You sent them in and now "Good Morning America" financial contributor Mellody Hobson has answers to your money questions.
Find out what she has to say below and click here to send in your questions to Mellody.
I am 53, single, with a good job. I have (had) approximately $120,000 in my 401(k). I do not want to touch the money in my 401(k) in any way; however, should I keep investing the max $20,000 per year? I am tempted to stop my contributions for six months and put the money in my money market account. I'd rather pay taxes on my money than throw it away.
From: Victoria Wilson, Texas
No, keep at it! You still have a number of years before retirement, so you have time to ride out this recent market volatility. When the market is down, one of my favorite market factors comes into play -- that of dollar cost averaging.
The dollar cost averaging is the approach to investing a set dollar amount over a specific period of time, which allows you to buy more stock when prices are low and less when prices are high. At the end of the day, the price balances out and you are able to take advantage of both the upside and downside of the market. Also, it is impossible to time the market, so you do not want to risk being on the sidelines when the market rebounds.
I am very, very concerned about my kids' college fund. With the market being so bad, I am losing money in the 529 plan. Can anything be done to protect my money? My oldest son is graduating from high school next year, and I am concerned about whether I will have any money left. I am already switching from a university for the first two years to a junior college to save some money, and my second son is going to college two years later. What can I do? Please help me.
From: Lisa Farrell, Smyrna, Ga.
Unfortunately, with such a short time horizon, there is not much you are going to be able to do to recoup the losses in your son's 529 plan. Most 529 plans offer very conservative options, so you may want to consider rebalancing and moving some of the money to protect what you have saved. The good news is there are billions of dollars in college scholarships for your sons to consider -- even if they are already enrolled in college. One of the best places to search for scholarships is Finaid.org, which has a free search engine with more than 1.5 million scholarships and $3.4 billion.
Answers to Your Financial QuestionsQuestion:
We have a 5 percent ARM which becomes variable in February 2010. Our plan was to sell our house before then. Our girls are in college now, and it is time to downsize. It is on the market, which, as you know, is not doing well. When would you advise that we look into refinancing? Or, should we just stay the course and wait for the house to sell? I hate the idea of paying closing costs to refinance and then pay them again if the house sells. We have excellent credit and very low debt, so we are not concerned about getting approved for a new loan. Please advise. Thank you, Lisa.
From: Lisa Rose, Winona, Minn.
Hi Lisa, my advice to you is to refinance and lock in your rate now. I know you are considering downsizing, but I do not think it is worth the risk in case your situation changes and you either decide to stay in the home or have difficulty selling it. Rates on 30-year fixed mortgages are still very attractive and are considerably lower than where they were just one year ago. The rate on a 30-year fixed mortgage is around 6.2 percent, whereas 20 years ago the same mortgage was 10.5 percent.
Also, do not be shy in trying to negotiate some of the closing costs with your mortgage lender. If your credit is excellent, you are likely a good candidate and may be able to shave some fees off your closing. So, take advantage of the rates and security a fixed mortgage provides.
As a 61-year-old single woman currently on disability — I am also concerned about my 401(k), which has dropped about $65,000 this year. Since I don't have many years before retirement (I may or may not be able to return to work) I wonder whether I should move more of my mutual fund elections into Treasury or money market funds. I only have about 25 percent there now. The rest is in a variety of stock funds -- domestic and international. Do I just hold on, or should I move everything or more of it to the less speculative Treasuries, etc? I would like to wait and try to recoup some of my losses but am concerned about losing much more.
Also,how do you find a good financial advisor now -- if you have no additional funds to invest but are simply concerned with the 401(k) choices? Does it make sense to consult a fee-only specialist now?
From: Naomi A, Ronkonkoma, N.Y.
Given the volatile markets, your concerns are valid! In your case, I do think it would be worthwhile for you to consider working with a fee-based financial planner. Two of the organizations I recommend are: The Garrett Planning Network, Inc. or Cambridge Advisors, Inc.
Garrett provides fee-only financial planning services and investment advice to people of all backgrounds and income levels. Similarly, Cambridge has a network of advisors across 25 states catering to clients of all levels of wealth. Both of these organizations are excellent starting points to locate a professional whose focus and expertis will match your needs.
Regardless of whether you choose to work with a financial advisor or not, you are not hiring out your thinking. You need to make a commitment to learning about your finances so you can have informed discussions with your advisor. When selecting an advisor who suits your needs, be sure to choose someone willing to take the time to educate you.
Confused About Your Finances?Question:
I am very confused and don't know what to do with my finances. However, I am taking your advice somewhat and leaving my money in the bank, but it's just sitting in a checking account. I have about $350.00 a month that I am able to save and not touch, but what do I do with it; how do I increase my savings — what should I do with my money?
From: Tina Gunnin, Chandler, Ariz.
My recommendation for you is to set up an automatic investment plan into a mutual fund. Instead of putting all $350 in a checking account, consider putting half or even $200 of the money into a stock mutual fund every month. Once you start investing, keep at it.
One of the basic premises of long-term investing is your money compounds over time. Basically, interest is like stacking blocks, with each new interest period growing on top of the previous one, allowing your original investment to continually increase. In fact, if you invest your $200 in a diversified mutual fund for 25 years, you could expect to earn an 8 percent annual return, sending your $200 a month to almost $192,000.
I am curious regarding your recommendation for a debt management consulting service. Specifically, I am looking for help in the areas of lowering my credit card interest rates, creating a budget, and becoming debt free.
From: Gwen, Carmel, Calif.
I get this question all the time. I am wary of credit consolidators that advertise their nonprofit status and make unrealistic claims that they can erase your debt easily. Several advertised "nonprofit" agencies charge a fee themselves that is equivalent to one month's worth of payments -- a bad proposition, given the fact the consumer is likely underwater and in need of paying off their debt ASAP.
To date, government oversight of this industry has been limited at best. In fact, often times, these organizations are not even licensed with their state Banking Department, even though state law may require it. However, there is one credit consolidation organization that I think does a terrific job -- the National Foundation for Credit Counseling. The NFCC has 1,300 offices nationwide that help consumers with debt management plans. I recommend that you go log on to the NFCC's Web site to find a counselor that is near your home in Carmel.