for signs of a new spark inside IBM. Shares rose 94 cents to close at $97.12 on the New York Stock Exchange before the earnings report, almost exactly the price they had when the year began. In extended trading after the earnings report, IBM shares gained $1.83, or 1.9 percent.

IBM's most closely watched unit, the company's services division, signed $11.1 billion in contracts in the first quarter, compared to $11.4 billion a year ago.

That figure — one of Wall Street's favorite barometers for gauging IBM's health — represents revenue that will be booked over the course of several years. In the first quarter itself, the services division's revenue rose 8 percent to $12.4 billion. It would have been a 4 percent gain at constant currency rates.

IBM's next-biggest arm, the hardware unit that makes servers, mainframes and computer chips, saw revenue rise 2 percent to $4.5 billion, though the figure would have been flat if not for currency fluctuations. Revenue in software, which accounts for an outsized portion of IBM's profit, grew 9 percent to $4.3 billion, helped by several acquisitions in the past year.

IBM did not immediately address analysts' full-year expectations, which call for earnings of $6.72 per share and sales of $95.6 billion.

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10 Top Best Places for Business and Careers

The news on the economy in recent months has been uninspiring. The subprime lending mess threatens to accelerate the housing slowdown. Gas is at its highest price in eight months. Gross domestic product growth this year is expected to be less than 3% for the first time since 2003.

But one part of the country consistently manages to produce strong economic growth and still keep costs down. For the second straight year, the Southeast placed five metros in the Top 10 of our Best Places for Business and Careers.

While most economies in the West have also outperformed their peers in the Northeast and Midwest over the past four years, living costs in those regions have risen dramatically. Housing prices in Phoenix, spurred in part by easy lending, are up 57% in the past two years, knocking it off our Top 10.

There are a few bright spots out West that have managed to keep costs under control--namely Provo, Utah, and Boise, Idaho, which came in second and third in our rankings. Business costs in Provo are 7% below the national average, while Boise's costs are 14% lower--music to the ears of local employers Hewlett-Packard and Micron Technology.

When it comes to the best place to do business or start a career, the clear winner this year is North Carolina. The Tar Heel state, home to banking giants Bank of America and Wachovia, placed five metros in the top 25.

Raleigh, N.C., grabbed the top spot after three years as runner-up in our rankings. Raleigh's economy has expanded 6% annually over the past three years. Helping to fuel this growth are business costs that are 13% below the national average and a labor force where 38% have a college degree--the 12th-highest percentage in the country. Other North Carolina metros that scored well include Durham (ranked seventh), Charlotte (21st), Asheville (23rd) and Winston-Salem (24th).

A new entry on our list of the 200 largest metros is Olympia, Wash. Washington's capital had been relegated to our ranking of the best small metro areas in years past, but thanks to a 2% annual growth in population (twice the national average), the Olympia metro and its 233,000 people graduated to the big metro list this year. Olympia soared to a ranking of 10th overall thanks to strong job and income growth over the past five years.

For this year's ranking we relied on West Chester, Pa.-based economic research firm Economy.com, owned by Moody's. Its business cost index factors in labor, tax, energy and office space costs. For living costs, Economy.com weighs housing, transportation, food and other household expenditures. It also supplied five-year historical figures on job and income growth, as well as migration trends.

Other data used in the rankings came courtesy of Portland, Ore., researcher Bertrand Sperling. He looked at the education of each metro's work force as well as the presence of four-year colleges in each area. Sperling also examined such quality-of-life issues as crime rates and cultural and recreational opportunities.

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Lunchroom's Hits and Misses of Job Hunt

Looking for employment? While it’s important to stand out from the crowd, it also pays to remain professional in your job-hunting techniques. Robert Half International surveyed advertising and marketing executives for the most unique strategies people have used while looking for work. Here are tactics that hit the mark — and those that missed — during the job search.

Hit: “A candidate sent us a slick electronic portfolio. It was quick and to the point.”
Miss: “A guy organized a chain letter that included a request for me to send his resume to 12 other agencies.”

Hit: “A person offered to work for free on a trial basis. I hired her.”
Miss: “One candidate handcuffed himself to the desk during the interview.”

Hit: “When I was interviewing, a candidate turned the tables on me and asked, ‘If you were a bicycle, which part would you be?’ I answered, ‘The handle bars, so I would be in control and steering.’ I was impressed that he asked me that question, and I hired him.”
Miss: “We had a job seeker send us a singing telegram.”

Hit: “One person I met with e-mailed me a thank-you letter just 10 minutes after the interview.”
Miss: “One job seeker sent lottery tickets with her resume.”
Decisions, Decisions …

What pair of slacks should you wear? Is it a turkey sandwich or a salad sort of day? You probably make hundreds of snap decisions during the week, but you need more to go on in the business world. Your success at work depends on your ability to quickly move a project forward while making thoughtful choices. Whether you’re selecting a new vendor for your company or weighing in on a hiring decision, making the right call can enhance your reputation. If it sounds like more than an art than a science, don’t despair. Here are some suggestions to help you become a better decision maker:

Assume nothing.

Not collecting key facts and instead going purely on “instinct” can be a recipe for disaster. No matter how much of an expert you are, you should always take into account the most current and relevant information available.

Don’t go it alone.

Your colleagues may have helpful input about the pros and cons of the choice you’re making — they may even have been faced with similar situations themselves. Don’t limit your intelligence gathering to those within your company — members of your professional network also are good sources to tap for insight.

Be aware of your biases.

Try to be objective and prevent past experiences from affecting your current views. Make a side-by-side comparison of each possibility.

Take your time.

While there’s often pressure to deliver projects faster, rushing can lead to poor choices or sloppy work. Take the time to process the information and make sure you understand what’s expected of you.

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Cell Phones - A Necessity For The Homeless


There are days like the one last week when John Marzette is low.

The 41-year-old homeless man is low on job prospects, low on cash and low on minutes for his cell phone.

"You don't have as much money as you usually would because you have to continuously charge it with prepaid minutes," Marzette said of the used T-Mobile phone his sister gave him to stay in touch. "It has its ups and downs. But it's an important thing to have."

Though it may seem strange to own a cell phone when you don't have a roof over your head, homeless advocates say the phones are becoming increasingly important to people living on the street.

They offer the best chance homeless people have at getting a call back from a potential employer. They are the most reliable way to stay in touch with family members who don't live in the area.

"There is a misperception that homeless people are lazy, unemployed people who don't work," said Lesa Weikel, a spokeswoman for the Homeless Coalition of Hillsborough County. "A high percentage of homeless people do actually work. It may be that they can't afford a home or a place to live, but they do get enough money to pay for a cell phone."

Last month, when a homeless man was hit and killed by a driver who didn't stop on Nebraska Avenue, his friend told police detectives to check the man's cell phone for a number to call his mother about the accident.

"It's absolutely become a lifeline," said Cory Crocker, who along with his wife, Tracey, provides services to the homeless through Covenant House Ministries in Sulphur Springs. "Some folks are only homeless for a very brief period of time, and that lifeline is hope."

For Marvin Wells, 35, it meant more than hope. It meant a chance to put much-needed money in his pocket.

Wells had done enough work on day labor jobs that employers would call him regularly when they needed an extra set of hands. But he couldn't pay his $39-a-month Cingular bill, plus taxes. He canceled his service two weeks ago, cutting off his sole source of contact to the only income he had.

"I haven't been able to compensate for it," Wells said. "It's hard to make it when you can't get the work. I had some guys who were calling me all the time, but they can't now."

Most who live on the street get a cell phone by buying a prepaid one for about $20 and then adding the minutes as they go. Most prepaid phones don't require subscribers to have an address because there's no bill being mailed. Prepaid phones also eliminate the chances of an account going into collections for breach of contract. If there are no minutes available, the phone won't work.

100 minutes for $20

William Hayes of St. Petersburg bought his phone for $20 at a corner convenience store. He uses it to keep in touch with his mother, his 16-year-old daughter and prospective employers. The phone came with 100 minutes when he bought it two weeks ago, and he's down to 35 minutes now.

"I tell my family to call me now so it doesn't burn up my minutes," said Hayes, 46.

If not a phone, voice mail

Pinellas County homeless advocates say they also have noticed the proliferation of cell phones among people who can't afford a place to live. But Pinellas offers an alternative for people who can't afford cells but need to provide a phone number to potential employers.

It's called Community Voice Mail. It works by providing homeless people a phone number and a way to record a message. The numbers can't be used for outgoing calls, but people can check their messages from any regular or pay phone.

"We're finding it very useful and we're getting more and more people signed up for it," said Sarah Snyder, executive director of the Pinellas County Coalition for the Homeless.

Tracey Crocker, a homeless advocate who was homeless herself before moving to Florida and meeting her husband, said the phones provide a sense of security. Especially for women.

Christa Eland, 47, doesn't have a cell phone but gets by with a calling card.

"The only problem is that when I try to call my kids, I always get the answering machine," she said. "They don't have a way of calling me back, so I waste all my minutes talking to a machine."

Her boyfriend has been in jail for the past five months but should be getting out soon. She said he's promised to help find them a place other than a shelter to sleep, if only for a few nights.

Maybe, Eland said, she'll talk to him about getting a cell.

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