How to save and build credit at the same time

12:30 PM Build, Credit No Comments

Business Week | By Christine DiGangi, Credit.com

Does it sound impossible? It isn't -- in fact, saving and good credit go together like ice cream and cake.

Personal finance is full of decisions: Rent or buy? Roth or traditional IRA? Save or build credit?

But these aren’t all either-or scenarios. In fact, having good credit and well-managed savings go hand-in-hand.

“You have to be serious about building your savings, because you’ll either end up paying bills late or you’ll run up on debt,” said Gerri Detweiler, Credit.com’s director of consumer education. But if you’re already in debt, it can be intimidating to think you have to tackle that in addition to socking money away for later.

The game plan won’t be the same for everyone, but one thing applies to everyone: It can be tough to maintain good credit if you’re not saving, too.

One thing that doesn’t require extra money is making timely payments, whether that’s credit cards, utility or loan payments. It makes up a significant portion of your credit scores (Credit.com’s free Credit Report Card tool can show you how your payment history impacts your credit scores), so it’s crucial to be organized and avoid missing any payments. No matter your money situation, paying bills before they’re due should be a top priority.

Read more: 5 lessons from this bull market

It can be really hard to make lifestyle changes, even when you know it’s the most logical way to meet your goals. But living beyond your means isn’t a sustainable financial plan. (Hint: If you can afford all of your expenses but aren’t saving for the future, you’re living beyond your means.)

The beautiful thing about budgets is that they not only help you avoid overspending, they also identify areas you can cut from. There are lots of online budgeting tools that give you a breakdown of where your money goes, but knowing where to cut is easier than actually doing it.

“It’s very hard,” Detweiler said. “Sometimes you’re not willing to give up things that you know you should.”

Everyone has different priorities — for some people, eating out is much more important than having cable, a well-decorated home or updated wardrobe — but something has to give.

“If you are tracking your spending carefully, you probably will see areas where you’re spending more than you realize,” Detweiler said. “That can help make a decision of where to cut back, even if it’s just temporary.”

Good credit scores aren’t about how much money you have; they’re about how you manage your money. Even if you have a tight budget, making small moves toward savings will be incredibly helpful in the future. Think about it: Even putting an extra $40 away each month leaves you with nearly $500 at the end of the year. If college students did that for four years, they’d have almost $2,000 in savings by the time they started their first jobs.

It has to be a priority, and if your current income really doesn’t cut it, it’s time to get creative. Consider getting another job, selling possessions you don’t need, opening a high-yield savings account or even changing your withholding on your taxes.

Without a sufficient emergency or retirement fund, any hard work you put toward improving your credit may be short-lived. For every step you take toward chipping away at credit card debt, paying off student loans or paying bills on time, you should contribute something to your future. Otherwise, you’ll end up back where you started.

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Build your own hedge fund

9:30 AM Build, hedge, Pakistani No Comments

| By James K. Glassman, Kiplinger

Save a small part of your portfolio for investments that don't move in lock-step with the stock market.

If you're looking for double-digit income, Pakistan has a deal for you. A model of geopolitical instability and down to its last $4 billion or so in foreign reserves, the sanctuary of the late Osama bin Laden has announced that it intends to raise $1 billion through its first bond issue since 2007.

Currently, outstanding Pakistani bonds that mature in five years yield 12.2 percent. That is a rich 11 percentage points more than the yield on U.S. Treasury IOUs of similar maturity. Plus, just imagine if Pakistan's prospects get better and interest rates drop. Holders of those bonds could reap big capital gains!

If you think that Pakistani bonds are a ridiculous asset to stick in your portfolio, you are not alone. And that is precisely the point. With the Dow Jones Industrial Average ($INDU) up 5,000 points in two years, I am getting nervous. It's time to think about investments that don't march in lock-step with U.S. stocks.

No, don't sell your shares in Google (GOOG) and ExxonMobil (XOM) to buy Pakistan. You should always invest in stocks for the long run -- and don't fear to hold them even when they seem pricey. But you should also reserve a small part of your portfolio -- say, 5 percent to 10 percent -- for true hedges, investments that don't move closely with the stock market. In other words, ones that sometimes go up when other assets go down, or that simply go their own way. Call this part of your portfolio your personal rogue hedge fund.

Individual Pakistani bonds are not easy to buy, and many good emerging-markets debt funds require large minimum investments or charge upfront commissions. The best choice among no-load mutual funds is T. Rowe Price Emerging Markets Bond (PREMX), with a portfolio that includes debt from Ukraine, Venezuela and the Philippines. The fund yields 5.6 percent -- certainly not in the range of Pakistan's bonds, but twice that of a 10-year U.S. Treasury bond. Expenses are a reasonable 0.94 percent.

The most straightforward hedge, of course, is a bear fund. Dozens of exchange-traded funds are designed to rise in value when the underlying index falls -- and, naturally, they fall in value when the index rises.

ProShares Short S&P 500 (SH), for instance, declined 27.1 percent in 2013, while the benchmark it matches in reverse, the S&P 500 ($INX), rose 31.8 percent. In 2008, when the index plunged 37 percent, the short fund gained 38.9 percent (for technical reasons, a perfect inverse relationship between a bear fund and its index is rare).

For my own rogue hedge fund, however, I prefer to short a sector that is doing particularly well. A good choice is ProShares Short Financials (SEF), an ETF that lost an annualized 25.7 percent over the past five years. It's linked to the Dow Jones U.S. Financials index. If bank stocks take a dive (as they are wont to do periodically), the ProShares fund should do well. (Unless otherwise indicated, returns and prices are as of Jan. 28.)

A similar approach is to buy an ETF or mutual fund that is run by a manager who chooses which stocks to sell short (a technique for making money when a stock goes down in value). An example is AdvisorShares Ranger Equity Bear (HDGE), an ETF that, at last word, had short positions in 47 stocks, including Tempur Sealy International (TPX), the mattress maker, and Sally Beauty (SBH), which distributes personal-care products.

The fund's website says its managers look for firms with "low earnings quality or aggressive accounting which may be intended on the part of company management to mask operational deterioration." Over the past year, the fund is down almost precisely as much as the S&P is up. In addition to being certain to lose money when stocks advance, another of Ranger's drawbacks is a high annual expense ratio of 1.78 percent, plus another 1.51 percent in interest expenses for borrowing shares to sell short.

Another, more personally satisfying strategy is to choose your own shorts from among hot stocks of the moment. In my September column, I suggested Tesla Motors (TSLA), the electric car maker, as a stock to avoid. Since the end of September, it has fallen 12 percent, but with a price-earnings ratio (P/E) of 57 based on predicted earnings for the year ahead, I expect the road to remain bumpy for Tesla shares.

Twitter (TWTR), which went public in November, has no P/E because it has no earnings, but its price-to-sales ratio is 59, compared with 19 for Facebook (FB) and 6 for Google (GOOG).

Or you can stalk a wounded company, such as Caterpillar (CAT), the heavy-equipment maker, whose profits and sales have been dropping but whose stock price is roughly the same as it was a year ago.

Caterpillar, like most companies, has benefited from low interest rates. But if rates rise sharply, it's a good bet that stocks will fall, as higher borrowing costs hit both businesses and consumers. So will most kinds of bonds. However, a special kind of debt, called floating-rate notes (FRNs), will give investors higher returns because, by definition, their interest payouts increase as rates go up.

The easiest way to buy FRNs is through funds such as Fidelity Floating Rate High Income (FFRHX), which invests in bank loans made to lower-quality borrowers. Typically, the interest rates on the loans are tied to a short-term-rate benchmark and reset every 30 to 90 days. FRN returns have little correlation with the stock market. They deliver above-average yields (the Fidelity fund yields 3.1 percent) and, unlike most other bondlike investments, they should hold their value as interest rates rise. Be aware, however, that if rates rise too much, these bank-loan funds may take a hit because corporate borrowers may have a hard time repaying their loans.

Another low-volatility choice is Merger Fund (MERFX). The fund (a member of the Kiplinger 25) owns stocks but has consistently produced steady returns that are almost totally uncorrelated with the broad stock market. In 2008, for instance, the fund lost just 2.3 percent, and in 2009 it gained just 8.5 percent (compared with a gain of 26.5 percent for the S&P 500). How? By investing in stocks involved in takeovers and mergers.

The fund's managers don't try to predict takeover bids. Rather, they buy the stocks of takeover targets after the bids are announced and hang on till the deals are consummated. The result: small but consistent profits. Merger's strategy is the opposite of risky, but for an investor seeking a way to balance possible losses in the stock market, it provides excellent ballast.

Commodities are the assets whose ups and downs have been least coupled with stocks' fortunes. Over the past 50 years, the correlation has been at right about zero. It was difficult for small investors to buy commodities in the past, but you can now invest in many through ETFs.

PowerShares DB Base Metals (DBB), for example, has holdings divided almost evenly among zinc, copper and aluminum. But for my rogue hedge fund, I prefer United States Gasoline (UGA), which, as the name implies, owns gasoline futures contracts. If the price at the pump goes up, you may be shelling out more to drive, but your investment portfolio will be happy. And that is the very definition of a nice hedge.

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$720 House can be build in a week

3:30 PM Build, House No Comments

The world's cheapest car is produced by the Tata Group. So is the cheapest water filters. Now the Indian company sets their sights on the housing market with a $720 flat pack at home, that can be created in one week.

The basic flat pack model is 215 square feet, consists of walls and Interior fiber optic or jute coconut, and has a life expectancy of only 20 years. Tata plans to a prefabricated house Kit, contains Windows, roofs, doors and more customers to offer.

With such a short lifespan, Tata flat pack is not ideal for, say, city developments. Instead, Tata plans to private buyers that have properties, as well as with regard to the State Governments, which until the houses India's homeless sell and poor could offer. Tata also plans, a larger version with roof solar panels and a veranda, which may for certain buyers more attractive market.

Tata is currently testing the home in West Bengal. Should it be commercially India available in the next six to eight months in accordance with the independent. For those of us outside of India, who could benefit from an ultra home that provide $300-House project much inspiration for DIY efforts.

Copyright © 2011 Mansueto Ventures LLC. All rights reserved.

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China's nuclear policy: 'Build, Build, Baby!'

2:28 AM Build, Chinas, nuclear, policy No Comments

Watching Japan?s nuclear drama unfold across the East China Sea, China is glued to the edge of its front-row seat.

There is a good reason for the rapt attention: In addition to fears that radiation from Japan could somehow reach its shores, China has more ongoing and planned nuclear construction than any other country ? about half of the world?s total.

While it has joined governments in Europe and the United States in announcing a safety review of its nuclear power sector, the pressure to complete its nuclear projects ? both those under way and on the drawing board ? is intense.

And its record in keeping corruption and mismanagement at bay in construction projects is checkered, to say the least.

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?One wonders how long a pause Chinese officials and businesses will feel they can actually take in examining the nuclear power issue,? says Nicholas Eberstadt, Henry Wendt Scholar in Political Economy at the American Enterprise Institute. ?China?s demand for energy ? if policy planners are correct about economic projections ? is like a freight train that is accelerating, and the demand is only growing.?

China?s power consumption grew 14 percent in 2010, according to the official Xinhua News Agency. At the same time, China?s leadership is aggressively trying to wean the country off coal, a huge source of air pollution and associated health issues in China.

In the last decade, Beijing has made nuclear power a central component in its energy strategy. China has 13 operating nuclear reactors producing nearly 2 percent of its total power output, but there are another 27 reactors under construction, 50 more planned and more than 100 proposed. With new reactors coming every year, China is aiming for a tenfold increase in its nuclear generating capacity by 2020, with rapid growth projected to continue until 2050.

Reason for pause
As the struggle to contain radiation was beginning at damaged nuclear reactors in Fukushima, in neighboring Japan, Beijing called for a comprehensive safety check and revision of safety standards for all nuclear plants in China.

"Safety is our top priority in developing nuclear power plants," the State Council, the power core of China?s central government, announced on March 16.

Coming from the State Council the edict carries weight.

?The Fukushima tragedy really gave the Chinese a serious wake-up call on the importance of nuclear safety,? said Zhou Yun, a Chinese nuclear security expert from China doing post-doctoral research at Harvard University?s Belfer Center.

But the accident in Japan does not mean China will move away from nuclear power, analysts agree. And it seems unlikely to significantly slow nuclear plant building.

Regulatory body needs bodies, teeth
Under the State Council's order, power plants and other nuclear facilities that are operational or under construction will be inspected, said Zhou. But the new standards will be imposed only on plants that have either not yet been approved or have not advanced beyond site preparation.

Significantly, the nuclear oversight body also is limited both in technical capacity and clout in the Chinese government hierarchy, she said.

The National Nuclear Safety Administration is a division of the Ministry of Environmental Protection in China, several steps removed from the State Council. On the other hand, the state-owned nuclear power companies ? China Guangdong Nuclear Power Group and China National Nuclear Corp. ? report directly to the council.

?In a country like China ? or more generally in Asia ? you have to show respect to people with higher titles,? said Zhou. ?That?s why people argue that the NNSA should have a higher level, directly under the State Council, not just a group or division or subdivision under Environmental Protection.?

The elevation of the nuclear safety agency, ?making it an independent regulatory body with authority,? was one of several recommendations made in a January 2011 report by the State Council Research Office to keep pace with safety issues in the nuclear industry.

The research office also warned that safety could be compromised by a growing shortage of technical expertise ? particularly among regulators because their salaries are not keeping pace with those of workers in the plants.

The challenge to technical inspectors is complicated by the variety of power plant designs China has in operation?with technology imported from France, Canada and Russia and the United States, as well as a domestic nuclear reactor design based largely on the French technology.

Finally, there is concern that this rapid growth in nuclear facilities presents not only a potential danger from the plants, but from the stress the growth puts on the nuclear supply chain, including nuclear fuel suppliers, transport systems and waste disposal sites.

Growing awareness, anxiety
Until now, government and business advocates of nuclear power in China have been largely untroubled by public opposition to nuclear power.

The only exception has been in Hong Kong, which operates with greater freedoms than China?s mainland, under a democratically elected local government.

When the Daya Bay Nuclear Power Station was built about 30 miles from Hong Kong, and opened in 1994, it did so over vocal opposition in Hong Kong, where more than 1 million people signed a petition to halt the project.

Two minor radiation leaks in the plant within the past year ? which management said were contained within the plant ? have revived unease and debate among Hong Kong legislators, but there has been no such open discussion in mainland China.

?For the most part, people did not pay much attention before the Fukushima nuclear incident,? said Zhou, the Harvard researcher.

But that is rapidly changing, she said. Chinese cyberspace is filled with discussion about Japan and nuclear safety. Anxiety about a possible impact from the leaked radiation prompted many Chinese to hoard salt and wear paper masks in misguided attempts to protect themselves.

Even so, China?s citizenry is more informed than in the past ? in part because of government reforms and more recently because of an explosion in access to information technology.

They are increasingly aware of corner cutting in construction that has had deadly effects ? such as in Sichuan, where dozens of schools collapsed in the 2008 earthquake there due to shoddy materials and construction, killing thousands of children.

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And in a major corruption crackdown in the railway ministry that is still unfolding, it emerged that one of the guilty parties had allowed use of a cheap chemical hardening agents for its high-speed rail system, calling into question their safety for trains moving up to 250 mph. The Chinese rail network has been accused of pushing the trains beyond the recommended speeds.

Corruption and greed also were cited as key reasons behind the melamine-tainted baby formula scandal that hit Chinese consumers in 2008.

The potential for catastrophic consequences offers some hope that the Chinese government will see its nuclear power industry as an area where it has too much at stake to allow scandal, said Eberstadt, of the American Enterprise Institute.

?There is huge capital investment,? in nuclear power, he said. ?The central government is inescapably responsible for their performance in a way that they arguably are not for dispersed and decentralized problems with the food chain supply.?

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Nonetheless, Fukushima has put nuclear power on the radar for a populace that was previously focused on enjoying its benefits.

?Internet users spent a lot of time blogging and in group forums discussing the Fukushima incident and its consequences,? said Zhou.

?People suddenly realize that China is building a lot of nuclear power plants. They check the map and find 27 or 28 under construction,? she said. ?So they start questioning the government:? Do we really have a nuclear safety culture???

2011 msnbc.com Reprints

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