How do you get a decent yield? By taking on more risk. This is why junk bonds have become popular. But you may wonder if junk bonds are a good idea. Could be.

The economy is sluggish at best, and the Fed has kept rates low to try and keep the economy inching along. Low rates let companies and consumers refinance older, more expensive loans. And low rates help companies borrow for expansion, although few are taking out new loans these days.

If you’re looking for a safe, high-yielding investment, however, you’re just out of luck. The average money market mutual fund yields 0.04 percent or $4 a year for every $10,000 you invest. The top-yielding one-year bank CD pays 1.55 percent.

If you’re trying to get more interest from your investments, you have two ways to do it. The first is to lock up your money longer. To get higher yields, you have to take on even more risk, which means investing in corporate bonds. These are long-term, interest-bearing IOUs. The company will pay you a set amount of interest until the bond matures, which is when you’ll get your principal back. The risk is that the company will go bankrupt before your bond matures.

The rip is that there isn’t much return on corporate bonds either. High grade corporate bonds yield about 1.32 percentage points more than comparable Treasury securities.

To get really high yields, you have to take considerably higher risks and invest in junk bonds, which are high-yielding loans to companies with poor credit risks. But what are the risks with these?

There is a risk of default. The peak default rate for junk bonds was 14.5 percent last November, and it was 6.3 percent in June. There’s also a risk of loss. The average junk bond lost 30 percent last fall.

But the reward is that the average junk bond is currently yielding about 8.43 percent.

The prognosis for the economy, according to many experts, is that it will creep along in a slow growth period. The good news about the recession, relative to junk bonds, is that it cleaned out the weakest junk bonds, so the ones that are left are the “good” ones. Relatively few new junk bonds are coming to market, so as demand increases, junk prices should rise.

However you choose to invest, do so carefully, and don’t be afraid to get the advice of a financial adviser or trusted friend. The only stupid question is the one you don’t ask.

Lenders say they want to help the small business owner and the economy, but there just aren’t viable borrowers. This is due, lenders say, to the fact that the loans needed by small business owners are for one of two reasons: helping a business stay afloat or business expansion. And with falling real estate prices, many small businesses don’t have the necessary collateral to back up their loans. Banks are feeling picked on by the federal government, which keeps pushing for new lending.

So why would a small business owner want to borrow money right now? The average answer is to reduce debt levels, a smart choice in a depressed economy. The other concern for the small guys is the new health care reforms and how they will affect businesses with fewer than 50 employees.

Washington has ramped up pressure on community lenders as well as large commercial banks to set up small loan funds. Regulators have attempted to grease the wheels with a program called TARP Jr., a $30 billion dollar small business lending fund for community banks.

But if most banks are claiming there are no viable borrowers, this doesn’t seem like much of a solution.
But something has to be done to give a boost to small business, which employes about half of Americans and accounts for 60 percent of new jobs. Will pushing loans on them be the answer?

The experts aren’t too sure. With consumer spending down and the overall economic climate unsettled, entrepreneurs don’t seem to be confident that this investment in the U.S. economy will pay off. And they fear that the little guys will be saddled with bigger debt.

One answer could be unsecured loans. A small business owner can obtain a loan from $10,000 to $5 million, with no collateral, minimal documentation, no annual fees and no prepayment penalty. All with rates starting at 7.93 percent.

First of all, take a look at your spending. Compare your cash flow for the first six months. Did you allocate enough to cover expenses or are you falling behind in certain areas? If you skipped setting up a budget to begin with, remember that solid financial planning begins with having a budget. There are plenty of tools to help you get started. Check your bank’s Web site, or look to see if your smart phone has an application that can help you track your spending. Good, old-fashioned paper and pencil work, too. The key is to put a plan into place and stick to it.

Second, look at how much you are saving. Just a small amount of savings can play an important role in your overall financial picture. You should be saving for both long- and short-term goals.

Consumers have been paying down their debt, and banks have been writing much of it off. But there’s still plenty of debt piled up. Carrying high debt loads can have a big impact on your credit score, make monthly budgeting more difficult and leave you more vulnerable in an emergency. If you are only paying the minimum on credit cards or are, worse yet, skipping payments, you could be headed for trouble. The first step toward resolving these problems is to stop using plastic and chart a plan for paying off your cards. Seek help if you can’t do it alone.

The area of taxes is uncertain still, because Congress has not yet addressed a number of expired tax laws. Anything can happen before the end of the year. Tax rates are expected to go up for all but the lowest income brackets in 2011. You may want to get tax advice before converting a traditional individual retirement account to a Roth IRA. Those conversions are intended to reduce taxes when it’s time to withdraw the funds, but the uncertainty of the tax laws and individual circumstances means switching may not be the best move for everyone.

One of the biggest blunders most people make is not putting enough money into a 401(k) plan to meet the match provided by their employers. The flip side is putting so much in that you reach the maximum allowable too early in the year and miss out on company matching for the remaining months. A review of your retirement plan starts with your 401(k) but doesn’t end there. It’s important to go through the process of looking at all your retirement avenues, including Social Security and company pensions, and figure out how much you will need to provide for yourself and your loved ones. It’s much easier if you ask an expert for advice.

The goal is simple: make sure you’re on track. Be honest about where you are, and if you don’t already have clear, concise goals, both immediate and long-term, it’s time to set them.

Sen. Dick Durbin, D-Ill., introduced three amendments to the bank reform bill to control how much credit card issuers charge merchants when consumers pay with a credit card. The measures would make several changes. From the banks’ perspective, it would require the Federal Reserve to set reasonable and proportionate fees that merchants will have to pay banks, and Visa and MasterCard, to process debit card transactions. Merchants currently pay a percentage of the total transaction, not a set fee based on the cost of the transaction. The new measures would give merchants more control over the transactions.

Some are calling the measures unfair, saying the cost to use credit cards gets passed around to everyone, including debit card users. It’s been called a social fairness issue because lower-income consumers and subsidizing a “first class upgrade.” Swipe fees are set by MasterCard and Visa, and average about 2 percent for credit card transactions, and are higher for rewards or corporate cards.

Banks don’t seem to care much about social fairness, with $48 billion at stake. They’ve mounted a major lobbying campaign to oppose the proposals. The American Bankers Association says the debit card issue has nothing to do with the financial crisis and does not belong in the financial reform bill.

The proposals would also have a dramatic impact on merchants, who have seen credit and debit processing fees increase more than five times what they paid a year ago. These merchants say they are paying for the reward points and air miles.

Durbin’s measures also call for the lowest rates possible to apply to government credit card transactions, noting that consumers are using credit cards to pay their taxes, toll fees and dog licenses.

These trend are a sign that the economy is on the rebound, and that the price of crude oil will increase even more, as consumer demand steadily increases.
Retail gas prices are expected to keep rising. So what can you do to save money at the pump?

First of all, combine your errands. Several short trips taken from a cold start can use twice as much fuel as one trip covering the same distance when the engine is warm.

Consider carpooling. Many cities make it easier by matching up commuters. And last, you can ride the bus, your bike, or even walk.

When driving, make sure to stay within the posted speed limits. Gas mileage decreases rapidly at speeds above 60 miles an hour. Avoid unnecessary idling. It wastes fuel, costs money and pollutes the air. Turn off the engine if you have to wait. Avoid jackrabblit starts and stops. You can improve in-town gas mileage by up to 5 percent by driving more gently. Use your overdrive gears and cruise control when appropriate. They can improve fuel economy when you’re driving on the highway.

Be sure to keep your engine tuned. It can increase your gas mileage by an average of 4 percent. Change your oil regularly. Clean oil reduces wear caused by friction between moving parts and removes harmful substances from the engine. You can improve your gas mileage by using the grade of oil in your owner’s manual and by changing it according to schedule. Also check and replace your air filters regularly. This can increase your gas mileage up to 10 percent. Keep your tires properly inflated and aligned. It can increase your mileage up to 3 percent.

Remove stuff you don’t need from the trunk, back or bed of your vehicle. An extra 100 pounds in the trunk can reduce fuel economy by up to 2 percent.

And last, follow your owner’s manual recommendations for the right octane level for your car. For most cars, regular octane is fine. Using a higher octane gas than recommended offers no benefit, and costs you more at the pump. Unless your engine is knocking, buying higher octane gas is a waste of money.

Steer clear of gas saving gadgets, and be skeptical of any gizmo that promises to improve your gas mileage. The Environmental Protection Agency has tested a variety of these gadgets and found the majority of them offered no benefit to fuel economy. Some may even cause damage to your cars engine or an increase in exhaust emissions.

We all have financial needs, but if you’re the parent of a special needs child, you have some unique considerations. There are legal, medical and financial issues you must give consideration to and plan for. There are three specific areas, according to the experts, that you must give attention to.

First of all, you must think about what will happen to the child after you are gone or if you become unable to care for the child. You will need to be sure the child will continue to receive the same level of care. A guardianship or conservatorship can help with this.

A guardianship or conservatorship is a legal mechanism that grants a designated adult legal power to make decisions for another person. When your child turns 18, he may need a guardian or conservator to manage certain aspects of his life. There are differing types of guardianships and conservatorships. A general guardian or conservator may have full decision-making power, which could include finances, living arrangements and medical decisions.

There are also limited guardianships or conservatorships, in which the powers can be limited to address the specific needs of the individual.

Another big consideration is government benefits. Make sure to structure how your assets will be distributed upon your death so that these benefits won’t be eliminated or reduced. One way to do this is through a trust.

A trust is a legal entity that holds and manages assets for the benefit of a specified individual. A trustee is assigned to manage the interest of the beneficiary. You can set up a special needs trust, which would allow the inheritance assets to become property of the trust and not the beneficiary. This would prevent any interruption in public benefits eligibility.

When planning for your special needs child, make sure to develop a savings plan. You will need to estimate how much it would cost to cover your child’s needs per month, then figure that out for his life span.

While that figure may be daunting, keep in mind that a way to take care of this is through life insurance, with your child listed as the beneficiary.

For years, when thinking of retirement, the mantra has been, “Save, save, save.” Paying down or eliminating debt is also important. But as retirement time draws closer, you should ask yourself if your nest egg is big enough to retire at the desired time, how much you would be able to spend if you do retire, and whether you should convert some of your savings into an annuity.

For many Americans about to retire, having enough money to maintain living standards has become more difficult. According to The Center for Retirement Research, the national retirement risk index shows that 45 percent of Americans are on track to fall short, by 10 percent or more, of the goal of replacing about 3/4 of their pre-retirement income after retirement.

The reasons for this trend are that people are living longer, outliving their savings; there are fewer guaranteed pensions; low rates of personal savings; and the cost of health care is ever rising. These trends make it difficult to build savings for retirement, and create uncertainty about when retirement can occur.

Before jumping into the deep end of the retirement pool, take a look at your spending habits, and think about how well your retirement income will cover those expenses. Is your mortgage paid off? What are your costs for real estate taxes? What about maintenance on your home? How much are you planning to spend on “extra” things like gifts for children and grandchildren?

Many Americans plan to retire at 65, but in some cases, it is wiser to wait a few years. You can collect full Social Security benefits at age 67, and will thus have fewer years to fund in retirement, if you retire later.

Financial experts agree that you should draw no more than 4 percent of your financial assets during your first year of retirement. After that, the amount can increase with the rate of inflation. Sticking with 4 percent generally gives people enough to live on and ensures that their retirement will last as long as they live.

Social Security is the most reliable income for most retirees. But many supplement that with savings from a variety of other sources. That may include a mix of stock or stock mutual funds and fixed income instruments. Using a chunk of your nest egg to buy a fixed annuity can guarantee a stream of income for life and can provide a measure of certainty in an overall plan. But experts caution that it’s good to wait until you’ve been retired for a period of time first, in order to monitor your income and expenses.

Your home is a major portion of your wealth. Downsizing to a smaller residence in retirement can provide additional funds for retirees. If finances become tight, a reverse mortgage can provide homeowners with steady income in exchange for declining equity in the home.

Retirement involves more than just money. It also involves living your dreams of traveling, spending time with family and doing the things you never had time for while working. And starting with a solid financial plan can help make your retirement dreams come true.

Personal financial planning consists of three general activities: controlling your day-to-day finances, choosing and following a course toward long-term financial goals, and building a financial safety net to prevent financial disasters.

You may ask yourself, why should I set a budget. For many, the very word budget has negative connotations. But instead of thinking of a budget as financial handcuffs, think of it as a means to achieve financial success. Budgeting and tracking your expenses gives you a strong sense of where your money goes and can help you reach your financial goals.

In order to set up a budget, you don’t need to invest in fancy software, but a good software program will make the job easier. Many banks now offer free banking and personal finance software. Give your bank a call or check out its website to see if this is the case for you.

If not, you can purchase software fairly inexpensively, or you can choose to forego the computer and revert to good, old-fashioned pencil and paper. Either way, be sure to record all of your expenses, even the smallest and most seemingly insignificant. You’ll be surprised at how it all adds up.

Next, you’ll want to be sure to set your financial goals. Are you saving for a house? A new car? Your child’s college education? Whatever  your goal, a budget will help you get there.

When building your budget, make sure to build in a cushion, or safety net, to help when disaster strikes. Whether it’s a car accident, unexpected medical costs or the loss of a job, you’ll want to build in enough of a cushion to be sure you and your family are still provided for.

Once all of these steps are in place, you’ll gain control of your personal finances. You will control your pocketbook…not the other way around.

For most of us, as kids we just knew that a will was something that our parents didn’t really talk about a lot, but we understood that it meant they would someday hand down things to us and other people they cared about.

These days, most surveys indicate that the majority of Americans rarely discuss with their parents. In most cases, adult children have no idea what their parents would want them to do with their “worldly goods” if Mom and Dad were to become incapacitated.

The reasons people create wills are simple: they want to pass on their assets to their family members, rather than let the government get it, they want to keep peace in the family by making decisions about who gets what ahead of time, and they want to plan ahead for the costs of health care should they become incapacitated.

But what if your parents aren’t prepared? If you suspect this is the case, you should broach the subject with them. But how?

Begin the conversation with telling your parents that you want to understand what they want. Ask specific questions about who they want to receive property, how they want their assets divided or spent, and whether they’ve thought about how to avoid high taxes and lengthy probate.

You should make sure to acknowledge that you understand that this is their money you’re talking about. Help them to understand that advance planning means they can maintain control.

Stay focused on your parents’ concerns and remember that this is about them – not your needs or wants. They may be struggling with finding a fair way of dividing up what they’ll leave behind, and would rather not confront these issues. If they are uncomfortable talking with you, recommend they talk with a financial planner.

One way to help them is to talk about your own experience in setting up a will or estate planning. Share with them what you’ve learned, and you could create openings for discussion.

However you go about it, get the conversation started. Tread carefully in bringing this up with your parents. Your motive should be entirely about helping them meet their own needs and wishes. Remember: an inheritance, if you receive one, is a gift, not a right.

Apply for an unsecured small business line of credit. If you can’t get it, and have to put up assets as collateral, don’t use your house as collateral if you can avoid it; put up your business assets instead. First of all, with all the upside down residential mortgages and foreclosures, the bank might not be anxious to accept it. Secondly, it’s a tough business environment and you can’t afford to risk your home.

Apply for government economic development programs first. If your application is accepted, you can use that money to bolster your application for a small business line of credit with the bank by improving your debt to income ratio. And even if you’re denied the government money, it won’t put a ding in your credit score.

Include even small angel investments in your financials. Your mom put in $5,000? Include it.

Include any new contracts in your application.

Ask for what you need. It’s easier to get a $500,000 small business line of credit than it is to get an initial $250,000 and go back for more money later. Having to go back hat in hand will give the impression that you don’t know what you’re doing or haven’t managed the first $250,000 well.

Make sure your business plan gives a very detailed description of your business’ products or services; roughly 40% of applications for small business lines of credit were denied because the bank didn’t understand the business, according to a survey by American Banker.

If your business has a limited track record, make sure your business plan fully reflects the owners’, board members’ and management team’s experience, skills and education.

Other things you can do to increase the chance you’ll acquire a small business line of credit are more subjective:
Dress like a banker, even if you’re an artist. You’re applying for a business loan, so you need to look like a businessperson.

If the loan officer will be meeting with you at your location, make sure the site is immaculate inside and out. Tell all staffers to clear off their workstations, dress up a little and stay busy. A significant portion of your budget is going for their salaries; if it looks like you’re overpaying your people, why would a banker think you could manage a small business line of credit