Franklin Prosperity Report

a penny saved is a penny earned

The
www.franklinprosperityreport.com
April 2012 / Vol. 4, No. 4
8 Surere Ways to Be Richer a Year From Now
Anyone who has ever tried a fad diet knows the basic facts about healthy
weight loss: Its not about cutting corners here and there. Its about
changing habits for good.
Money is no different. You might find a cool online coupon for half off a
dinner out. But thats not really saving. Its just spending a little less
than you might have anyway.
No, getting rich is about saving and investing more, permanently. And like
those tough diet resolutions, its hard to make changes to our spending
habits. But it can, and must, be done. To help you, The Franklin Prosperity
Report talked to finance pros about their ideas for spending less and
saving more, then making that money work.
We asked experts for their top ways to be richer one year from now, from
little mental tricks to big financial moves. Like with any resolution, it
takes time to see results. But the ideas youll read here provide a great
starting point for anyone looking to create a more realistic, and more
comfortable, financial lifestyle.
Following are their top eight ways to be richer one year from today,
arranged in three categories: Daily Living Ideas, Medium-Term Strategies,
and Long-Term Moves. Each varies in terms of difficulty and return on
effort, but every one of them will put more money into your pocket today
to invest or spend tomorrow.
Continued on page 2
INSIDE . . .
7 Retirement
Dont lose out on Social Security! Heres how
to maximize your benefts
9 Spending
Luxury vacations for those who dont have a
million dollars in the bank
11 Insurance
What to know before insuring jewelry and
other unique valuables
Is your credit card Payment Protection
Insurance a waste?
13 Your Home
Before you decide to pay of your mortgage in
retirement, read this
16 Dr. Franklins Mailbag
18 Franklin Matters
20 Ask Franklin
2 FranklinProsperityReport.com April 2012
Daily Living Ideas
1. Budget, at least once. This can be daunting for some, and it is a chore.
But getting that initial snapshot of where the money goes can be a power-
ful tool, says Kevin Shahan, a financial education speaker in Tulsa, Okla.
My experience is that when someone knows what they are really spending in
what areas, it often offers motivation to help them change some spending
habits, he says. Recently, I had a family who, after tracking, realized
they were spending $300 a month in Red Bull!
Write it all down. Whether you track it weekly, monthly, or dont bother for
another year, at a minimum you could have your own Red Bull realization.
More on budgets: Dont overdo it. Software programs that track every penny
are informative, but you dont need to be a fanatic or spend money on fancy
software to do a simple budget. Put your bills on the table, get out a pen,
and write it down. Make it a family affair. Teaching children about spend-
ing and responsible saving can help you avoid indulging your children by
spending here, there, and everywhere, experts say. All those little things
add up over time.
Finally, factor in the splurges. If you know Christmas is a month when
things get loose, plan ahead for it by setting aside money through the year
or by picking up presents when they go on
sale, months ahead of the holidays.
2. Take grocery coupons seriously. If you
saw a $50 bill on the sidewalk, would you
pick it up? Or walk on by? Thats how much an
ordinary family could save each week just by
clipping coupons and using them correctly,
says Jeanette Pavini, household savings
expert at Coupons.com.
Start by looking at circulars, the newspa-
per inserts that show up on your lawn in
the freebie paper once a week. (You also can
pick them up at the stores, usually at the
front door, or see them online.)
Grocery stores publish these fliers to point out whats on sale, Pavini
says. Build your menu around those items, she advises, to get maximum
savings. Thats where you are going to save money. Then look for coupons
for what is already on sale, because you double your savings, she says.
Coupons.com put the idea to the test, going shopping with real families
each week. One mom was spending $500 to $600 a week. Those two things
using the circular and matching the coupons cut her bill 48 percent,
Pavini says. You could easily bank $2,400 a year, she estimates, without
resorting to anything extreme to get the best deals.
Continued from page 1
Bens
Online Picks
www.Coupons.com: This website
aggregates savings offers from a
vast number of retail categories,
and is the largest online provider
of digital coupons.
1
April 2012 Moneynews.com 3
Finally, if an item is out of stock, ask for a rain check. Thats the
biggest mistake people make. They dont ask for a rain check, Pavini says.
Usually the best deals are going to go in the first day or two, but the
store will honor the deal if you ask. Grocery stores are locked in a fight
against their rivals for your every dollar. Be
sure to take advantage of that.
More on couponing right: The Internet and your
smartphone are crammed with coupon offers, but
one of the most often overlooked is restaurant
deals, Pavini says. Restaurant.com sells gift
cards at monster discounts, up to 80 percent off, and you can sort by your
ZIP code, cuisine, or entree price. Remember, eating out is not saving;
its spending. But if you find a place on the list where you already plan
to eat, take the discount.
3. Bottle up your bills. Still having trouble putting money aside? OK,
heres an idea: a cheater-proof piggy bank. You probably dont carry around
bills anymore. Debit cards took care of that. But you can turn small sums
into major savings with just a little bit of discipline and an empty soda
bottle, says Ilene Davis, a financial planner in Cocoa, Fla.
First, figure out what 5 percent of your monthly income would be. Lets
say you bring in $3,600 a month. So 5 percent is $190. Divide by 30 days
and round up to the nearest buck. In our example, the figure would be $6,
about the cost of a quick lunch.
Instead of plunking down that cash each day for a burger and fries, give
your heart a break and stuff the bills instead into a cleaned-out 2-liter
soda bottle. Once the money is inside, you cant easily fish it back out.
Each day, put that amount in the soda bottle. When the bottle is full,
put the money in a savings account. When there is enough, buy a certificate
of deposit. Repeat, Davis suggests. In a year, that strategy turns lunch
into $2,190.
More on fooling yourself: Ramp up the soda-bottle trick by rolling excess
CD cash into long-term investments, once you think you have enough of a
cushion. Compounding at a stock market return of 7 percent, that lunch
money can turn into more than $104,000 over 20 years.
Medium-Term Strategies
4. Pay yourself first. This is the golden
rule of saving without pain. You cant waste
money if you dont have it in your hands. Your
employer can easily set up direct deposit to
a separate account, even in a different bank
or into a tax-advantaged IRA.
Wherever you decide to squirrel it away,
make sure you cant just whip out a debit
Jeanette Pavini is the
household savings expert
for Coupons.com, a leading
website for online coupons
and deal hunting for
groceries, apparel and more.
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4 FranklinProsperityReport.com April 2012
card and spend that balance down. Encouraging someone to set up a separate
bank account and deciding to save 5 to 10 percent each pay period and live
on the rest is huge, Shahan says. For most people in our country, to save
what they have left at the end of the month typi-
cally doesnt work very well.
If you go for the investment funding plan, make
sure you adjust your stock allocations slightly
downward each year to protect yourself against
near-retirement market meltdowns, says Nicole
Boyson, assistant professor of finance at Northeastern Universitys College
of Business Administration. If you save this way, you are in great shape
not only in a year but also years down the line.
More on saving: Its vital that you do something as opposed to nothing.
Start by saving $10 a week automatically. Many banks will auto-deduct from
your checking to your savings, perhaps on your payday, when you might not
notice. Ramp it up each quarter or each year, banking your raises or wind-
falls as you go. If you get a tax refund, that money should go straight
into your savings account.
5. Get debt under control. Pay down credit-card debt once and for all,
advises Kevin R. Worthley, a certified financial planner with Retirement
Planning Co. of New England in Warwick, R.I. Negotiate a better rate with
your current card or roll the balance over to a
card offering a better deal.
And avoid new debt. Instead of using your credit
card or debit card to pay for groceries, use
cash, Worthley says. It still has that feel that
you are paying something. With cash, you actu-
ally feel like you are handing over something you earned, he says. Put a
sticker or wrap a piece of paper around your credit card to remind yourself
not to use it. Is this something you need, or is it a want? Worthley says.
Is this something your family really needs?
Ask your card company to lower your maximum balance, too, Worthley says.
Having a lower ceiling on potential debt can be a good discipline builder.
Banks are more willing to do that because it helps them with their credit
exposure when it comes to regulators, he says. If you have a $15,000
limit, ask to lower it $5,000.
More on debt-free living: Cut up your cards.
Sounds easy, and it is. Start by taking the credit
card out of your wallet or purse and simply dont
carry it around.
Getting a lower interest rate on a credit card is
a stopgap solution, says Coleen Pantalone, associate dean for undergradu-
ate business and a finance professor at Northeastern Universitys College
of Business Administration. The real solution is, dont carry credit
Nicole Boyson is an
assistant professor of
nance at Northeastern
Universitys College of
Business Administration in
Boston.
Kevin R. Worthley is
an investment adviser
representative of the
Retirement Planning
Company of New England,
based in Warwick, R.I.
Coleen Pantalone is
associate dean for
undergraduate business and
a professor at Northeastern
Universitys College of
Business Administration.
April 2012 Moneynews.com 5
[cards], she says. You could save hundreds or thousands of dollars.
6. Take a break on health care. Many people take the health-care plan at
work that offers them the least money out of pocket. And that might make
sense in some cases, but many people would benefit from considering a high-
deductible plan coupled with a health savings account, says Eric Tyson,
author of Personal Finance for Dummies.
A couple can set aside $6,250 a year pretax in 2012 and can spend the money
tax free on qualified medical expenses. If the money is not spent, it rolls
over year after year and can compound like an ordinary IRA might, then can
be withdrawn in retirement for health spending.
You can put quite a bit of money into one of these accounts and get an
immediate tax break and the money compounds over time tax free, Tyson
points out. Its triple tax free: the upfront tax break, the ongoing tax
break, and the back-end tax break.
For instance, just considering the pretax savings, someone in the 28 percent
tax bracket would see a tax reduction of $1,750 each year. Over two decades,
that can compound into $59,120 at a 4.5 percent market return, still tax
free if spent on medical care in retirement.
Even someone of modest means should consider an
HSA, Tyson says. If youre not a six-figure
earner, you might not have access to a health
insurance plan thats tax deductible, he says.
But even if you just pass money through the
account, you still get the current year tax break. That enables people
spending any money on current health-care expenses to get the tax break,
regardless of income.
More insurance tactics: One of the more obvious changes for any type of
insurance is to simply raise your deductible, experts say. The default
option on car insurance, for example, is rarely the best deal for a safe
driver. If you raise a $200 or $500 deductible up to $1,000, your premiums
could fall by up to 40 percent.
Long-Term Moves
7. Tax-free rainy-day fund. Putting money aside for an emergency is a must,
but theres a neat twist to saving up a cushion, points out David Nanigian,
assistant professor of investments at The
American College use a Roth IRA instead.
You should be saving anyway in a tax-
advantaged plan, such as a 401(k), IRA,
and perhaps both. But dont overlook the
Roth IRA option, Nanigian says.
Thats because you can withdraw the money
later tax free and probably penalty free,
Eric Tyson, MBA, is a
personal nance author
and columnist. His book
Personal Finance for
Dummies was a Wall Street
Journal best-seller.
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6 FranklinProsperityReport.com April 2012
as long as you withdraw from the amounts you originally saved up (not
market gains or money converted from a traditional IRA). Your tax adviser
can give you details, but the important part is
that you might not need the emergency fund, in
which case you have a big leg up on your retire-
ment savings.
If its an emergency fund, it should still be
invested in very liquid assets, Nanigian says.
At least if you put [money] in an IRA, if the emergency doesnt happen,
you have boosted your retirement portfolio.
More on retirement saving: Your first urge as a parent might be to save
for your childs college fund. If you have to choose between your child
and you, however, choose yourself. Your kid, if he or she in fact opts for
college, can likely borrow or work his or her way through. You, however,
will not be able to borrow to pay your cost of living in retirement.
8. Get more from your nest egg. Retirees are certainly weary of low rates
on CDs and money markets, but most are likely unwilling to stick their
necks out on riskier assets, such as stocks. Bonds and bond funds, too,
present a new level of risk if interest rates
suddenly rise.
For senior savers, a middle ground can be brokered
CDs, says Doug Goldstein, a certified finan-
cial planner and director of Profile Investment
Services in Jerusalem, Israel.
Purchased from a broker or financial adviser, brokered CDs can pay more.
If you buy a brokered CD that is issued with a low coupon which means
you get it at a discount the return will be higher than buying it at a
local bank, Goldstein says.
For people who are far into their retirement years, look for long-term
callable CDs, which you also can get from a broker, Goldstein says. Its
just what it sounds like: a better rate, but the bank can call the CD
back, if it wants. But these pay more.
The long-term callable CD has whats called a death put. Which means
his or her heirs can cash it in immediately, Goldstein says. You could
get two or three times what a normal CD pays, but if you should die, the
heirs can cash it immediately.
More income strategies: Nobody in their retirement years should be gambling
their security. However, experts say, U.S. blue-chip dividend stocks are
paying out pretty substantial rates these days, particularly utilities
and big consumer-goods firms. If you can put a portion of your princi-
pal at risk, it might be time to seek opportunities to get into dividend
stocks when they dip.
Reporting by Greg Brown
Doug Goldstein is a
certied nancial planner
and director of Prole
Investment Services, based
in Jerusalem, Israel
(prole-nancial.com).
David Nanigian is an
assistant professor of
investments at The
American College in Bryn
Mawr, Pa. He earned a
Ph.D. from Texas Tech.
April 2012 Moneynews.com 7
Retirement
A Costly Social Security Mistake to Avoid
Social Security benefits can represent a big stack of cash. A typical
monthly benefit of $2,200 has a present value well over $500,000. Consider
all your Social Security options carefully to avoid making a costly mistake.
Like all government law, Social Security is not a simple piece of legisla-
tion. Since the Social Security Act became law in 1935, hundreds of amend-
ments have added to the complexity. To make the best decision, you must
consider income before retirement, income during retirement, and taxes.
Retirees cant rely on commonly held beliefs. Dont assume that simplistic
rules such as Always file for early benefits or You need to stop work-
ing to receive benefits are correct. Specific cases break every rule of
thumb. And these one-size-fits-all answers leave many retirees failing to
maximize the benefits they have earned.
The decision is even more critical for women. For 42 percent of single
women older than 62, Social Security is their sole source of income. Women
on average outlive men, meaning they need to make their savings last
longer. Widows are twice as likely to live under the poverty line as men
who have lost their wives, and the poverty rate for elderly single women
is 23 percent, compared with just 5 percent for retired couples.
Couples must take their joint longevity into account before either one
files for benefits. The person with the longer life expectancy will inherit
either a wise or a foolish decision that will last a lifetime. Given that a
husbands benefits are often higher and the wifes life expectancy longer,
each case needs to be analyzed carefully.
Consider for illustration the hypothetical case of James and Linda Miller.
James was born in 1950 and is turning 62 this year. He can receive $2,384
a month at age 66, his full retirement age. Linda is three years younger,
and wondering what both of them should do.
Now, consider about three quarters of Americans file for Social Security
benefits before their full retirement age. This mistake is statistically
most costly when the husband chooses to begin claiming at age 62. In our
example, such a mistake would cost the Millers $152,046 in lifetime income.
Assuming normal life expectancies, Linda should file for benefits at age
63. James will be age 66 at that point and have the opportunity to pursue
an often overlooked Social Security loophole: He can choose to file only
for his spousal benefit and delay filing on his own benefit until age 70.
We call this File as a Spouse First, or FAASF. You can see the results
of this optimal strategy in the table below. Each box represents the amount
of total lifetime benefits that would be sacrificed if James and Linda did
8 FranklinProsperityReport.com April 2012
not file at their optimal ages.
Unfortunately, many people file after considering only one or two isolated
options. The Social Security Administrations new online filing system
enables quick decision-making, too, so people can easily submit their
request without any professional advice or planning.
But before filing, you should be informed about all the options. To begin,
you need to know your personal Social Security earnings and the projected
benefits for both you and your spouse.
You can request an estimate at www.ssa.gov/estimator and then print the
results. Or call the Social Security Administration at 800-772-1213. For a
general review of Social Security, start by reading Retirement Benefits
(Publication No. 05-10035) online.
Social Security planning is crucial for everyone. People with significant
assets should carefully consider both the lifetime benefits and tax conse-
quences of Social Security in light of their overall portfolio strategy.
For the less well off, Social Security benefits will dictate their retire-
ment lifestyle, making it paramount to decide very carefully.
This Marotta on Money column was written by David John Marotta and
Matthew Illian. Marotta is president of Marotta Wealth Management, Inc. of
Charlottesville, providing fee-only financial planning and wealth manage-
ment at www.emarotta.com and blogging at www.marottaonmoney.com.
Maximizing Your Benefits Using the FAASF Loophole




Assumes Jamess planning age is 82 and Lindas planning age is 85
62 63 64 65 66 67 68 69 70
62 -$152,046 -$146,325 -$127,501 -$108,877 -$93,400 -$63,447 -$38,070 -$17,272 -$1,050
63 -$150,996 -$145,275 -$126,451 -$107,827 -$92,350 -$62,397 -$37,020 -$16,222 $0
64 -$146,691 -$140,970 -$122,146 -$103,522 -$88,045 -$68,592 -$43,215 -$22,417 -$6,195
65 -$145,494 -$139,773 -$120,949 -$102,325 -$86,848 -$67,395 -$52,518 -$31,720 -$15,498
66 -$146,796 -$141,075 -$122,251 -$103,627 -$88,150 -$68,697 -$53,820 -$43,522 -$27,300
67 -$133,332 -$127,611 -$108,787 -$90,163 -$74,686 -$55,233 -$40,356 -$44,362 -$38,640
68 -$118,678 -$112,956 -$98,683 -$80,059 -$64,582 -$45,129 -$30,252 -$19,954 -$42,840
69 -$101,854 -$96,132 -$84,518 -$73,315 -$57,838 -$38,385 -$23,508 -$13,210 -$25,797
70 -$88,390 -$82,668 -$71,054 -$63,759 -$54,454 -$35,001 -$20,124 -$9,826 -$24,416
James
L
i
n
d
a
Be strategic regarding when you choose to start collectng your Social Security, especially if married. Take
James and Linda, for example. If they both start collectng at 62, they lose out on $152,046. If they both
wait untl theyre 65 years old, which is ofen recommended, they stll lose out on $102,325. The best
scenario for this couple is for James to collect at 70, and Linda to start at 63. Why? Its because of the
FAASF loophole. (Read the artcle for details.)
April 2012 Moneynews.com 9
Vacation in Style on the Cheap
Whether you want to tour the exotic locales of the world or just puddle-
jump from Des Moines to Memphis, a little extra homework can save you some
serious cash.
When it comes to getting the best deals on travel, I have found a little
preparation goes a long way, says Carolyn Paddock, a former flight atten-
dant who took her years of travel experience and founded the informational
website InFlightInsider.com.
The first step to getting a better deal, of course, is to determine the
seasonality of your target destinations and make sure youre making plans
to go in the off-season. The key is, it doesnt
totally have to be totally out of season like
going to a Colorado ski resort in July but just
enough that the crowds are dissipating, reducing
demand and flattening prices.
Go just before or just after the high traffic
times and you will get better rates, Paddock
says. The crowds are gone, but its still warm or cold depending on where
youre going.
Next, be sure to sign up for email fare alerts with any and all airlines
youd consider using. You also should sign up with aggregators.
For example, Travelocity.com has FareWatcher Plus alerts, and Expedia.com
has 24-Hour Sales, Paddock says. And check out Hipmunk.com for great
prices on flights. I just bought a one-way ticket to Paraguay on Hipmunk
for $650 my colleagues paid $1,300 for the exact same flights using a
different website.
You should do a little research on your dream destination, too, Paddock
suggests, to see whether it has a doppelgnger. You can travel to a
sister island or town, she says. For instance, I had the most incred-
ible holiday on the less expensive island of Ischia next to the glamorous
sister island Capri off the coast of Naples, Italy. It wasnt crowded
but it was still posh, with thermal baths, spa treatments, and delicious
fresh food.
Spending
Carolyn Paddock is the
founder of the website
InFlightInsider.com, where
she discusses the latest
luxury travel trends and
practical insider tips.
He that can take rest is greater than he that can take cities.
Bens Good Cents
10 FranklinProsperityReport.com April 2012
As for accommodations, instead of automatically seeking out a hotel for
your visit, try the short-term home or apartment rental market.
Even during the high season, you can really save a bundle doing this, and
you dont have to deal with hordes of people in the hotels, maids coming at
inconvenient times, and high room rates, Paddock says. If you just prefer
to stay at a hotel, dont just book online call and find out whether they
are running promotions, holiday specials, or end-of-season deals.
Ground transportation is the next decision. If renting a car, Paddock says,
its often cheaper to do it for the week even if you dont need the car
that long.
Also, check to see what promotions your credit card has with rental compa-
nies, she says. When I was in Nice, France, I saved an extra 10 percent
off the already-discounted rate with Hertz
by using my Amex Platinum card.
Once youve arrived and unpacked, the next
step is to avoid the cash-grabbing tourist
traps. At a hotel, the best resource is the
concierge, she says. Let him or her direct
you to the great restaurants and shops that
are inexpensive. Duck off the beaten path for
food sometimes you just have to explore a
couple of blocks off the main street to find
the better local spots.
Local guidebooks hold a trove of discounts,
too. Last November, I took the express train
from Stansted to London, and in the guide-
books, I was delighted to discover that the
Radisson Hotel where I happened to be stay-
ing had a 2-for-1 special on afternoon tea.
It was a perfect English treatfor a chilly
gray day, Paddock says.
Save Your Cellphone Minutes
You can preserve cellphone minutes by skip-
ping voicemail greetings and instructions
youve heard a million times before (such as
leave a message after the tone). Press the
star (*) key when calling if youre a Verizon
customer, the No. 1 (1) for Sprint users,
and the pound (#) sign for AT&T and T-Mobile
subscribers. If your carrier isnt on the
list, just try the buttons in this order 1,
then *, then #, and remember which one takes
you directly to the message beep.
Bens
Online Picks
1
2
3
4
www.InFlightInsider.com:
Providing travelers with the latest
trends and insider information on
all things travel, InFlightInsider
was founded and is run by
Carolyn Paddock, a travel industry
insider with over two decades of
experience in the eld.
www.Travelocity.com: Touting its
Customer Bill of Rights, this
travel site provides easy booking
for ights, hotels, cars, cruises
and vacation packages.
www.Expedia.com: Billing itself
as your online travel agency,
Expedia provides an interface for
customers to book ights, hotels,
vehicles, cruises and packages,
separately or in combination.
www.Hipmunk.com: A newer
addition among the established
online travel booking sites,
Hipmunk aims to cut through
extraneous search results and
make it simpler to organize your
travel plans.
April 2012 Moneynews.com 11
Insurance
The Ins and Outs of Insuring Your Jewelry and
Other Valuables
Question: What do your great-grandfathers pocket watch, your diamond
engagement ring, and the fur-lined parka you just bought have in common?
Answer: They all need to be insured and the type of insurance policy you
choose for one may not be the best choice for the others.
Theres no general rule of thumb that says, This is what everyone
should do, says Jeff McCarthy, manager of Harrington Insurance Agencys
Cambridge, Mass., office. Also, insurance terminology can differ from one
part of the country to another, so make certain that you and your agent are
talking about the same type of coverage.
Most homeowners and renters insurance policies provide coverage of $5,000
or less for jewelry, watches, and furs and the policies come with a
deductible. Beyond that, there are two options: blanket or scheduled, both
of which provide coverage on an all-risk basis and are deductible free.
You could lose a stone from a ring and its covered, McCarthy says.
Blanket coverage policies are written for a set sum that covers a specific
class of items, but the individual items covered do not have to be speci-
fied. For example, a $10,000 jewelry blanket policy could cover 10 $1,000
pieces, 20 $500 pieces, or 40 $250 pieces. There is typically a maximum
per item in each class, McCarthy explains.
Scheduled personal property coverage is a separate endorsement on a home-
owners policy that insures a specified item at a specified value and
requires an appraisal from a qualified expert that precisely describes each
scheduled item.
The appraisal gives the insurance company a basis for how much to charge
for the premium, and the description provides the tools it needs to settle
the claim, McCarthy says. Ask for a replacement value appraisal, but
remember that, five years from now, your valuables could be worth more.
In the event of a loss, the insurance companys duty is to restore the loss,
but insurers have the right to do so at the cheapest price.
If you have a pair of diamond earrings and lose one, the company is only
obligated to replace one, McCarthy explains. And the company will pay
only for like kind and quality, which means that, if your insurer can
replace the diamond earrings you insured for $5,000 with a pair of like
size, color, clarity, and carat weight that only cost $1,500, thats what
will happen.
12 FranklinProsperityReport.com April 2012
Payment Protection Insurance: Worthwhile or Waste?
Credit-card issuers have your back. Or so they want you to think. Nearly
every issuer offers customers the chance to protect their credit score by
purchasing payment protection insurance to cover your payments in the event
youre unable to. But this protection isnt all its cracked up to be. And
in most cases its a waste of time.
Beverly Blair Harzog, a consumer advocate, credit-card expert, and spokes-
woman for Credit.com, says payment protection plans are usually not a good
idea. They can get very expensive, averaging around 90 cents for every
$100 you carry on your balance.
Take Bank of America, for instance. Your monthly protection fee is billed
to your Bank of America credit card at 85 cents for every $100 of the
plan balance (up to $25,000) you carry on
your monthly credit-card statement. Under
the plan, you may be able to cancel up to
two times your minimum monthly payments for
up to 18 months in the event of an invol-
untary job loss or you land in the hospi-
tal and are unable to pay your credit-card
bill. Your charging privileges will continue
while youre receiving the payment protec-
tion insurance benefits.
Citibanks Credit Protector also automati-
cally bills monthly at 85 cents per $100
of the new balance shown on your billing
statement for the previous billing period.
Unlike Bank of America, if you tap the cover-
age, youre unable to use your account while
receiving benefits.
Each plan is different; theres no standard
set of rules, Harzog says. So one card may cover one type of payment
emergency while another wont. Each also sets rules on and restricts how
long you can use the protection, how often you can receive benefits, and
what balances may or may not be covered.
You may not even qualify for coverage. Your job may disqualify you, as some
plans dont cover seasonal workers, self-employed workers, or provide any
coverage regardless of your job if you quit. And if you have a history of
paying late or missing a payment or two, you could be denied coverage.
Instead of shelling out cash for credit-card payment protection plans,
Harzog suggests taking money thatd be used to pay on this insurance and
put it toward the debt, or even into an emergency fund savings account if
youre worried about not being able to cover bills in the future. Or put it
toward a life insurance or disability insurance policy, which could provide
financial assistance for many bills, not just one credit card, she says.
Bens
Online Picks
www.Credit.com: A website
founded by consumer advocates
and credit experts, Credit.com
provides free education and
tools regarding protecting and
enhancing credit scores and
comparing credit card offers on
the market.
1
April 2012 Moneynews.com 13
Your Home
Retirees Should Think Twice Before Paying Of
Their Mortgages
Assuming you have the money to do so, should you pay off your mortgage and
retire mortgage free? Not necessarily, says George Conboy, president of
Brighton Securities.
Just because youre able to do so doesnt mean its a good idea, Conboy
says. If you owe $80,000 on your mortgage and you have $90,000, you can
make a case that you should pay it off, but what
if you need $30,000 in the next six months?
Also, while paying off a mortgage is fairly easy,
unwinding that payoff may be difficult or impos-
sible because the homes value may not support a
new mortgage loan. Just because youre a senior
and not working doesnt mean you cant get a mortgage, but you should not
assume you can get one, Conboy cautions.
Sometimes paying off your mortgage makes sense because doing so provides
a better return on your money than other options. However, you might be
paying so little interest that its worthwhile leaving your mortgage
outstanding. Thats something to consult about with your tax adviser,
Conboy says, adding that refinancing may provide a better option than a
payoff. If youre 74 years old, refinancing to a longer amortization at a
lower rate of interest will cut your payments, which may bring you closer
to maintaining the standard of living you want to have.
If you decide to refinance, shop for the best rate, including the closing
costs, Conboy advises. Seniors, in most cases, should not consider paying
points to buy down the initial mortgage payment because the only time that
makes sense is when the mortgage holder anticipates keeping the mortgage
for the entire term, he says.
Financial planner Rich Arzaga, CEO of Cornerstone
Wealth Management, points out that paying off a
mortgage eliminates the tax deduction for mort-
gage interest, which may result in a higher tax
bill. But, for those with capital in excess of their lifetime needs, paying
off their mortgage will likely yield a lower estate to transfer to benefi-
ciaries because the appreciation for the home will probably be lower than
that offered by other investment vehicles.
Finally, even though seniors may still be paying on their mortgages, the
amounts of interest they are paying can be fairly small. I will never say,
Go take out a big mortgage so you can raise your tax deduction, Conboy
George Conboy is president
of Brighton Securities,
an independently owned
brokerage and nancial
services m located in
Rochester, New York.
Rich Arzaga is the founder
and CEO of Cornerstone
Wealth Management, Inc., a
fee-based nancial planning
rm in San Ramon, Calif.
14 FranklinProsperityReport.com April 2012
says. I do say, Sharpen your pencil and consult a tax adviser to learn
what the tax impact will be.
Repair or Replace? Heres How to Decide
Is your refrigerator making funny noises? Is your shower head spraying
water out of places that arent supposed to be porous? Are you finding hot
and cold spots in food that comes out of your oven? At some point, every
aspect of your home is going to develop an issue, so it pays to know when
you need to replace it and when you can get away with a simple (or even a
slightly more complex) repair job.
Rick Croce, a general contractor whose firm, Smykal Renovations, has won
awards from the Home Builders Association of Greater Chicago, offers the
following tips:
Windows. A draft around the window can usually be repaired with new weather
stripping. But if the window looks cloudy or moist, its a sign that the
seals are broken and the window needs to be replaced.
Tile. A few damaged tiles on a floor or bathroom wall can be easily replaced,
particularly if you have spares from the original installation. As long as
the substructure is sound, cracking or flaking grout also can be repaired.
Bathroom fixtures. An older toilet that isnt working properly can be
upgraded to a more energy-efficient, low-flush toilet relatively cheaply
and will save more money in the long run, Croce says. But if the damaged
item is the bathtub, consider refinishing it before you replace it.
Youre really opening up the entire Pandoras box when you change a tub
because it changes everything, he says. A new tub will typically require
remodeling at least the tile on the wall and floor, if not the entire bath-
room a big-ticket job. But a tub can be refinished for just a few hundred
dollars.
An improperly working shower head is often caused by hard water deposits
that have built up over time and is an easy do-it-yourself replacement that
costs very little.
Ovens and stoves. If your food isnt cooking evenly, give it a chance
before you upgrade. Our recommendation is the first time it goes down,
call the repair person. If it does it more than once in a year, its time
to replace it, Croce says.
Refrigerator. If you start hearing noises when it turns on and off, thats
a sign youre having issues, Croce says, or if its not keeping the prod-
ucts frozen or the temperature isnt even all over. As with ovens, repair
it the first time, then see what happens.
Dishwasher. If you keep the food trap clean but find your dishes are still
April 2012 Moneynews.com 15
coming out dirty or if water is leaking, call the repairman. But if you
have consistent breakdowns over a short period, its time to get a new
one, Croce says. Service calls are expensive, and after a few, youre
paying 70 percent of a new item.
Microwaves. If its a countertop model, dont bother repairing it theyre
so inexpensive that its more cost-effective to pick up a new one. But
if its more advanced, like part of an oven, I would have that serviced at
least one time, Croce says.
Furnaces and air-conditioning units. By having yours cleaned annually by a
professional, you extend its life. Be on the lookout for any musty, dusty
smells, weird banging noises, or a flame that burns more dull orange and
yellow than crisp blue.
Thats a sign you want to get a serviceman to take a look at it because
its not burning oxygen properly, Croce says. If your furnace is already
8 to 10 years old and its been serviced multiple times, Id say its time
to consider a new one. A more energy-efficient furnace will save you money
and serve you better over the long haul.
Water heater. If the water doesnt heat or recover its temperature very
quickly, the corrosion in the tank is starting to make it ineffective,
[and] thats a major sign that you most likely need to have a new water
system, Croce says. On the other hand, water on the floor could mean
theres a valve issue just a minor repair. Water coming from the bottom of
a new tank, however, means trouble. Id call someone and have them price
me out a new tank, he says. Theyre hundreds of dollars, not thousands.
Clothes washers and dryers. The moving parts on a washing machine belts
and motors can generally be repaired. But if youre repairing them
frequently and the washer uses 40 to 50 gallons of water per cycle, its
better to upgrade to a more energy-efficient front-loader. If clothes are
coming out of the dryer still damp and the vents arent clogged with lint,
call a repairman.
Roof. This is a big-ticket item that youll want to repair as much as
possible before replacing. Missing, curled or cracked shingles, dark spots
or mold in the attic, sagging plywood, light coming in from the outside,
warped flashing around vents and skylights, and gutters full of heavy gran-
ules are individual signs of wear that can be fixed. But if the roof has
more than a handful of those items, then its time to replace it, Croce
says. If you have one or two isolated areas, then fix them as best you can
and get another year or two out of the roof.
Bens Good Cents
Almost every man has a strong natural desire of being valued
and esteemed by the rest of his species.
16 FranklinProsperityReport.com April 2012
Every month, we ask readers for their best tips on making and saving money.
The amounts dont matter; its about little changes anyone can make to keep
more cash in their pockets to save, invest, or spend better elsewhere.
Food for Thought
To save money on groceries, I limit my extended shopping trips to one to two
per month. We still need to replenish milk weekly, but I assign that task
to my husband. He picks up a gallon or two when he stops to fill up his car
with gas. Believe it or not, gas stations have great deals on milk prices
plus it keeps you out of the grocery store where a simple trip for one
item normally has you coming home with a full bag or two of impulse buys.
Staying out of stores on a weekly basis keeps us from tempting purchases
like sweets. Instead, we purchase everything well need for our family
during the one big trip to the store. Yes, we do buy snack items, includ-
ing cookies, chips, and ice cream. However, the one-time purchase is then
used for a month versus the weekly consumption/buying pattern. We end up
spending only a fourth of what we wouldve otherwise spent on these items.
You can safely freeze butter and bread without compromising taste or qual-
ity. Fresh fruit and vegetables usually have a good shelf life, plus you
can supplement with frozen or canned. For savings on meat, we buy family-
size packages, then divide them into portion sizes by putting them in
smaller freezer packages.
Another great tip is to check the quick-sale bin. Most stores will sell
their meat department cuts from the day before for a 40 percent discount
the following morning. Also, if your store offers buy-one, get-one deals
and you have a small family, take advantage of these deals and go shopping
with a friend. You can split the food and the bill.
Shopping this way ensures that you consume what is already in your pantry,
fridge, and freezer, eliminating the waste and cost of having to throw away
expired foods that you forgot you had. I find that Im planning more and
preparing more home-cooked meals than ever before.
Sue M., Houlton, Wis.
This Chip Is a Lifesaver
I read your recent Mailbag regarding a recommendation to copy credit and ID
information (October 2011 issue). Heres a more thorough solution.
I have two small memory chips: One is an SD chip in my camera, and one is a
USB chip (i.e., a thumb drive). I keep a directory file protected and hidden
on my computer. This directory contains photocopies or text documents of my
drivers license, voter registration, medicine, medical history, contact
information for current doctors, insurance cards, credit-card bills (one
each), 800 numbers of credit bureaus, a checking account deposit slip and
statement, loan statements, a list of all emergency numbers and addresses
Dr. Franklins Mailbag
April 2012 Moneynews.com 17
of near relatives, and my living will with relevant medical instructions.
I put these files on both chips. The camera chip contains a directory
called DCIM. Using your computer, create a parallel directory for this
information, copy these files to it, and protect the directory. Do the
same for the USB chip. Hide and protect the files.
The camera is in my car. If stolen, the thief must be a computer expert to
suspect that the memory card contains this information, let alone access
it. Most people dont know such information can be stored in their camera
chip. I carry the USB chip in my pocket. The back of my insurance card
contains the message that I carry the USB chip on my person.
Sounds like a lot of work? One day I woke up very, very weak. It took me 15
minutes to get to my car. I drove to the nearest hospital. The emergency
entrance door was closed: Code Red: full. I walked to another entrance,
into the emergency ward, and collapsed on the floor with total heart fail-
ure. Had I collapsed anywhere else, I would have been too weak to live. The
medics took my wallet, saw the card, took the chip, and I was given appro-
priate care 10 hours before I recovered consciousness.
Another example. I live in a motor home. One day after a bicycle ride, I
returned to find the RV stolen. All I owned was my bicycle and the clothes
on my back. (For those of you with a concrete foundation, visualize return-
ing from your evening walk to find your house in flames ignited by thieves.)
After six hours with the police, I spent the entire night and most of the
next morning calling the numbers on my chip.
Once, my chip saved my life. Once, it saved my sanity.
Chuck K., Livingston, Texas
(Un)Make Your Mark
A year ago, my son sat a hot teapot directly on our wooden breakfast table,
ruining the finish. I tried the mayonnaise trick to remove the stubborn
white mark, but it didnt make a dent. I was so happy to read there might be
another solution vinegar and olive oil. After saturating the table in the
mixture for three hours, the water mark was 80 percent gone, certainly not
noticeable the way the white mark was before. I think I have my table back!
Nancy U., South Hamilton, Mass.
Squeeze Out Every Last Savings
Theres usually at least a weeks supply of toothpaste left in the tube
when you cant squeeze anymore out of the top. I cut the bottom off the
tube, squeeze it open, and get out what I need each time I brush. I keep
cutting the tube off as needed until I reach the top, where there is a lot
of toothpaste left.
Sue S., Covington, Wash.
SHARE YOUR SUCCESS! SHARE YOUR MONEY-SAVING ADVICE AND GET $50! Send your
tips on saving, spending wisely, and investing to saving@franklintips.com
or by regular mail to Franklin Tips, P.O. Box 20989, West Palm Beach, FL
33416. If we publish your idea, well send you a $50 Walmart gift card.
18 FranklinProsperityReport.com April 2012
Benjamin Franklin was the oldest of the founding fathers he was indeed
a whole generation ahead of George Washington, John Adams and Thomas
Jefferson and yet he was the most forward-looking of the group, a man
ahead of his times. He was a supporter of free-enterprise capitalism and
globalization, defender of the rights of minorities, a lover of modern
gadgetry, and proponent of womens equality. Those are all attributes of
the modern Western world.
Of all the founders, he would be the one most comfortable living today. He
would not be surprised by the tremendous advances in peoples incomes and
living standards. After the American revolution, he predicted, America
will, with Gods blessing, become a great and happy country.
He was an optimist and a believer in progress and the American dream, the
idea that every American could get ahead through industry, thrift and a
good education. Franklin was in many ways the father of American capital-
ism. He would be pleased with the buzz of daily life in the market place
and our major cities.
As an advocate of the new economics of free trade and open borders, he
embraced the benefits of globalization, the spread of democracy and repre-
sentative government. Our cause is the cause of all mankind. God grant
that not only the love of liberty but a thorough knowledge of the rights
of man may pervade all nations of the earth so that a philosopher may set
his foot anywhere on its surface and say, this is my country!
Throughout his adult life, he was mesmerized by scientific advances in
transportation, medicine, and agriculture, and loved to hear about and even
create his own new inventions. I have sometimes almost wished it had been
my destiny to have been born two or three centuries hence, he dreamed,
for inventions of improvement are prolific, and beget more of their kind.
The present progress is rapid.
Many of great importance, now unthought of, will before that period be
procured, he continued. I mention one reason for such a wish, which is
that if the art of physic [medicine] shall be improved in proportion with
other arts, we may then be able to avoid diseases, and live as long as the
patriarchs in Genesis. Franklin would be the first to have a cellphone and
an HD television.
Franklin Matters
Franklin, the Most Modern
Of the Founders
By Mark Skousen
April 2012 Moneynews.com 19
His views were advanced for his era when it came to treatment of minori-
ties. He released his slaves during his lifetime, and was an advocate for
the abolition of slavery. He considered blacks equally capable as whites.
He blamed most of the Indian disputes on the white population.
Franklin was a defender of womens rights and treated them as his equals.
Women, especially, flocked to see him, to speak to him for hours on end,
commented his French friend Le Roy. The savant of
Philadelphia is no distant marble figure like the
reserved Virginian George Washington or the cantan-
kerous prude John Adams. Here was a red-blooded
American Casanova who disdained the mores of a sexu-
ally-repressed Puritan age, and was adored by the
fairer sex for his charm, story-telling, fame, and
savoir faire.
As far as politics is concerned, there are many
characteristics of todays government he might find
agreeable and some disagreeable. He was not espe-
cially fond of the gold standard, and preferred paper
money, though he feared too much inflation could be
mischievous and the populace apt to demand more than is necessary. He
supported and invested in Robert Morriss Bank of North America, a precur-
sor to Alexander Hamiltons Bank of the United States, Americas first
central bank.
Some features of modern-day America would appall Franklin. He would feel
terribly uncomfortable with the size and burden of todays national debt,
and the failure of Americas leaders to balance the budget.
The sheer size of the federal government would depress him. He believed a
virtuous and laborious [industrious] people can be cheaply governed. He
would dislike the engagement in foreign wars by the U. S. military. The
system of America [should be] commerce with all; war with none.
Be free,

I have sometimes
almost wished
it had been my
destiny to have been
born two or three
centuries hence.

Mark Skousen, Ph.D., a sixth-generation grandson of Benjamin Franklin, is an

economist and holds the Benjamin Franklin Chair of Management at Grantham
University. Hes the author of The Compleated Autobiography by Benjamin Franklin, a
tome that flls in the 33-year gap lef by Franklin in his original work from age 51 until
his death, using Franklins own papers as the guide.
20 FranklinProsperityReport.com April 2012
Ask Franklin
I want to start making a few online stock
trades a month. Where can I get the best deal
on fees without having to keep an account
minimum or make a certain amount of trades
per month?
Tim Y., Laramie, Wyo.
The best deal is less unanimous than you
might think, advisers say, because the terms
of the account can vary widely. Some offer
considerably more free trades initially but
charge more per trade after your freebies
are used up, while others simply charge a
flat fee or require less money to open an
account.
However, according to the folks at
Brokerage-Review.com, the top five discount
online brokerages are OptionsHouse.com,
Scottrade.com, OptionsXpress.com, Zecco.com,
and TradeKing.com.
Ive seen identity-theft-protection services
for adults. Are there viable services to
protect a childs Social Security number and
identity?
Muriel K., Phoenix
Randy Abrams, director of technical educa-
tion at anti-virus software firm ESET, says
that identity thieves rarely target children
because the most common method of targeting
is to steal credit information and chil-
dren younger than 17 arent supposed to have
credit reports.
However, almost all the identity-protection
services that protect adults can include
children in the plans they offer (just ask),
and if a credit report does surface, they
will work with you to prevent further damage
by instituting fraud alerts, credit freezes,
and consistent credit monitoring.
The Franklin Prosperity Report is a publication of
Newsmax Media, Inc., and Newsmax.com.
It is published monthly for $49 per
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The owner, publisher, and
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errors and omissions. Rights to
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For permission, contact the publisher at P.O. Box
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Founding Father
Benjamin Franklin
Chief Executive Ofcer
Christopher Ruddy
Financial Publisher
Aaron DeHoog
Editor
Michael Berg
Contributing Editor
Dr. Mark Skousen
Art/Production Director
Elizabeth Dole
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Information is obtained from sources believed to be
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