You’ve heard of the “Cash for Clunkers” government program that recently ran out of the original $1 billion. The Senate just approved an additional $2 billion for the program last night to extend the popular program and President Obama is expected to sign it into law as early as today. But just because it’s popular doesn’t mean you should take advantage of it.

Here are the details of the program. You can trade-in a gas-guzzling “clunker” that is less than 25 years old and gets 18 MPG (miles per gallon) or less. Check fueleconomy.gov for official MPG numbers. You must buy a new car in conjunction with the trade-in. The car must have be registered and insured for a full year before the trade-in. The program runs through November 1, 2009 or until these additional funds run out. Check out the cars.gov for full details.

If you were looking to buy a new car already (before you even knew about the $4,500 rebate), you can get a pretty good deal for a trade-in if your car qualifies. I would check out Kelly Blue Book or Edmunds to figure out a rough private party value for your car. If it’s worth way less than the $4,500 rebate and you have the money to pay for another car, I would take advantage of it. If you don’t have the money or have to take out a loan, why get into debt, especially if your clunker works just fine? It just seems like a waste to me, especially when the working clunkers have to be scrapped.

Another piece of legislation that you might not have heard about is the extension of the $250,000 FDIC insurance through 2013 that was passed back in May. The limits are expected to go back to the original $100,000 per depositor on January 1, 2014. In the meantime, you’re protected up to $250,000 on bank accounts, CDs, IRAs, and other accounts. You don’t have to worry about losing your money if a bank fails.

Photo credit: REUTERS/Jonathan Ernst

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So the largest financial swindle in history ended Monday. The judge proclaimed, “Bernard L. Madoff shall be and hereby is sentenced to a term of imprisonment of 150 years.”

Bernie Madoff is the perpetrator of a $65 billion Ponzi scheme that spanned several decades and took thousands of victims. The 150-year sentence is essentially a life sentence as the 71-year-old Madoff is very unlikely to outlive his sentence.

A Ponzi scheme is where someone claims to own a company or “know” someone that has access to investments that have very good returns and are “guaranteed.” This person actually doesn’t invest the money from “clients” (victims), but uses new investors’ money to pay returns to older investors. This is how he gains trust from the investors by paying regular dividends. This makes it seem legitimate. But obviously it’s a scam from the beginning.

Madoff is believed to have started his elaborate scam in the 1980s, but his luck and his money ran out last December when too many investors wanted to cash out.

Some notable Madoff victims include actor Kevin Bacon, Dreamworks CEO Jeffrey Katzenberg, Director Steven Spielberg’s charity, former New York Governor Eliot Spitzer, and actor John Malkovich.

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As you may or may not have heard, GM recently declared bankruptcy this past Monday to become the fourth largest bankruptcy in U.S. business history. The General obviously had way too much debt on the books. Over $172 billion worth!

But what’s the problem? Well, GM should have gone bankrupt much sooner than Monday. It should have gone bankrupt six months ago. But it was unpatriotic to let GM fail. It was un-American to let GM go bankrupt. Too many jobs would be lost. It would send a catastrophic wave throughout the auto industry. But yet it happened. GM went bankrupt.

So why delay the inevitable and spend $20 billion in taxpayer money (and counting) in the process? We might as well call it “Government Motors”. Even after billions in government bailout funds, GM went under. 21,000 jobs will still be lost. Dealers reduced by 2,600. Plants still shut down. What did we get for $20 billion but a poorly-run company which should have failed months ago?

Saturn was sold off to Penske Automotive Group on Friday and Hummer is reportedly being sold to China’s Sichuan Tengzhong Heavy Industrial Machinery Company.

Why do I have a feeling that this country is moving towards socialism? Failure needs to be allowed. Without failure, there’s no motivation for success. Without failure, how can we learn from our mistakes?

So what can we learn from the GM bankruptcy? Get out of debt!!! Debt will make you bankrupt. And vote for someone who actually has your best interests in mind. America doesn’t need socialism. It needs a return to the foundations that this country was based on: a faith and trust in God and a free market. Let freedom ring.

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President Obama signed into law today credit card reform that was long overdue (no pun intended). The legislation had bipartisan support in the House and Senate and President Obama has been pushing it for a while. The legislation passed despite opposition from the credit card industry and I’m glad it did.

These credit card companies are taking advantage of consumers and just plain not treating them right. But if people didn’t get into credit card debt in the first place, so many Americans wouldn’t need this legislation.

Now the legislation doesn’t take effect until February 2010 which is not soon enough in my opinion.

Here’s how it protects you:

• It makes it harder for anyone under 21 to get credit cards.
• It bans rate increases until you’re more than 60 days late and restores the original rate after 6 months of minimum payments.
• It forces credit card companies to post credit rules on the Internet.
• It mandates a 45 day advance written notice of any interest rate hikes.
• It forces them to apply payments to the highest interest rate first.
• It bans universal default, where credit card companies can increase rates if you’re late on payments to any lender.

Well, here’s how you can protect yourself between now and February 2010 when all this takes effect. Get out of debt! You can’t pay any penalties if you don’t have any credit card debt. You don’t have to wait for the government to help you. Help yourself! God bless.

P.S. Did I just notice that President Obama is left-handed? I wonder how many left-handed presidents we’ve had.

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You’ve probably heard about it now, but Chrysler LLC earlier today filed for bankruptcy protection. The company will continue to operate and has an agreement with Italian carmaker Fiat to utilize some technologies, cars, etc. to help Chrysler going forward.

As far as I’m concerned, it was about time, and probably a little too late. Chrysler should have filed for bankruptcy before they used my (and your) tax dollars to avoid the inevitable. The U.S. government (we) already gave Chrysler $4 billion! And now they’re going to get another $8 billion?!

I don’t know about you, but I want to have a say about where my tax money is going. And I definitely don’t want to invest it in a bankrupt company who obviously didn’t have enough cash and too much debt to run. So you and I own Chrysler. Not by choice.

What has America become? End rant. And by the way, America’s still the best country in the world, but if we keep making bad decisions, I don’t know where we’re headed as a nation, as a culture, and as a people.

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You could read the entire stimulus bill (the American Recovery and Reinvestment Act of 2009) online at the Library of Congress that President Obama signed into law today. Or…you could just find out how it affects you right here on Christian Finance Blog!

First things first. You’ve probably heard that the new bill has a tax credit on your paycheck. It’s called the Make Work Pay credit and it’s worth 6.25% of any earned income in 2009. The max is $400 for singles making less than $75,000 and $800 for families with $150,000 or less combined income. It will be distributed through payroll for the last 26 weeks of the year. So it equates to about $15 a week for single filers who qualify for the $400. This will not come through your tax refund like the last stimulus. It also provides a one-time $250 payment for those who don’t work and retirees.

The next big tax credit in the new bill is the $8,000 New Homebuyer credit. This is different from the $7,500 new homebuyer “credit” that was supposed to be paid back over 15 years. The new $8,000 new homebuyer credit is a real tax credit, not an interest-free loan. It actually reduces your tax liability. Even if your tax bill is less than $8,000, you’ll get the difference back. If you overpaid your taxes throughout the year, you’ll get your regular refund plus the $8,000 extra! Sounds like a good deal to me!

So how do I qualify? You have to purchase a home between January 1, 2009 and November 30, 2009 and be a first-time homebuyer. To qualify to be a first-time homebuyer, you must not have owned a primary residence home within the last 3 years. It’s okay to have owned investment property or a vacation home as long as you didn’t live in it for most of the year. Also, you need to stay in the new home for 3 years to keep the tax credit. Income restrictions are the same as the Make Work Pay credit; $75,000 for singles and $150,000 for married filing jointly.

The next part of the bill that may affect you is the Car Buyer tax deduction. This is a tax deduction not a tax credit (which is more valuable). A tax deduction only reduces your income so it’s only worth the amount times your tax rate. The deduction allows you to deduct the state and local sales tax for any new car, truck, R.V., or motorcycle that was charged on the purchase during 2009. This won’t help you if your state doesn’t have a sales tax and it’s an above-the-line deduction so you don’t have to itemize to get the deduction. Income restrictions are $125,000 for single filers and $250,000 for joint filers.

Next up is the American Opportunity Tax Credit for 2009 and 2010. This tax credit increases the existing Hope Scholarship tax credit from $1,800 to $2,500. Income restrictions are $80,000 ($160,000 for married filing jointly). Partial credits are available to those making up to $90,000 ($180,000 filing jointly). Also related to this is the increase of the Pell Grant to $5,350 in 2009 and $5,550 in 2010.

For those of you who are unemployed, there’s also help for you in the bill. Cobra coverage (which allows the unemployed to keep health insurance from a previous employer) will be subsidized up to 65% of Cobra premiums for up to 9 months if you laid off between September 1, 2008 and December 31, 2009.

Unemployment benefits are also going to be increased by an additional 20 weeks (and 13 weeks more in certain states where unemployment is higher than 6%) and $25 additional weekly. Also, the first $2,400 is tax exempt in 2009 on your federal income taxes.

There are other portions of the stimulus bill like increased food stamp payments and deductions for energy efficient appliances and others. I may not agree with some of Obama’s policies but I’ll take free money any day! Bring it on Prez!

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I normally camp out at Best Buy, but this year’s deals weren’t appealing to me. So I decided to go to Wal-Mart this year. And I picked a Super Wal-Mart near my house since they usually have more quantities of doorbusters than regular Wal-Mart’s. I had my tent ready, but guess what? Super Wal-Mart’s actually open at midnight instead of 5 am on Black Friday!

So my friends and I walked around the store not looking for anything or shopping. I just wanted the doorbusters. The Wal-Mart employees were actually still getting ready by bringing pallets of stuff wrapped in black plastic out in between the aisles. We read some magazines in the magazine aisle trying to pass the time. There were no lines at all except for some bunches of people around certain pallets. At about 2 am we decided we’d read enough magazines and decided to walk around again.

We went by the electronics and, behold, there was a line! So we lined up and waited. And waited. And waited. And did some more waiting. It’s really tough waiting in line inside the store because everyone was standing up. I wasn’t about to stand to stand for three hours so I bucked the trend and sat right on the floor. Honestly, I would’ve rather camped outside and been able to sleep in my cozy tent.

Well, 5 am hit and the black plastic began to be ripped off! It was chaos everywhere! Of course, I was stuck in the electronics line that wasn’t moving, but I could see all the action from where I was! People were scrambling to get everything and there was barely any room to breathe, much less move. All of a sudden, I could hear the screams of some women. Apparently, a fight broke out in the grocery section between two women! The guy in front of me said that he saw another fight in the toy section between two women with boxes and toys flying everywhere! He even said that one box hit him in the head! I had never seen such chaos in my life! Best Buy never got this crazy.

There was much worse violence in stores around the country, however. At a Toys ‘R Us in Palm Desert, California, two gunmen shot and killed each other after the women they were with started fighting. Apparently, it was not shopping-related violence. Two women fighting in a toy store on the busiest shopping day of the year wasn’t shopping-related? Yeah, right!

A Wal-Mart employee was also killed at a local Wal-Mart in Valley Stream, New York on Friday. He was trampled to death by a crazy mob trying to get in the store. It is just not worth it.

I am considering doing Black Friday completely online next year and skip out on the crazy mess and chaos. I will definitely not go to Wal-Mart on Black Friday again. It is just too disorganized and took way too long. I mean, they had just one register for the entire electronics line that wrapped around the store. We were probably number 50 in line and it still took most of the morning trying to get out of there. Insane.

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By now, most of us have heard about the news of the $700 billion bailout signed into law by President Bush on October 3rd, 2008. The bill is designed to bailout the numerous banks throughout the country that were making bad mortgage loans. The government (read: we, the taxpayers) are now going to own $700 billion worth of homes and hopefully sell them later for a profit. How much later is in question.

Do I support the bailout? It doesn’t matter. It has already passed. What I can do is try to analyze the effects of the bailout to you and I. Joe Doughnut. The average American. I definitely don’t like the idea of using taxpayer money to bailout any huge corporation that made bad decisions. They should be allowed to fail. This is a free market capitalist country. I’m afraid America is moving more and more toward socialism and that’s scaring me. But enough of that.

The real question is why does it matter to me personally? After all, this is a personal finance blog. Along with the huge amount of “bad” in the bailout, there some “good” thrown in there as well. For example, the bill increases the FDIC insured limit from $100,000 to $250,000 deposits at all banks and credit unions (that are FDIC insured). That means more protection for you! Hopefully it will get you to save more and spend less, too! This expires December 31, 2009.

Also included in the bill is about the alternative minimum tax. It was expected to hit 20 million taxpayers with an unexpected tax increase this year but it was originally supposed to affect 155 high-income households who owed little or no taxes at the time when it was introduced.

So what does the bailout mean for me? What does it mean for you? It means that I’m doing everything I can to get out of debt and avoid my own “credit crisis”. If I don’t have any debt and a have whole bunch of cash, I won’t have a credit crisis! If I don’t need to borrow, I don’t need credit! What a concept!

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As many of you know, I bank at Washington Mutual (WaMu). As many of you also know, WaMu actually failed and the government sold it to JPMorgan Chase for $1.9 billion on Friday. This was the largest bank failure ever in the United States. So what caused the downfall of the nation’s largest bank?

The major reason is the huge amount of subprime (bad) mortgages that WaMu made over a period of time. Subprime mortgages are mortgages made to people with less than stellar credit. These people are most likely not able to afford the mortgages that they were put into. However, the bank could charge a higher interest rate and make more money on them. The problem started when house prices took a dive nationwide. The same people were now underwater with their homes and many walked away because they couldn’t make the payments.

But the bigger problem and the catalyst that caused the failure was the many people who took out all of their money based on fear and false rumors. In the ten day period following the collapse of Lehman Brothers, WaMu customers took out $16.7 billion in deposits. This caused WaMu to not be able to conduct day to day business because of the lack of cash.

I keep repeating this over and over. It is not a time to panic. Fear and worry doesn’t solve any problems. Only action solves problems. No one lost any money when WaMu went down. No one, including everyone with more than $100,000 at the bank, did not lose any money at all. Let me say that again; nobody lost any money, period.

So what does this mean to you?

If you bank at WaMu, you now bank at JPMorgan Chase (technically). In the short term, this means business as usual. You continue to use the same account numbers, branches, checks, debit cards, online banking, ATMs, etc. All JPMorgan Chase ATMs are now available to you fee free. JPMorgan has a nice page explaining everything about your banking after the buyout.

The merger is going to take some time. I would say that within the next 6-9 months, JPMorgan will begin to consolidate and get rid of the Washington Mutual name. I’m going to continue to bank there. I’m not taking out my money. I’ll continue to use the online bill pay and have my paycheck direct deposited there as I always have.

If you don’t bank at WaMu, it just means one less bank to choose from. It means less competition. It probably means higher prices. Higher interest rates on loans and less attractive rates on savings devices. Less competition is never good. But the lesson here is, don’t panic. Your money is safe and sound. Just remember to keep less than $100,000 in any account at any one bank. Unfortunately, I do not have that particular “problem”. God bless!

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The FDIC (Federal Deposit Insurance Corp.) shut down the Columbian Bank of Topeka in Kansas yesterday which had about $752 million in assets and $622 million in deposits.

This is already the ninth bank failure this year. There were $46 million in uninsured deposits by 610 accounts at the bank that exceeded the $100,000 insurance limit.

Now, I don’t write this stuff to scare you. I write this to let you know that you will be covered under the FDIC insurance for any deposits under $100,000 at a FDIC-insured bank. You don’t have to worry.

For more on this subject, check out this and this.

Source: CNN Money, FDIC

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This is just another reason to make sure you are covered under the FDIC insurance protection of up to $100,000. You can find more information on the article I wrote earlier on FDIC insurance. This is no time to panic. Your money is safe and there’s nothing to worry about.

Any bank can fail if there is a run on the bank because of the way banks operate to begin with. Banks don’t hold all of their deposits on hand and are only required to hold a certain percentage so if there is a run on the bank, there won’t be enough assets to cover the withdrawals. But there is no reason to take out your money because of FDIC insurance.

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Washington Mutual (WaMu) recently upped their online savings interest rate to 3.75% from 3.50%. It’s one of the highest rates going right now and a great place to park that emergency fund. I use WaMu as my main bank because of the numerous branches and ATMs in my area. Here’s my full review of the checking and savings accounts. Just so you know, you have to apply online and open with a checking account to take advantage of this deal. This is not available in the branches.

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The latest bank to “bite the dust” is IndyMac Bank in Pasadena, California. Earlier today, the FDIC took over the failed IndyMac Bank. This is already the fifth bank to fail this year alone compared to “only” three in 2007 and none in 2006 or 2005. This is also the second largest bank failure in U.S. history.

So what happens if your bank fails? Well, not a whole lot. The bank usually is taken over by the FDIC (Federal Deposit Insurance Corporation) or the NCUA (National Credit Union Administration) and an announcement is made (notices posted on doors, news information sent out). Usually, another bank will buy the assets (and liabilities) of the failed bank and the branch will be reopened as a branch of the new buyer. When there’s a buyer of the bank, checks will continue to clear, debit and ATM cards will continue to work. This is only applicable to the insured amount ($100,000 per depositor or $200,000 per joint account).

However, if there is no buyer, the checks, debit cards, and ATM cards will not work. Checks will be returned and stamped “bank closed.” Typically, the bank is closed on a Friday and by Monday, checks are mailed out for the insured deposits. You will have almost immediate access to your insured funds. However, any amount that exceeds the FDIC insured deposits becomes a creditor of the failed bank and you may or may not see the money after the assets are sold off by the FDIC. You may not see all of your money.

You likely won’t know that a bank’s about to fail until it has happened. That’s why it’s so important not to exceed the insurance limits at any one bank. So don’t keep more than $100,000 at any one bank. If you stay within the insured limits, you’ll have relatively quick access to your money.

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Source: MarketWatch, Bankrate

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HSBC Direct recently bumped up their online savings rate to 3.50% until August 15, 2008.

FNBO Direct also announced today via email that they were bumping their online savings rate to 3.50%. They also increased some of their CD rates. These are great places to park that emergency fund.

You can also earn 3.90% at SmartyPig which is a little different than an online savings account. I just opened an account and should have a full review soon.

Does this signal the end of rate decreases by the Fed? Have we hit the bottom as far as interest rates go? I think so especially since inflation is now on the rise. The Fed will have to increase rates in order to help combat inflation as seen in soaring energy costs and food costs.

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