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Consumer Reports; Money Mistakes can cost you $$$

Money mistakes that could cost you $1,000,000
The Consumer Reports Money Lab puts a price tag on some common financial blunders and explains the best ways to avoid them

Retiring before you need to
Cost: $237,000 to $309,000

For starters, you'll be giving up income you would have earned during what might be the best-paid years of your career. What's more, Medicare won't cover you until age 65, so you might have to buy individual health insurance at an age when costs are apt to be at their highest. And each year you postpone is one less year your savings will need to support you.

We asked the Social Security Administration how much his benefits would be reduced if he had retired at 62 vs. 66. The answer was $403 a month for life. If he lives to age 78, that will cost him $8,899; to 85, $42,751. True, the equation would change somewhat if he took early benefits and invested them, but few retirees have that luxury.

We solicited price quotes for health insurance from Blue Cross/Blue Shield of Illinois. Premiums ranged from $6,501to $44,958 over three years, depending on coverage limits and deductibles.

Launching a divorce war
Spouses can't always avoid a divorce, but they can take steps to reduce the financial impact. Hiring a lawyer can be a good idea to make sure your interests are represented. But the more issues you want to slug out, the more billable hours you'll run up. (The rate in big metro areas such as Los Angeles can be $475 an hour.)

Underinsuring your home
Cost: $16,000 to $194,000

Even with the recent retreat in home prices, if you've lived in the same house for 10 years, it's likely to be worth 54 to 104 percent more than you paid for it, depending on where you live. But if you haven't updated your homeowners insurance and disaster strikes, you could lose those gains.

Overpaying for your mortgage
Cost: $27,000

The annual percentage rates on mortgages in a given area can vary by close to a percentage point. That might not seem like much, but over a 30-year term, it adds up to a bundle.

Carrying a credit-card balance
Cost: $5,000 to $23,000

Owing money on a credit card is a costly mistake that can take its toll for a very long time. If you have a card with an interest rate of 15 percent and you pay only the minimum due each month, it will take you 22 years and 2 months to retire a $5,000 debt, and you'll have paid $5,729 in interest.

Some 45 percent of consumers maintain a credit-card balance that averages $2,200, according to the Federal Reserve. But Fair Isaac, the credit-scoring company, says 15 percent of consumers have balances of more than $10,000. We applied an average 15.2 percent interest rate to each of those balances and assumed the borrower got in the habit of carrying a balance for 20 years.

Maintaining an unhealthy lifestyle
Cost: $4,600 to $42,000

Unhealthy habits not only tend to catch up with us as we age, but they also can hit our bank balances in the form of higher life-insurance premiums.

Ignoring Roth accounts

Cost: $9,000 to $26,000

Roth IRAs and Roth 401(k) plans can protect you from likely future tax hikes, because you pay taxes on your contributions today rather than when you withdraw them. T

Cashing out your 401(k)

Cost: $6,000 to $17,000

Almost 45 percent of workers cash out their 401(k) accounts when they change jobs, according to a survey of some 200,000 plan participants by Hewitt Associates, a human-resources consulting firm. Workers ages 20 to 29 are the most likely to do this, but 42 percent of employees ages 40 to 49 make the mistake too.

Not only do they have to pay income tax on their withdrawals, but in many cases the IRS also imposes a 10 percent penalty. More important, they lose the tax-deferral they could have maintained by rolling the money into an IRA or other retirement account.

Underfunding your 401(k)
Cost: $36,000

This year, workers younger than 50 can put up to $15,500 into a 401(k); those over 50 can make an additional "catch up" contribution of up to $5,000. On average, workers contribute considerably less than their allowable limit. You can't make retroactive contributions, so each dollar not contributed this year is an opportunity you've lost forever. You also lose the opportunity to earn income on those tax-deferred dollars.

Paying needless fund fees
Cost: $4,000

If you buy mutual funds from a broker, investment adviser, or other salesperson, you could pay commissions, or "loads," of up to 5.75 percent. But if you buy no-load funds, you'll pay no sales charges and start off that much ahead. Annual expenses can also vary widely among funds, from 1.5 percent or more a year to as little as 0.1 percent.

According to the Investment Company Institute, a trade association, stock fund investors made initial investments averaging $23,000 in 2005. We projected that out over 10 years, assuming the money had been invested in one of two S&P500 index funds and that our investor had added nothing further during that time.

Falling for a scam
Cost: $100 to you-name-it

Otherwise smart people can be no match for professional con artists, who are virtuosos at playing on people's vulnerabilities. Their scams cross into almost every area of personal finance: can't-lose investments you must grab now, fake health insurance that promises coverage for low premiums, incredible bargain prices for normally expensive goods or services.

You can lose your life savings in a financial scam, of course, and we've all heard the horror stories. But most people lose only a few hundred to a few thousand dollars. To find what's typical, we consulted the National Consumer League's Top 10 list of telemarketing and Internet scams.

Investing too conservatively during retirement
Cost: $360,000 to $750,000

Conventional wisdom has long suggested that as retirees age, they should shift money out of stocks and into more stable investments, such as bonds. But the problem with bonds is that their annual returns may barely keep pace with inflation, while stocks, over time, typically provide returns significantly above inflation. And inflation can be a retiree's worst enemy.

source; consumer reports

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Microsoft Corp. wants to buy Yahoo Inc. with an unsolicited takeover offer of $44.6 billion. This can make for quite the challenge to Google's dominance of the lucrative online search and advertising markets.

The offer is for $31 per share . The announcement sent Yahoo's share price up 60 percent in premarket trading, while Google fell 8 percent, weighted down by a fourth-quarter earnings report that missed Wall Street expectations.

In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer indicated the world's largest software maker is determined to bring the two companies together.To underscore its resolve, Microsoft is offering a 62 percent premium to Yahoo's closing stock price Thursday.

"Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers," Ballmer wrote.

In a prepared statement, Yahoo said its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent cash and 50 percent stock.

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Financial Aid for College Tips from GH

Here's how your teen can get extra financial help:

1. Go local. Competition for big national scholarships can be fierce. But local chapters of service organizations like Rotary International or Lions Clubs International may get fewer applicants, especially for smaller awards (ranging from $500 to $1,000). You should also pay attention to announcements of local scholarships in the community pages of your town paper.

2. Make volunteer work pay. Kids who are big on community service have a good chance of getting a scholarship — more and more of these grants are available every year at both private and public schools. For a list, visit

3. Sign up for contests. While most of these competitions reward standouts in writing and the arts, some involve more luck than talent. The American Fire Sprinkler Association ( holds a drawing for ten $2,000 scholarships for students who ace a 10-question, open-book, multiple-choice test. Several companies and banks — such as Tylenol, Calgon, and Wells Fargo — give from $1,000 to $5,000 to lucky winners. So do a number of college-related companies: Next Step magazine (up to $20,000) and ($1,000).

4. Try co-op programs. Many universities team up with local employers to create programs where students earn money in an off-campus job that’s related to their major. Your child can work part-time while in school or alternate between semesters of full-time work and full-time study. The Directory of College Cooperative Education Programs (it’s $69, so look for a copy at your library) lists 460 schools with co-op programs, which are especially popular at engineering schools. Finishing this kind of program can take five years, but students graduate with little or no debt and a lot of résumé-enhancing experiences. They’re also frequently hired by their co-op employers at significantly higher starting salaries. The National Commission for Cooperative Education ( has a “best of” guide about these programs on its site.

5. Check out professional associations. They offer scholarships to students planning to major in their field, or even to kids who are just looking into that kind of job. Visit for a huge database of scholarships from various associations. Students can apply for these at any point in their college career, but their application will be more convincing after they’ve declared a major.


New Home Sales

Housing Starts/Building Permits
Privately-owned housing starts in December 2007 were at a seasonally adjusted annual rate of 1,006,000. This is 14.2 percent below the revised November 2007 estimate of 1,173,000.

November 2007
-7.9 % change

December 2007
-14.2% change

The Commerce Department is expected to report that new home sales dipped 0.3 percent in December from a month earlier to a seasonally adjusted annual rate of 645,000 units, according to the consensus forecast of Wall Street economists surveyed by Thomson/IFR. Builders have slashed prices, but many buyers have stayed on the sidelines because they're having trouble getting mortgages and believe prices will continue to fall.

Sales of existing single-family homes plunged in 2007 by the largest amount in 25 years, and median prices fell for the first time in at least four decades, according to the National Association of Realtors .