Top 25 Web 2.0 Apps for Money, Finance, and Investment

How do you manage your money? Investments? Do you remember what your roommate owes you, or what you owe someone else for lunch when they picked up the tab? Can't keep track of where you're spending all your money? Pulling your hair out after paying for your medical bills? Need to cut back, so that you can save and find a nice home? Or maybe you'd rather spend your lucre on a vacation for the best price.

The smart way to money management, personal finance, and investing is to use the right tools — tools that aren't so intimidating that you'll ignore them after a while. This guide to the top 25 web 2.0 applications should help you with the above will come in handy when it comes to managing all your money concerns. [If you're not familiar with "web 2.0", read: what is web 2.0, or the compact definition.] Many of these apps have a community nature to them, so if you need some friendly advice from members, or wish to give it, you can.

Applications are listed approximately in alphabetical order within each grouping (except when two apps are described jointly.) Most of the services covered here are either free or have a free component or trial.

Lending, Borrowing This group of applications refers to those in which money actually changes hands electronically, either as part of a loan or as some form of payment (but not as part of an investment). Mobile applications have been left out, as the term web 2.0 hasn't yet been widely extended to smart phones and PDAs.

1. Prosper
   
   Prosper offers social networks for peer-to-peer community loans and financing. A group leader can create a new group and invite people to become members. An individual can register as a borrower and loan prospects can build a profile for themselves. Loans from a lender can be distributed to a single person or divided amongst several borrowers. A borrower's loan might come from a single lender or several, to reduce risk, and borrowers can choose from whom they select loans, based on the interest rates offered.


2. Zopa
   
   Zopa is a lot like Prosper. It serves as a potential alternative to expensive short-term loan rates, ideal for managing some of your consumer debt. Zopa does differ slightly from Prosper in some regards however. Zopa has nuances in the way loans are qualified and applied. Also note that Zopa is currently an UK-based system, however, they are "coming to the United States".

Personal Finance, Money Management, Expense Sharing

These applications deal specifically with tracking your personal finances and expenditures, paying bills, etc.

3. DimeWise
   
   DimeWise lets you define multiple accounts (savings, checking) and enter and track your transactions, including future expenses. Each expense can have a category tag as well as a note. Expenses can be exported or imported (OFX format, aka Microsoft Money 2002+, Quicken 2004+), set as recurring (daily, weekly, monthly, yearly), and even plotted as a chart to help you determine where your money is going. They have a 30-day free trial.


4. Foonance
   
   Foonance bills itself as a flexible way for individuals, couples and families to manage their personal finances. You can track your net worth over what they call "money stores", import your bank statements, "transfer" amounts between stores, "schedule" transactions and categorize them, and view pending transactions and money store balances. There don't appear to be any report capabilities, unlike DimeWise.


5. iOWEYOU
   
   iOWEYOU is described as an expenses sharing calculator that roommates or friends can used to keep track of who owes what. The service is free for groups of up to five people. While no money changes hands, it might be great for that insane roommate of yours who calculates rent to the fourth decimal, based on an actual square footage ratio of your room compared to the entire place... Uh, you know what I mean.


6. NetworthIQ
   
   NetworthIQ is the recipient of an SEOmoz.orgWeb 2.0 Awards Honorable Mention in "Business, Money, and eCommerce" and was declared #6 in the Top 10 Innovative Web 2.0 Applications of 2005. It's a free personal finance manager that allows you to monitor your net worth, debts, assets, etc. You can share your net worth publicly with other members, and view theirs as well. No private contact information is displayed, though a few PF (personal finance) bloggers do have a link to their website.


7. Wesabe
   
   Wesabe is a web-based personal finance tool where you can manage your finances. They've also added acommunity component where you can share your experiences with money, your saving tips, and your personal money goals. [While Wesabe isn't the only place to share goals, it seems that what was once taboo (publicly declaring your worth and your goals) is now encouraged.] Wesabe actually interacts with your bank accounts, so it's more than just a tracking tool. There are a few tiers of membership, including "free", as well as a free promo on Pro accounts through 2007. This appears to be amongst the most robust of the "personal finance management" tools being offered online at present, and there are many more features than what's covered here.

Stock Market, Investing, Tracking, Portfolio Management

These applications are specifically for tracking stocks and discussing with community members, managing a portfolio, and conducting actual trades.

8. BullPoo
   
   The name BullPoo itself is enough to warrant a look at this investment community where you can "share and collaborate on investment information." It has a rich interface, but possibly a bit intimidating, where you can organize your portfolio, store trade history, set an avatar, write or read blogs on whatever stock, make forecasts on a stock to see how you compare to other members, and loads more. For someone with the investment bug that wants to be part of a community, this site could be a positive "timewaster".


9. CAPS (Motley Fool)
   
   The Motley Fool's CAPS application is similar in nature, if not appearance, to BullPoo. At least from a superficial view. It's not so much about tracking your investments as participating in a community and predicting or viewing predictions of stock outcomes. There's a lot here to be absorbed, but it seems like quite a diversion from regular Motley Fool financial advice in that it seems almost frivolous.


10. DigStock
    
    DigStock is a Digg-like list of stock market + investing articles. Members submit a synopsis of an article from elsewhere (with the URL) and other members vote for the stories they like. Each story, instead of being tagged with a topic category, is tagged with the appropriate stock ticker symbols. The assumption is that because the article ranking is community-based, active members will help define what type of stories are desirable. And of course, there's the obligatory stock charts.


11. FeelingBullish
    
    FeelingBullish is very similar to CAPS in functionality, and also follows a community model of sharing and communicating with other investors.


12. GStock
    
    GStock is "a virtual supercomputer" for stock market analysis. It runs on a grid computing model and claims to test over one billion investment strategies per stock. Then it emails you BUY/ SELL (B/S) alerts for major US-traded stocks in your portfolio. They also claim that 70% of trades based on their BUY/SELL alerts make profits. Navigation, though, is extremely sparse. Enter a stock ticker symbol in the search field to get a chart with B/S indicators. Then apply common sense as to whether you should take the action offered, based on your price for that stock.


13. MoneyTwins
    
    MoneyTwins is not Forex (foreign exchange) trading per se, but rather, if you have foreign currency and want to exchange it with someone for other currency, you can do so with community members instead of a bank - thus reducing commission costs.


14. SaneBull
    
    SaneBull is customizable web interface with movable components that let you track specific stocks by symbol and market, as well as browse news feeds from several financial websites. It uses a number of web 2.0 technologies including AJAX.


15. StockTickr
    
    StockTickr is another social investing application. You can watch animated stock tickers change in real-time, or subscribe to the RSS web feed. Trades are categorized by popular, profit, long, short, open, closed, and alerts. Though what you are watching is based on the portfolios of members. That is, all watchlists are shared amongst the StockTickr community.


16. Wikinancial
    
    Wikinancial is a financial community where watchlists are shared, as are discussions in the forum — each stock has its own. In addition to the obligatory market and stock charts, there's also an archive of articles, presumably written by members. They have something called the "chat" box, though it's not an integrated IM (Instant Messaging) client, merely a form for starting a new discussion thread. Though provision for real-time chatting, text or voice, might add another dimension to the community, provided some controls such as group moderation were implemented.


17. Zecco
    
    Zecco combines two popular features — a financial community and free online investment trading. That's right, free, as in no commissions and no hidden fees. This bold move garnered them thousands of new accounts on launch day, an event that was covered by CNBC TV. To actually trade, you have to provide banking information, employment information, and a government ID, all of which have to be faxed after account confirmation.

Real Estate

These applications help you to find, sell or just manage your real estate properties.

18. Homethinking
    
    Homethinking is a real estate application with a difference. They take an Amazon/ eBay approach in that you can find agents and see "reviews" of that agent, as well a list and a map of what properties they are handling at present. Details of how many properties they have sold are also provided, including location, house details, and asking and final prices. A random query for Atlanta showed a list of agents for whom no reviews were present. However, Homethinking claims over 1.5 million listed agents and nearly 2.5 million transactions.


19. iiProperty
    
    Have real estate in your investment portfolio? iiProperty offers numerous features to help you manage your properties online: advertise properties for sale or rent (allows pictures), send notices to tenants or rent invoices, track rents and leases, view status indicators and alerts, manage income and expenses. iiProperty is a fairly comprehensive package with 5 price points, including Lite (free), which lets you advertise properties, post to Craigslist, and track online ads, leases, tenant records, rent due + received, and more.


20. Rentometer
    
    Need to get away from your insane roomate who calculates rent to mad decimal places? Use Rentometer, which is part of iiProperty. It lets landlords determine if they are not charging enough rent for their area, and tenants can find out if they are being charged too much. A random test for a $1000/m studio apartment in Sandy Springs (Atlanta), Georgia showed that, just down the street, there's an similar unit for only $525. Move, and you can put the savings into stocks, or loan it out on Prosper.


21. Trulia
    
    Trulia is a real estate search engine for the United States that gives you the option of specifying price range, property type, # of bedrooms and bathrooms, and square footage. You can specify region by city or zip code, and a search produces not only a list of properties and a link to the appropriate seller, but a Google map of the region with icons marking each. They also offer interactive heat maps which show price trends. So if you are interested in investing in one or more properties, Trulia gives you a birds eye view of what's available that fits your criteria.


22. Zillow
    
    Zillow has a database of millions of residential properties that buyers can browse, along with maps, estimates of a property compared against nearby properties, advice on loans, and a loan calculator. Sellers can get an estimate of their home and keep it private or make public. They can also compare profiles of nearby properties. Current homeowners who are neither buying nor selling can get an estimate of their home and compare it to other properties.

Miscellaneous

These are applications that have a web 2.0-ish aspect to them but do not fall into any of the above categories.

23. cFares
    
    cFares lets you specify desired trip details such as from/to locations, departing/returning dates, time of day (morning, noon, afternoon, etc.), and ticket class (economy, business, first class), and finds you the lowest airfare in their database. They'll also check nearby airports around your from/to locations, to provide alternates. For example, a trip from Boston to Atlanta on Dec 13, returning Dec 20, economy class returned Delta and American Airlines flights ranging from $149 to $199, plus taxes in some cases. While searching is free, these rates are only available to cFares members. Membership allows you to purchase a ticket online.


24. MedBill Manager
    
    MedBillManager, as the name suggests, lets you manage all your medical records (providers, bills, etc.) online, track payments owed to you, and track medical expenses for easy reporting to the government, insurers, and employers. You can compare your medical costs against that of other members. While MedBillManager is a fairly robust, complex application, they've done a nice job with the explanation page and the sample screens, so it's easy to see the scope of the application.


25. PayScale
    
    Want to know whether what you are earning for your job compares to others? Need to know if you are paying an employee fairly? PayScale has a database that spans numerous countries and breaks them down into regions (states, provinces). An interesting thing about PayScale is that it appears to build its database from members. Not exactly accurate if there's false data being entered, but over time, the information will probably become more accurate. They offer you a free salary report as an incentive to fill out your details. In addition, they also have resources (links, articles, etc.) for job seekers.

Additional Sources

Additional (general) sources used for the items above include:

• Emily Chang's eHub.
• SEOMoz Web 2.0 Awards.
• Ajaxian.
• TechCrunch.
• Mashable.
• Lifehack.
• Lifehacker.
  

yourcreditadvisor.com

How Not to Ruin Your Life

A Home Truth about Real Estate Investing

In 1978, my wife and I bought an adorable little condo near Palm Springs as a spot to relax and play with our Weimaraner dog, Mary.
It was a tiny place, but we loved it. We paid $100,000 or so for it. Four years later, we got bored with the place and sold it for about $125,000. That was in 1982.
Now we have a place nearby that we enjoy, and were looking for a smaller place in which to put up our guests. By complete coincidence, a condo very similar to the one we sold in 1982 came on the market and I went to look at it. A lovely spot, to be sure. But the asking price? $345,000.

The Buts and What-Ifs

That means the house has kept up with inflation -- barely.

In fact, when I do the math, I realize that it hasn't fully kept up with inflation. Plus, the owner would have had to pay rental fees (it's on land leased from a Native American tribe), condo fees, taxes, and insurance. Granted, he would also have gotten the great pleasure of living there, but it wouldn't have been a great investment at all.
On the other hand, if the same person had bought the Dow in 1982, he would've made roughly 10 times the money by now, not counting dividends, which would have meant he would've made close to 20 times the money.
There are lots of "buts" and "what ifs" in real estate, to put it mildly. There are neighborhoods along ocean fronts, lake fronts, and in New York City and San Francisco where anyone would've made a fortune buying real estate in 1982.
Prices in some parts of Manhattan, along Florida's coasts, and in Malibu have gone up substantially more than in Palm Springs. Usually, the key to low real estate price growth is an abundance of land to build on, such as in Phoenix or the Palm Springs area. The key to high real estate growth is a prestigious neighborhood or an extreme shortage of space, such as ocean front in Malibu.

Taking Stock

Still, my wife and I bought our house in Malibu for $600,000 in 1990. It might have gone up by 150 percent since then, but in that span, the stock market has more than tripled on the Dow, counting dividends. Other indexes such as foreign stock indexes have gone up vastly more than that.
Now, more "buts" and "what ifs": There are long periods when the stock market doesn't make you much money. The S&P is still lower than it was seven years ago. Stocks adjusted for inflation lost about 80 percent of their value in the slump of the 1970s and part of the 1980s. So nothing is a slam dunk.
Professor Robert Shiller of Yale has demonstrated, however, that over very long periods homes barely keep pace with inflation. Stocks, over very long periods, beat inflation by a large margin. (Please remember that "over very long periods" part. You can easily buy at a peak and not see that peak again for many years. But barring war, you will see it -- and zoom past it.)
There are many, many good reasons to buy a home -- and a vacation home -- besides price. There's much joy to be had in living inside a house that's yours on land you own (or lease from the Morongo Indians). But as an investment, homes -- unless bought with an eye to scarcity or in prestigious neighborhoods, and even those sometimes don't work -- are to be lived in, loved, and passed on.
I myself love houses, and own a lot of them. I get immense joy from them. But for long-term gains, broad indexes (also called indices) of stocks are where you want to be.

A Living Investment

Again, I don't want to disparage real estate. As you know, I usually write about how to make money, usually by investing but sometimes also by improving your human capital. But spending money is also a part of life, and buying things you like and get a lift from is a big part of life. The only things I know of that can do both are homes.
Yes, I realize I wrote above that they weren't a great investment compared with stocks on broad indexes, and they're not. But they'll keep their value a lot better than cars or jewelry or clothing or trips to Hawaii.
They'll also give you a fabulous sense that you have a fortification against landlords, neighbors sending yucky cooking smells into your apartment, and a lack of control over your own dwelling.

Great, But Not Perfect

Maybe it's just me, but I get great joy from knowing that I'm within my own four walls, owned jointly only by little old' me and the bank. As far as I can tell, houses -- or condos -- are the only items you can both own and enjoy as a consumer good and also as an investment.
Moreover, if you land in the right neighborhood or hit the right swing in the cycle, they can even be a great investment. Now is a very nice time to start owning, with prices way down in most of the United States.
Again, you won't make as much in the long run as you would on stocks, but no one I know can live inside a stock, make love inside a stock, read a story to a child inside a stock, or lie in bed reading next to their dogs in a stock.
So, yes, real estate rules. It's a good, even great, investment -- just not the perfect investment.

Ben Stein

Tax and loans do's and don'ts

Tax and loans do's and don'ts


Question 1: I am 27 years old and want to buy a house by age 30. I am starting to finally put a dent into my credit card debt. However I won't have money for a house down payment. Is it so terrible to buy a house with no money down?

It's great that you're able to pay off some of that debt. But putting no money down on a home is not advisable. And remember, it's not only the down payment you'll need, but also closing costs, says Greg McBride of Bankrate.com. Don't lose sight of the goal to pay off your credit cards, but make saving an equal priority. Have some of your paycheck automatically funneled into a savings account or a CD. Getting into the habit of saving is the surest way of reaching your goal.

Question 2: I have just paid off 7 credit cards. Would it be wise to close them now? Will this raise my credit score or lower it?

Good job paying off those cards. It's in your best interest to close some of those cards so you aren't tempted to run up your debt again. And although closing these accounts won't automatically raise or lower your FICO score, mortgage and auto lenders still gauge your credit risk by your credit limit. So, reducing that credit limit is a real positive. For more on what affects your credit score, you can go to myfico.com.

Question3: What is an old fashioned home equity loan and how does it differ from a HELOC?

A home equity loan is really just a second mortgage. The interest rate is fixed and your monthly payments remain the same. Taking out a home equity loan is a good move if you plan on using the money in a lump sum - like, paying for college or paying off medical debt. A HELOC - or a home equity line of credit works like a credit card.

It carries a variable rate and you can tap into it whenever you need to. You can adjust your monthly payments with a HELOC and you'll be able to benefit if interest rates decline. A HELOC can be a great way to pay for debt that comes in stages, like home improvement projects or for emergency funds if you lost your job.

Question 4:Can I take money from a taxable account and put it into an IRA to take advantage of the deduction? Then, can I put the money back into the taxable account after I've gotten my refund?

The sad fact is that you're going to pay taxes on your money sooner or later. So whether you shelter it in your IRA or you pay taxes on it now is up to you. But keep in mind that if you're younger than 59 and a half years old you'll have to pay taxes plus a 10% penalty if you withdraw money.

Gerri Willis

Auto loans: What you need to know

Common financing missteps can cost you thousands on a new or used car. Here's how to get it right.

Few of us have the means to write a check for the full amount of a new - or even used - vehicle.
Unfortunately, car buyers, treating financing as an afterthought in the car buying transaction, can easily waste thousands of dollars.
Here are some tips on what to do and what to avoid.

Know your incentives

Web sites like Edmunds.com (which provides automotive data for CNN's Web sites) list available incentives in your area. Often there are low-interest, or even zero-percent, financing deals you might qualify for.
Don't assume you need perfect credit. Ford Motor Co. (Charts), for example, has recently opened up its zero-percent financing incentive to buyers with a few potholes in their credit history.

Don't go in empty-handed
Hybrid vehicles top fuel economy list

It's true that a car company's "captive finance arm," - for example, Ford Motor Credit or Toyota Motor Credit - will probably be able to offer you a better financing deal than an outside bank or credit union. After all, it's their job to help you buy one of their parent company's products.
But that's not automatic. It can't hurt to make them work a little for your business by researching the cheapest financing you can get before you go to the dealership. A credit union or an organization like AAA or USAA can sometimes offer you access to rates you couldn't get at a regular bank.
Companies like Capital One Auto Finance will even allow you to bring a check to the dealership without having to agree to take the loan. The loan doesn't start until you write the check, which can be up to a pre-approved amount. Until then, all you've done is arranged competitive financing. You can still take it or leave it.
Just don't forget that interest rates are negotiable. If you arrange financing at a car dealership, part of that interest goes to the dealership itself. The dealership's business manager also has an incentive to work with you to earn your business.

Don't get stretched

Before you go car shopping, you have to know how much car you can afford. That means you need to know how much of a down payment you can make, how much you're likely to get for your current car and how much your monthly payments will be.
It's tempting to just let the dealership work it all out for you.
In that scenario, you tell the salesman what kind of monthly payment you're looking for and show them your trade-in. They'll tell you whether you should stick with the entry-level model or if you can move up a step or two. And you'll probably be pleasantly surprised that you can drive a much nicer car than you thought for monthly payments that fit your budget. Yes, the loan stretches out for six years but... look at this car! Feel those seats. Listen to that big, strong V8. Come on, if you can afford it each month, who cares how long the loan is?
Well, obviously, another year or two of payments means thousands of extra dollars out of your pocket. It's just being removed more gently.
Then there's another problem you might find out about years later. The longer your car loan is, the longer you'll be "upside down" in your car payments. In other words, a longer loan extends the period during which you'll owe more on the car than the car is worth.
So figure out your payment situation and know what you can afford before you start shopping.

Do your own math

Once the deal's all figured out, there's one simple step a lot of people forget to take. Get out your pocket calculator and figure out how much that car is really costing you.
Just multiply your monthly payment by the number of payments you'll be making. Then add on your down payment and the value of your trade-in. If you were fortunate enough to qualify for zero-percent financing, there shouldn't be any surprises.
If you're paying interest, especially if you've taken out a long-term loan, you might be shocked by how much that car is costing you.
For example, a six year loan at 7.9 percent on a $35,000 car would cost you almost $10,000 more than the same vehicle if you were paying no interest, according to Edmunds.com.
Then you can decide if that car is really worth almost $45,000.

Peter Valdes-Dapena

5 serious taxpayer problems

National Taxpayer Advocate Nina Olson submits her annual report to Congress, criticizing the AMT, the tax gap, IRS use of private debt collectors and more.


The most serious problem facing taxpayers today is complexity, and no tax represents that complexity better than the Alternative Minimum Tax, according to National Taxpayer Advocate Nina Olson in her annual report submitted to Congress on Tuesday.
The National Taxpayer Advocate is appointed by the Treasury Secretary and is charged with representing taxpayer interests before the IRS and Congress.
Olson's report outlines for lawmakers what she considers to be 21 of the most serious taxpayer problems - not a conclusive list by any means, as she notes in her report.
Here are five that Olson details:

Alternative minimum tax

First imposed in 1969, the AMT was intended to ensure that the wealthy few paid their fair share of tax by preventing them from exercising too many loopholes, many of which have since been closed.
Today, because its income exemption levels were never adjusted for inflation and because it disallows key breaks allowed under the regular tax code, the AMT threatens to capture millions of primarily married couples with kids and incomes in the middle- to upper-incomes range.
Now, Olson writes, "the AMT is left to punish taxpayers for engaging in such 'classic tax avoidance behavior' as having children or living in a high-tax state."
To make matters worse, it's hard for taxpayers to figure out if they owe AMT, which imposes a higher bill than they would pay under the regular income tax code. And if they find out they do, they may also be subject to a penalty for failure to pay sufficient estimated tax if they didn't count on having to pay AMT.
"'Gotcha' taxation is not good for taxpayers or the tax system," Olson writes. She recommends that lawmakers repeal the AMT as it pertains to individuals.
Leading tax writers in the House and Senate have said they would make AMT a priority issue this year, but given the high cost of repeal - estimated in the neighborhood of $1 trillion over 10 years - repeal is a tall order.
More likely, but in no way guaranteed, are possible reforms to the AMT - such as indexing income exemption levels for inflation. (Here's a closer look at the AMT and whether you may be subject to it.)

Tax gap

Every year, $290 billion in federal taxes owed are not collected. The biggest reason for this "tax gap" is the under-reporting of income, but not all of it intentional. The IRS has noted that confusion over how to comply with complex tax laws also contributes to the gap.
"It is a problem for taxpayers because the average taxpayer is paying thousands of dollars in extra tax each year to subsidize noncompliance by others," Olson writes.
To close the gap, she recommends a number of things, including a move toward fundamental tax simplification, greater third-party information reporting, and better IRS compliance efforts that respect taxpayer rights.

Costs and benefits of private debt collection

Olson has come out strongly against the IRS's recently instituted practice of farming out some of its past-tax-owed debt collection cases to private agencies.
The initiative was intended to be cost-effective, but Olson writes that the IRS has acknowledged it can deal with delinquent accounts more efficiently than private companies, and the Taxpayer Advocate Service has found a high number of complex cases assigned to private companies, instead of the less complex ones which they were originally intended to get.
"The IRS has a nearly $2 billion collection budget with thousands of collection employees. In contrast, (private collection agencies) PCAs at this stage of the initiative are using 75 employees to collect on these accounts , and the IRS is using 65 employees to monitor them," Olson writes.
What's more, she says, the Taxpayer Advocate Service has observed "poor customer service to multilingual taxpayers, (private collection agencies') operational plans being withheld from public disclosure, and PCA collection scripts through which PCA employees attempt to manipulate taxpayers."
Her recommendation to lawmakers: Repeal the IRS's authority to use private debt collectors.
In a six-page response to Olson's charges on private debt collection printed in the report, the IRS noted that two of the three private companies it uses have bilingual staff and the third is in the process of arranging assistance for non-English callers.
In general, the agency said, "Given the backlog of IRS receivables and our limited collection resources, [this] initiative allows the IRS to ensure that more delinquent taxpayers are personally assisted in meeting their obligations. ... [A]nd we will continue to make program decisions to protect the privacy and security of taxpayers while collecting outstanding government debt."

Transparency of the IRS

The IRS needs to do a better job of disclosing to the public its updates to procedures and IRS guidance, and the agency needs to make sure its employees as well as taxpayers and practitioners are aware of what is most current, Olson contends.
"Transparency in tax administration is essential to assure taxpayers that the tax laws are being administered fairly," she writes.
The IRS, in a written response to Olson's critiques, said it is "committed to improving the way it manages instructions to staff. We acknowledge we have experienced growing pains as we have moved towards electronic creation and delivery of the plethora of instructions to staff we produce."

Early intervention in IRS collection cases

Not dealing with delinquent accounts early enough "contributes to long-term financial problems for many taxpayers and costs the government billions of dollars in lost revenue," Olson writes.
And cases are left pending even when taxpayers have tried to settle their debts through installment agreements or offers in compromise, she notes.
Olson recommends that the IRS improve the way it prioritizes cases, initiate more personal contact with taxpayers and become more flexible in the way it provides realistic payment options for taxpayers who owe back taxes.
In its written response to Olson's critiques, the IRS said it agrees that early intervention is important, noted that it is analyzing the rates at which cases are deemed "currently not collectible," and stressed that "all of our processes are designed to reduce personal burden by directing taxpayers to the right treatment at the fastest possible time."

Jeanne Sahadi

Maximize your financial aid

Be the early bird
College applications may be out the door, but your work isn't done. Financial aid season starts
Get cracking. Is it 2007 already? Fill out the FAFSA (Free Application for Federal Student Aid) - which determines your child's eligibility for federal aid and is used by colleges to determine his aid package - as soon as you can after Jan. 1. Go to fafsa.ed.gov to get forms and info.

Roll with it. Schools with rolling admissions policies also distribute aid throughout the year. The best packages go to the earliest applicants; be sure you're at the top of the pile.

Don't rule anything out. Even if you're sure you won't be eligible for need-based aid, know that many schools also use the FAFSA for merit scholarships, so if you haven't filled out the form, you may jeopardize your kid's chance at getting any merit aid.

Work on your profile

It's not just the FAFSA. Some private and state-supported universities use an application called Profile, which determines eligibility for nongovernmental aid. Profile costs $18 to file with each school; download it at profileonline.collegeboard.com.

It's not just about you. While the FAFSA tracks one year of income data, Profile tracks three years and takes into account whether your family owns a home as well as the wealth of stepparents and divorced, noncustodial parents.

It's not always bad. Profile can result in a higher EFC (expected family contribution) than the FAFSA , but not always, since it considers such things as regional variations in the cost of living, notes Mark Kantrowitz, author of College Gold: The Step-by-Step Guide to Paying for College.

Know all the angles

Go to school. The National Association of Student Financial Aid Administrators holds free seminars nationwide offering professional help with the FAFSA. Find a seminar near you at collegegoalsundayusa.org. Web sites such as FinAid.org have calculators that enable you to get a ballpark figure of your expected family contribution without providing identifying information.

Watch for phony Web sites. The official government site where you can get free information and application materials is fafsa.ed.gov. A for-profit, commercial site with a similar Web address, fafsa.com, charges $80 to help complete the application. But why pay when there's good, free assistance available? FAFSA's help number is 800-4-FED-AID (800-433-3243).

Take a shot. Remember that there is no absolute cutoff figure for financial aid eligibility, so you've got nothing to lose by throwing your hat in the ring. Michael Fraher, director of financial aid at Vassar College, notes that roughly 50% of students are getting need-based aid at Vassar, where the median family income for those receiving aid is a little more than $80,000.

"Given federal and state tax liabilities, the number of people in a household and the number of kids in college at the same time," he points out, "it's not unusual to have over $100,000 in income and still get financial aid at schools like ours."

Barbara Bedway

Exchange-traded funds (ETFs): 5 smart strategies

ETFs: 5 smart strategies
Exchange-traded funds can cut your investment costs, lower your tax bill and simplify your life. Just make sure you handle them with care.

When Exchange-Traded funds, or ETFs, came on the scene in the 1990s, they looked like the rarest of new financial products - one that actually made money for you instead of just your broker.

The earliest ETFs emulated the Standard & Poor's 500 and other broad stock indexes. They were like traditional index funds, only better, offering the same one-stop diversification but with lower fees and tax bills.

As more financial advisers and small investors caught on to ETFs' advantages, the companies that issue them began expanding beyond major indexes to narrower slices of the economy such as health care and technology.

Again, the benefits to you were clear: Avoid the high management fees of sector funds and lower the risk that comes with picking stocks. It's no surprise that investment pros were soon calling ETFs the coolest thing to come along since, well, index funds, and predicting that ETFs would revolutionize the way you invest.

And then things went from cool to, like, crazy.

Not content to limit themselves to major market benchmarks, ETF sellers began churning out dozens of funds aimed at ever smaller market subsectors, including leisure and entertainment, networking and semiconductors.

The number of ETFs has ballooned from just 30 with $34 billion in assets six years ago to more than 200 today holding more than $300 billion. ETFs are quickly becoming a means of turning long-term index fund investing on its head, providing an easy way to make risky investments in whatever slice of the market happened to be hot five minutes ago.

Wanna invest in a nanotechnology or clean-energy ETF? You can -- although it's debatable whether you should. Ditto for that euro ETF you can buy if you believe that the value of the dollar will fall.

That doesn't mean ETFs are now so dangerous that they're only for the foolhardy. You can still cash in on their original promise if you ignore the hype and instead focus on how they might fit into your long-term investing strategy.

With that attitude in mind, here are five smart ways you can make the most of ETFs.

PLAN 1: Put a windfall to work

Payoff:Save a bundle on fees ETFs can be an excellent way to invest a large sum such as a 401(k) or IRA rollover, a bonus or some other windfall. Use ETFs for the portion of the money that you want to put into U.S. stocks, where ETF annual operating expenses are typically lower than those of comparable index funds.

Yearly fees for ETFs that give you broad exposure to foreign markets, on the other hand, are higher than what you'd pay for an index fund, while fees for bond ETFs and index funds are about the same.

One caveat: Because ETFs trade like stocks, you buy them through a broker, which means forking over a brokerage commission. That can eliminate ETFs' cost edge if you're making frequent investments or putting in small amounts.

PLAN 2: Create the "me" mix

Payoff: Diversify across all your wealth-producing assets With ETFs you can customize your asset mix in ways that used to be possible only if you built a complicated portfolio from scratch - or paid an adviser to do so.

Say you work for a financial services company that gives you stock options as part of your pay package. Between your salary and your options, you've already got a big piece of your future riding on the financial sector.

Instead of buying a broad market index that would give you even more exposure to the banking industry, you can assemble a portfolio of industry sector ETFs that duplicates the overall market while toning down or even eliminating its financial component.

Similarly, ETFs allow you to stress a particular investing style. If you're in or nearing retirement, for example, you might want more exposure to value stocks since they tend to be less volatile than shares of fast-growing companies.

In that case you might consider adding an ETF that tracks an index of value shares. Conversely, if you're a younger investor willing to assume more risk for higher returns, you could invest in an ETF that focuses on growth stocks.

Sound confusing? It needn't be. The ETF Allocator tool at the iShares website (ishares.com) will help you create a customized mix.
PLAN 3: Go a little farther afield

Payoff: A safer portfolio Diversifying beyond the traditional asset classes of stocks and bonds is a way to dampen a portfolio's risk. If you wanted more protection from inflation, for example, you could add an ETF that invests in natural-resources stocks or in TIPS (Treasury Inflation-Protected Securities), government bonds whose payments rise with inflation.

You can also gain an extra measure of protection by buying ETFs that specialize in areas that may be quite volatile on their own -- such as gold and emerging markets stocks -- but that can actually dampen a portfolio's swings since they often zig when the stock market zags.

If, on the other hand, you want to get more current income from your portfolio, you can buy an ETF that homes in on dividend-paying stocks or REITs (real estate investment trusts).

Here are some options:

For inflation protection, try iShares Goldman Sachs Natural Resources Index and iShares Lehman TIPS Bond.

For income, try iShares Dow Jones Select Div. Index and Vanguard REIT VIPER.

For still more diversification, try Vanguard Emerging Markets VIPER and iShares COMEX Gold Trust .

PLAN 4: Round out what you've got

Payoff: Higher returns with less risk ETFs make it easy to plug gaps in your portfolio. Say you own a lot of big-company stocks but nothing at the small end. You know that properly diversifying your investments lowers your risk and raises your returns, but you're not up to sifting through thousands of small shares, or even hundreds of actively managed funds.

By buying a small-stock ETF, you instantly get all the small-company exposure you need for a bit less than you'd pay for an index fund.

Conversely, if you're a small-cap enthusiast who figures you won't find many compelling bargains among the well-researched ranks of big companies, you can buy a large-company ETF to fill out your portfolio.

Even if you like investing in individual stocks, ETFs may be able to play a role in your portfolio.

If you pick individual large-cap stocks... ...buy Vanguard Small-Cap VIPER.

If you pick individual small-cap stocks... ...buy iShares S&P 500 index.

PLAN 5: Harvest a tax loss

Payoff: A big deduction come next April 15 ETFs can also help you do some tax maneuvering. Let's say you're sitting on a $5,000 loss in Dell shares but you still like the company's long-term prospects. You want to sell your stock to lock in the loss for the tax write-off, but you don't want to lose any appreciation in tech shares during the 31 days that the IRS "wash sale" rules say you must wait before buying back the stock.

Here's what you do:

You own a tech stock at a loss...sell the stock for the tax savings...buy a tech ETF...wait 31 days...sell the ETF...buy back the stock.

Walter Updegrave

An experienced investor is confident in his diversified stock portfolio

Get your bond fix - the easy way
An experienced investor is confident in his diversified stock portfolio - but where do bonds fit in?

NEW YORK (Money) -- Question: As aggressive savers and investors, my wife and I, who are 50 and 48 respectively, have accumulated a significant diversified portfolio of stocks. What we lack are bonds, and I have zero experience in this area. I put some money in a bond fund a few years ago, and it went down immediately. My wife and I are positioned to retire in five to 10 years, so I know we need some bonds to protect us in the event of a market meltdown. But I'm feeling intellectually paralyzed. Help! - Anthony S., Honolulu, Hawaii

Answer: I understand perfectly. When you were younger, so much younger than today, you never needed anybody's help in any way. But now those days are gone and you're not so self-assured. Now you find you've changed your mind, you've opened up the door.

Oops, sorry. That final plaintive plea at the end of your question hurled me into a Sixties time warp and suddenly I couldn't get the Beatles' "Help!" lyrics out of my mind. Not to worry, though. I'm happy to help you get your feet back on the ground - and your portfolio in shape for your looming retirement.

First of all, you should know you're hardly alone when it comes to being mystified by the workings of bonds. In many ways, the bond world is like looking through a Glass Onion where what we think of as economic reality gets distorted.

For example, most of us hate to see the economy go into recession. But the bond crowd, as the saying goes, likes a recession and loves a depression. That's because interest rates tend to fall in a stagnant economy. And since interest rates and bond prices are like two ends of a see-saw, falling interest rates mean rising bond prices - and rejoicing among bond investors (as long as companies and governments keep making those semi-annual coupon payments).

And then there are all those arcane terms: calls, premiums, discounts, coupon, zero-coupon, maturity, duration...it's enough to make you Cry Baby Cry.

Well, relax. There are plenty of ways to get the benefits you need from bonds without having to become a bond expert. That said, learning about how bonds work and what some of the lingo means never hurts. So before you do anything, I suggest you take a look at our MONEY 101 lesson on Investing In Bonds. You might also want to check out a bond site that, appropriately enough, is also called Investing In Bonds. Run by The Bond Market Association, the site has a lot of good tutorials and articles about bonds and plenty of data for people who want to get into the nitty-gritty of bond investing.

But let's Get Back to some specific Help! for you.

How much in bonds

Basically, between now and retirement you want to transition to a less volatile portfolio by dialing back the percentage of equities in your portfolio and increasing the amount in bonds. There's no specific figure for how much ought to be in bonds vs. stocks. But as a general rule, I'd say that by age 60 or so, you probably want somewhere between 40 and 50 percent of your portfolio in bonds.

As you age, you can then continue to increase your bond exposure, so that by age 70 your bonds represent 50 to 60 percent of your portfolio and by age 80 maybe 30 to 40 percent.

These are general guidelines. The figure that's right for you will depend on how much risk you're willing to take, what other sorts of resources you have (Social Security, other pensions, income from an annuity, etc.) and how much money you have (if you're really loaded and a short-term setback in the market won't seriously affect how much money you can draw from investments, then you can afford to be more aggressive, if you wish).

But the two most important things to remember are: first, you don't want to go into retirement with too aggressive a portfolio; and second, while there's a place for bonds in your portfolio leading up to and even after retirement, you still want to keep some of your savings in stocks in order to provide some growth to maintain the purchasing power of your portfolio.

Which bonds to buy

Okay, so what should you buy to get whatever amount of bond exposure you feel is right for you?

You could go with individual bonds, but generally that's a hassle and can be expensive unless you're investing, say, $50,000 or more. The exception is Treasury bonds, which you can buy directly from the U.S. Treasury, but even there I'm not sure it's worth the effort for most people, especially if you want to reinvest your bond interest payments.

So for most people I think mutual funds are the investment of choice for bonds. With funds, you could put together a portfolio of your own combining funds with short- or intermediate-term maturities that invest in government or high-quality corporate bonds and maybe even some high-yield bond funds.

But the easiest way to go - and a way I think makes good investment sense - is just to go with a total bond market index fund. You get virtually the entire investment-quality bond market in a single fund. And since you're buying an index fund, the annual expenses are extremely low, which is always a plus but particularly so for bond funds since higher expenses exert a bigger drag on bonds' generally moderate returns.

(For recommendations of specific funds you might consider, see the bond funds in the MONEY 65.

You don't have to pull off this move into bonds all at once. In fact, you're better off making the transition over several years. You can start by putting any new investment dollars into bonds. If it appears this approach isn't going to give you enough bond exposure by the time you're ready to retire, you can always start selling some of your stock funds and plow the proceeds into bonds. You can do this as part of the process of annually rebalancing your portfolio.

To the extent you can, try to confine these moves to tax-deferred accounts like 401(k)s and IRAs so the Taxman doesn't siphon off any profit on the sales. But if you must sell stocks or stock funds in taxable accounts, then look for opportunities to mitigate the tax bite by selling shares that will trigger losses or only small gains.

If you do all this over the next five to 10 years, I've Got A Feeling things will Come Together quite nicely and, financially at least, you'll be Free as a Bird in retirement.

Walter Updegrave

Look beyond the biggest stocks in the biggest markets

Time to see the world in a new way
International mutual funds can do a lot for you, but it's easy to head off in the wrong direction. Hint: Look beyond the biggest stocks in the biggest markets.

Until recently.

Nearly $130 billion has poured into overseas stock funds this year, more than five times the amount invested in U.S. equity offerings. A lot of that is just performance chasing, since foreign stocks have trounced domestic ones over the past three years thanks to faster overseas growth and a falling dollar.

But chances are you need to invest even more in foreign markets, and it wouldn't hurt to be a little more adventurous about it too.

Just as American tourists tend to flock to the familiar big names such as London, Paris and Tokyo, U.S. investors are sending almost all of their money to those markets as well. That's no way to really see the world - and it's no way to invest in it either.
Increase your stake

As recently as five years ago, many investment advisers recommended stashing just 10 percent to 20 percent of your stock portfolio in international funds. Most of us don't come close to that small amount. In a recent survey, for example, Fidelity found that two out of three of its 401(k) plan investors did not hold a single overseas equity fund.

That shortfall is especially worrisome today, when pros recommend putting 25 percent to 35 percent of your equity portfolio in foreign stocks. "The U.S. accounts for only half of the world's market capitalization," points out Anthony Ogorek, a financial adviser in Williamsville, N.Y. "And overseas economies are growing faster than in the U.S., so that's where the best returns can be found."

Foreign funds also give you a way to hedge against the U.S. dollar, since they hold companies that earn returns in overseas currencies. When the dollar is weak, as it has been lately, you get a boost when those returns are converted into U.S. greenbacks. The reverse is true when the dollar strengthens.

Look beyond large-caps

There is no question that large-cap overseas funds make great core holdings. By owning shares of huge multinational companies, these funds are a relatively safe way to play overseas markets, which is why they have become a staple of 401(k) plans. But if you stash your entire overseas allocation in large-caps, you won't get the full benefits of international diversification.

"In today's globalized economy, the financial markets of developed countries have become more closely tied than before," says Yale finance professor William Goetzmann. "So the stocks of big companies tend to perform in the same way, no matter where they're headquartered."

A U.S. money center bank such as J.P. Morgan Chase, for example, isn't all that different from Germany's Deutsche Bank. Both operate overseas, and they have similar reactions to global economic moves.

Moreover, if you restrict your international investing to large-cap funds, you will miss out on large swaths of the world's markets, as well as some of the best returns. That's because these funds invest the bulk of their assets in a few developed countries while holding little or nothing in emerging markets.

Get off the beaten path...

One way you can diversify beyond foreign large-caps, suggests William Rocco, a senior analyst at Morningstar, is to invest in a small-cap and midcap foreign-stock fund. These offerings mainly buy shares of companies with stock market values of $8 billion or less that trade in developed countries, although many invest a small stake in emerging markets as well.

Just as with U.S. small stocks, foreign small fry tend to grow faster than their large-cap siblings.

And because small companies typically get most of their sales locally, they are more closely tied to their country's economic growth than to global markets. That provides you with greater diversification.

Small-cap foreign funds are more risky than foreign blue chips, however, so put no more than 5 percent to 10 percent of your stock portfolio in one.

A top choice: T. Rowe Price International Discovery (PRIDX (Charts), which is on our Money 65 list of recommended funds. Recently the fund's top stakes included $2.5 billion Soitec, a French producer of silicon chips, and Financial Technologies, a $2 billion Indian developer of trading software.

...Or go even further

If you're the adventurous type, consider a diversified emerging markets fund, which holds the stocks of companies in developing countries. With these funds you have the potential for bigger returns - and bigger losses. It's not unusual for emerging markets to plunge by as much as 20% in a month, as they did earlier this year, before rebounding.

Invest no more than 5 percent of your equity portfolio in these funds. On our Money 65 list, we recommend SSgA Emerging Markets (SSEMX (Charts), as well as Vanguard Emerging Markets Stock (VEIEX (Charts), an index fund that is also available as an exchange-traded fund (VWO (Charts).

Once you have arrived at an asset mix that suits your goals, it's important to keep your expectations in check. Since overseas equity funds have had a tremendous run, chances are their returns will cool down, but no one can really say when. So be prepared to hang on.

And remember, experienced world travelers are ready to cope with any change in the climate.

By Penelope Wang, Money Magazine senior writer

Building a business

This family has aggressive financial goals but a conservative mix of stocks and bonds. Their goal: retire from their corporate jobs in a decade.

NEW YORK (Money Magazine) - When Doug van Almelo's job as an airplane mechanic was transferred from Los Angeles to Indianapolis after Sept. 11, he and his wife Carole saw it as a chance to start over.

"With the high cost of living and the fast pace, it was hard to set aside money and time," says Carole, who runs her own Web design company.

Thanks to lower housing costs in the Midwest, the couple were able to use the proceeds from the sale of two homes in California to pay off all their debts and seed a $300,000 portfolio.

Determined to build up their investments even faster, they drastically cut their living expenses, hoping to save half of their six-figure salaries. Their plans hit another bump, however, when Doug was laid off in 2003.

Then, after working as a contractor for a year, he was called back to his old job - in Los Angeles. Now, Doug, 49, commutes home every three weeks for a two-day stay.

In two years, Carole and sons Alex, 15, and Nicholas, 11, will join him on the West Coast. "It's difficult, but we look at this as an opportunity to really save for all of our futures," says Doug.

Still, the van Almelos are eager to leave the corporate world behind and strike out on their own. Within 10 years, Doug wants to retire from his airline job. At that point, he and Carole, 48, hope to buy a small business or farm and work together in a second career.

Where they are now

Despite the fluctuations in their income over the past few years, the van Almelos have managed to build their total portfolio to $400,000, which includes $100,000 in 529 plans for the boys.

The rest of the money is spread among IRAs, 401(k)s and taxable accounts, with 35 percent in bonds, 39 percent in large-cap stocks and 20 percent in international equities. They also have $20,000 invested in a handful of individual stocks, including Google and Apple.

When they return to L.A., the van Almelos figure they'll buy a small condo, which should keep their housing costs roughly in line with what they are in Indiana.

Though he no longer gets a pension from his airline, Doug is socking away 20 percent of his pay in the company's 401(k), and Carole maxes out her Roth IRA. Luckily, Carole's parents have offered to help pay for the boys' school expenses, so they no longer need to add much to the 529s.

Carole and Doug have weathered several financial storms the past few years and have recovered admirably, says Indianapolis financial planner Walt Koon. But starting a new business at 60 is ambitious, especially considering that neither has a pension, Carole works for herself and Doug is in a volatile industry.

What they should do

The van Almelos' best shot at hitting their goal, Koon says, is to save as much as possible outside their retirement plans before they leave their traditional jobs - and to be far more aggressive in their investment strategy.

Right now about a third of the van Almelos' money is in Dodge & Cox Income (DODIX (Charts), a long-term bond fund. "A bond fund is for capital preservation. But at their age, they still need growth," says Koon, who recommends that they reduce bonds to just 9 percent of their portfolio.

He'd also like Carole and Doug to sell their individual stocks and pare back their stake in large-cap funds from 39 percent to 35 percent.

They should use some of that money to boost their stake in international stocks as well as mid- and small-cap domestic equity funds, which are more volatile than large-caps but historically have higher returns.

They can keep a lid on costs by selecting Money 70 index funds such as Vanguard Small-Cap (NAESX (Charts) and iShares MSCI EAFE (EFA (Charts).

"When it's crunch time, we've always been able to save money," says Doug. "I think we can stretch a bit more to fund our goals."

By Donna Rosato, Money Magazine staff writer

Oil plunges below $51

Crude hits 19-month low after Saudi minister says cuts working, no need for an emergency OPEC meeting.

LONDON (Reuters) -- Oil prices plunged more than 3 percent back near $51 a barrel Tuesday after Saudi Arabia said OPEC production cuts were working well and that there was no need for an emergency meeting of the producer group.
U.S. light crude for February delivery tumbled $1.78 to $51.21 a barrel after touching $50.93, the lowest since May 2005, in earlier New York Mercantile Exchange trading. In London, Brent futures shed 82 cents to $52.30.
The price of crude has plunged more than 16 percent this year in part due to warm weather in the Northeast, the world's top heating oil market, in early January.
The selloff comes as some other commodities have come under pressure - which could lead to further selling down the road.
"We took measures in October in Doha and measures in Abuja (in December) and I believe these measures are working well. Inventories in the fourth quarter have come down ... which puts the market closer to balance," Saudi Oil Minister Ali al-Naimi said in New Delhi.
"Do not panic. Actually there is no reason for a meeting."
The Organization of the Petroleum Exporting Countries (OPEC) agreed to cut 1.2 million barrels per day (bpd) of output from Nov. 1 and then to cut another 500,000 bpd from Feb. 1.
There had been speculation OPEC could hold an emergency meeting before its next scheduled conference on March 15.
Venezuelan Energy and Mines Minister Rafael Ramirez has said oil prices had fallen "too much" and that he would favor an extra meeting.
Other commodities have also had a rocky start this year and base metals fell in early trading Tuesday before stabilizing around midsession.
"We should not underestimate the global mood on commodities," said Frederic Lasserre of SG CIB in Paris. "There is not as much appetite for commodities anymore."
He predicted oil prices would test $50 in the near term, but then fresh buying interest could emerge.
Analysts said OPEC would also brake the slide and deeper price falls could drive the cartel to implement further cuts.
"We don't really see a collapse in prices. The further it goes down, the more hesitant the market will be about going even further," said Eoin O'Callaghan of BNP Paribas. "OPEC still has an impact on the market."
Stocks of oil majors fell across the board Tuesday.
Shell (down $0.41 to $67.40, Charts) lost 0.6 percent;
Exxon Mobil (down $1.09 to $71.57, Charts) slid 1.4 percent;
ConocoPhillips (down $1.02 to $62.81, Charts) retreated 1.4 percent;
BP (down $1.52 to $63.12, Charts) was down 2.2 percent.