Ask the CFPs

An Online Q&A

With Rutgers New Jersey Agricultural Experiment Station (NJAES) Cooperative Extension programs for consumer audiences focused on health and wellness topics, personal finance questions are no longer answered via e-mail. However, below is an archive of personal finance questions that were previously answered by Rutgers Cooperative Extension faculty.

Below are e-mail questions that were asked of our CFPs:

Q: My wife and I currently owe about $180,000 on our home and have a 30-year, fixed-rate mortgage with 7.25% interest. We want to refinance to get a lower rate. The bank quoted us rates for another first mortgage, and also for a second mortgage. They made it sound like the second mortgage is easier, and might be in our benefit (because of no closing costs). What is the difference between refinancing with another first mortgage as opposed to a second mortgage? [Read Answer]

Q: What advice do you give for somebody seeking to increase their savings? [Read Answer]

Q: Military members will receive a pay increase--I think it's about 4 percent. What's the best way for a small saver, say an enlisted man, to invest this money? Is it possible to build up a decent sized nest egg on a military salary? How many years will this take? [Read Answer]

Q: I would like to determine how a husband and wife should divide their assets, and by whose name the asset should be held in, in order to minimize the impact of estate taxes at the time of death of either, or both. [Read Answer]

Q: I recently read that it is possible to obtain a form from the Rutgers Cooperative Extension in order that I may be able to get a free credit report. The article indicated that copies are free once a year to New Jersey residents. [Read Answer]

Q: My father had a serious stroke this past January and I'm trying to help my mom handle her financial affairs. Apparently, my father has a credit card that requires an annual fee. We would like to cancel this account. However, I heard that there is a proper way to cancel an account so that it does not adversely affect your credit rating. Will a letter from the Power of Attorney cancelling this account be sufficient and protect the credit rating of my parents? [Read Answer]

Q: Three years ago I asked your advice on refinancing a $35,000 mortgage and you suggested a home equity loan. The home equity route saved me from paying closing costs associated with refinancing. Thank you for that advice.

My wife and I are now in the process of buying a new house. Once we sign the purchase and sales agreement we intend to put our current house on the market. We will be putting 20% down on the new house and taking out a mortgage for the remaining 80%. We anticipate having a $100,000 balance on the new mortgage after selling the current house and applying the proceeds towards the new loan. At that time we plan to take out a home equity loan (4.87%) to pay off the new mortgage. What type of mortgage do you suggest that we apply for to secure the new house during this interim period? My inclination is to obtain a one year ARM. The specific advertised loan that I'm looking at lists an interest rate = 2%, points = 0, APR = 3.733%, Index = 1YTB, Margin = 2.75%, Lockdays = 60. They also advertise Total Estimated Non-Recurring Closing Costs = 0.

What do you think of one year ARM's for short term loans? Do these types of loans typically contain hidden fees such as early pay off penalties? What is the significance of the margin? Are there any better options that I should consider? [Read Answer]

Q: I Will be 69.5 and my wife will be 70 when I retire next year. My company has a defined benefits retirement plan with several options.One option is to take 25% in lump sum with remaining 75% in monthly installments. I have just about ruled this out based on potential payout over time. With or with out lump sum, there are options to take from 100% to 50% in order to provide for the surviving spouse. The dilemma is predicting how long either of us will live. My health is reasonable while hers is fraught with medical problems. I want her to have enough to live on if I die first, while optimizing our income while we both are alive. Any suggestions? [Read Answer]

Q: I recently found an article entitled, "Roth IRAs: A Place to Save for Retirement," which appeared in your Visions newsletter. Could you please tell me the difference between a Traditional IRA and a Roth IRA? Are there any fees and what is the lowest and highest that you can contribute for the year 2002 (until April of 2003) and for the year 2003? [Read Answer]

Q: I am in the process of trying to pay down approximately $15,000 in consumer debt but also would like to build an emergency fund. I have about $1,000 month available. What is the best way to proceed? Use all of the money to pay down the debt, build the emergency fund, or split between the two? [Read Answer]

Q: I recently obtained a copy of my credit report and score (+610). My goal is to pay off at least three out of the five overdue credit accounts. I paid one off completely and am working on the others. With each account that I settle, by how many points does my credit score increase? [Read Answer]

Q: The question I have is the Load versus no load funds? Then I hear about the Funds are either an A Fund, B Fund or C Fund plus a couple more? Then I hear they will change from a C to an A fund over time. Then bring in the 12B Fees? I tried to go with the no load fund where most of my investment money goes in at the beginning so it can earn more and hopefully compound. Is there a simple way to sort these out and which fund do most middle class people use? [Read Answer]

Q: I'm 36 and may soon win a personal injury case for the amount of $50,000 up to $1,000,000 or more. Who can I get advise from on this matter? I'd rather collect it all in one lump sum and then invest it myself but I knew very little to protect myself. My goal is to make it easy to keep up with and simple. Also I would like to put all of it in one place to have just one statement a month (yet be diversified in a portfolio). I would like to invest into a vehicle that will allow the principal to grow month after month while paying me dividends each month to live on. Also I can't take any risks in losing any of it. I will need to keep it as liquid as possible so I could get to it if I needed to. If I win big I don't want to risk anything, just slow growth. If I set up a structured settlement I would have no principal after they finished paying it. That's why I want to invest it myself. I guess I'm looking for a dream investment account. Can you answer these questions? [Read Answer]

Q: Exchange Traded Funds (ETF's) offered on the American Stock Exchange are all index funds and the expense ratio is probably lower than a Mutual Fund index fund. These funds are well worth the cost, especially if purchased on a dollar cost basis through some company like Sharebuilder. I have, in the last few months, switched to purchasing ETF's this way and am a little less worried now. What do you thing about ETF's as opposed to Mutual Fund indexing? [Read Answer]

Q: I've got quite a lot of my retirement money tied up in tech stocks. I would like to reduce my losses and get rid of some of them. I'm afraid of the tax consequences which I don't know anything about. If I sell some of these do I pay taxes on the receipts even though I sell for less than I paid for them? [Read Answer]

Q: I have $25,000 in a 401 retirement fund, $40,000 in other mutual funds, and $25,000 in credit card debt. Should I pay off these cards and cut them up or take out a 5- to 7-year home equity consolidation loan to pay these off? [Read Answer]

Q: I was wondering if you knew what recourse credit card companies have in New Jersey if a consumer defaults on payments. Can the credit card companies attach a lien on a home or garnish wages? Thanks for your guidance. I have enjoyed reading Money 2000 News. Keep up the good work. [Read Answer]

Q: I have a thirty-year, adjustable-rate mortgage on my condominium, which increased to 9.00% in November of 2000. This is my primary residence. I only owe $35,000 on the mortgage. I also pay private mortgage insurance ($17.00 monthly) on top of the mortgage. I have excellent credit. The property is worth approximately $95,000. I have inquired at a number of lending institutes about refinancing. All the banks quote great rates in the paper and on the Web. My problem is the low mortgage amount. None of the lending institutes will give me the advertised price for such a small amount. On top of this, they are all asking approximately $1500.00 for closing costs. A $1500.00 cost to borrow $35,000.00 seems outrageous. If I remain at this residence for ten more years I will have the balance of the mortgage paid off. There is however a good chance that I will relocate in two years. Ideally I would like to refinance with little or no closing costs. I would be willing to pay over the going mortgage rate in order to do this. I at least would like to eliminate the PMI. Do you have any suggestions? [Read Answer]

Q: I could use some help with financial advising. I am a 22 years old married college student and both my husband and I will be entering graduate school in the fall. We have a savings of $6,000 and a money market account worth $10,000. We have a $3,500 debt for student loans that has an interest rate of around 7%. Should be pay off the loan? What would be a small, wise investment to make for two young people just starting out without a lot of money? I would like to start thinking about the future and am not sure where to begin with money management. It is also difficult since we are mostly living off of borrowed money (student loans). I have been told to wait until after graduate school when we both have income but I know nothing about financial planning and don't want to start too late. [Read Answer]

Q: I am in the military and have been forced to sell my house. I will realize a net profit of approx. $27,000. I will be moving to a base that I will only be at for two years so buying another house is not a good option. I would like any information and guidance you could provide on capital gains tax. I have heard I would be exempt for two years and possibly longer while I am in the military. I would like to invest this in mutual funds or common stock. I have very little experience in investing, this is really the only savings I have. [Read Answer]

Q: Are capital gain distributions from a mutual fund always considered ordinary income? If some of the stock that the fund sold was held for more than a year (since that is taxed at 20%), would the fund make this distinction so that I could save on paying the ordinary income tax and pay the 20% tax instead? [Read Answer]

Q: My wife and I, both in our early 30s, and one eight-year-old daughter, have a portfolio of the following:


$87,000.00: Fam Value Fund

$81,000.00: Cash (bank savings account)

$76,000.00: Stock Options in TWMC (my wife's, who is now unemployed)

$15,000.00: My 401(k) contributing in 3 aggressive growth funds

$6,400.00: My wife's 401(k) noncontributing in a balanced fund


We are seeking to diversify and wondering what you'd recommend using a moderate-to-agressive outlook. [Read Answer]

Q: I currently hold four funds in the same family that I feel comfortable working with. They are an equity income fund, an international stock fund, a large cap value fund, and a science and technology fund. I would like to open up one or two more funds to better diversify. What do you think of my current holdings and what other funds might I want to consider? [Read Answer]

Q: How can I find a qualified financial advisor that will look out for my interests rather than his or her own? [Read Answer]

Q: My husband insists we pay off our home as soon as possible by making extra mortgage payments of $200 each month which will cut our 30-yr. mortgage down to being paid off in 10 years. We have a 7.875% interest rate mortgage. He wants to take out a home equity loan which won't cost anything and pay it off in 10 years. I think we should take that $200 and invest in his 401k. He is 55 and we only have 10 yrs. to pay off the house and save for my son's college. I am not working and we have to be careful with money. Which would you think is the better investment? [Read Answer]

Q: What is the best way to find out whether there are any liens against our property? Would a credit report show liens? If so, what is the cheapest way to get a credit report--we do not want to increase our debt at this time. [Read Answer]

Q: I am in the process of selecting a financial planner. I have interviewed one fee-only and one commission based planner but will still interview others. When I asked the fee-only planner for the names of existing clients as references she declined to provide them on the grounds of client confidentiality. Is this a reasonable response for a CFP? [Read Answer]

Q: I am a Money 2000TMparticipant who was recently downsized from my company and have the option of keeping my 401K with my former employer or rolling it over. I've heard of brokerage accounts. What exactly are brokerage accounts? Would this be a good place to roll over my 401K? What do you suggest? What fees should I expect from the rollover or brokerage account? A financial advisor I spoke to believes my former company invests conservatively and that I would be better off with a rollover. I am nervous because there is much I don't understand. Does dollar cost averaging come into play here? [Read Answer]

Q: I wonder if we, the general public, are interpreting the marginal tax rate incorrectly and thereby over paying the IRS. In the article "Tax laws penalize two-income households" written by Jeff Schnepper, it states that "taxpayers pay 15% on the first $25,350 earned in 1998 and 28% for all money earned between $25,350 and $61,400." My thought is then, why do I get taxed at the rate of 28% on all earnings if I earn a total of $55,000? Is it that I should have only paid the rate of 28% on $29,650, which is that portion that exceeded $25,350 and 15% on the first $25,350? In other words, I may have over paid the IRS $3,295.50. By paying via a single rate of 28% on my total income, as opposed to paying at a terraced rate. Would you please clarify this for me? [Read Answer]

Q: I heard, from a news report, that a company will be going public soon. How do I found out if they are selling stock? Where can I purchase it? Is online purchasing better than a broker? [Read Answer]


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences