If you're like most people, you probably bring your automobile to a professional mechanic for routine maintenance. You see a doctor when you have concerns about your health, and for regular exams. When the need for legal counsel arises, you consult an attorney. All of us rely on the expertise of others. It's no different when it comes to personal finances--most people could benefit from working with a financial professional. Here are some good reasons to do so:

You don't know what you don't know

No one can be an expert on every subject. Managing your finances on a day-to-day basis is one thing; implementing a comprehensive investment plan to fund your retirement while setting aside funds for your child's education is something else. That doesn't mean that you're not capable of doing it, only that you shouldn't underestimate the expertise needed to put together an effective plan. If you're going to go it alone, you'll need to educate yourself, and that brings us to the next point ...

You have good intentions, but never set aside the time

There's an entire industry built around providing individuals with the tools they need to do their own financial planning. Books, magazines, websites, calculators, worksheets, and videos all empower individuals to take a more active role in their financial future, whether they're working alone or with a financial professional. Not one of these tools, however, will help unless you set aside both the time to learn to use the tool, and the time to apply the tool to your own situation. Working with a financial professional forces you to stop procrastinating, and shifts the time commitment from you to the professional.

Doing it all yourself isn't efficient

There's a long list of things that we could do ourselves but choose to pay someone else to do for us instead. For example, you could paint your house, but you may be happy to pay someone else to do it. Why? It's more efficient. You can spend the time working on other things and, if you choose the right professional, it will probably be done faster and better than if you did it yourself. The same goes for working with a financial professional.

You're not objective

It's hard to look at your own situation objectively. Having someone else with experience analyze your financial condition can be extremely helpful. And, in cases where you and your spouse aren't on the same financial page, a financial professional can listen to all concerns, identify underlying issues, and help you find common ground.

Keeping up with change is a full-time job

In the last two years, there have been at least five major pieces of tax legislation signed into law. Even seasoned financial professionals have had a difficult time keeping up with the changes. Not understanding how these changes might affect your financial plan could be dangerous, but understanding the changes takes time and effort.

You see the trees, but not the forest

A good financial professional can help you see the big picture. He or she can show you how your financial goals are related--for example, how you might save for both your child's college education, as well as your own retirement. He or she can work with you to prioritize your goals, implement specific strategies, and choose suitable products or services. A financial professional can also stay on top of your plan to make sure it remains on track, recommending changes when conditions, or your circumstances, dictate.

When times are tough, that pool of dollars sitting in your 401(k) plan account may start to look attractive. But before you decide to take a plan loan, be sure you understand the financial impact. It's not as simple as you think.

The basics of borrowing

A 401(k) plan will usually let you borrow as much as 50% of your vested account balance, up to $50,000. (Plans aren't required to let you borrow, and may impose various restrictions, so check with your plan administrator.) You pay the loan back, with interest, from your paycheck. Most plan loans carry a favorable interest rate, usually prime plus one or two percentage points. Generally, you have up to five years to repay your loan, longer if you use the loan to purchase your principal residence.

You pay the interest to yourself, but ...

When you make payments of principal and interest on the loan, the plan deposits those payments back into your individual plan account. This means that you're not only receiving back your loan principal, you're also paying the loan interest to yourself instead of to a financial institution. But the benefits of paying interest to yourself are somewhat illusory.

Here's why. To pay interest on a plan loan, you first need to earn money and pay income tax on those earnings. With what's left over after taxes, you pay the interest on your loan. When you later withdraw those dollars from the plan (at retirement, for example), they're taxed again because plan distributions are treated as taxable income. In effect, you're paying income tax twice on the funds you use to pay interest on the loan. (Note: Special tax rules apply to Roth 401(k) contributions.)

The opportunity cost

When you take a loan from your 401(k) plan, the funds you borrow are removed from your plan account until you repay the loan. While removed from your account, the funds aren't continuing to grow tax deferred within the plan. So the economics of a plan loan depend in part on how much those borrowed funds would have earned if they were still inside the plan, compared to the amount of interest you're paying yourself. This is known as the opportunity cost of a plan loan, because you miss out on the opportunity for more tax-deferred investment earnings.

Other considerations

There are other factors to think about before borrowing from your 401(k) plan. If you take a loan, will you be able to afford to pay it back and continue to contribute to the plan at the same time? If not, borrowing may be a very bad idea in the long run, especially if you'll wind up losing your employer's matching contribution.

Also, if you terminate employment, your plan may require that your loan become immediately payable. If so, and you don't have the funds to pay it off, the outstanding balance will be treated as a taxable distribution to you, and if you're not yet 59½, a 10% early distribution penalty may also apply to your taxable balance.

Still, plan loans may make sense in certain cases (for example, to pay off high-interest credit card debt, or to purchase a home). But make sure you compare the cost of borrowing from your plan with other financing options, including loans from banks, credit unions, friends, and family. To do an adequate comparison, you should consider:

Interest rates with each alternative
Whether the interest will be tax deductible (for example, interest paid on home equity loans is usually deductible, but interest on plan loans usually isn't)
The amount of investment earnings you may miss out on by removing funds from your 401(k) plan

When you're looking for credit, it's worth understanding what potential creditors are looking for when they're looking at you. Traditionally, they're looking for the three C's: capacity, character, and collateral.

Capacity

Potential creditors want to know if you have the wherewithal to repay a debt. To this end, they'll inquire (usually on an application form) about your income information: How much is it? Does it come from wages, commissions, or some other source? Does it come on a regular or seasonal basis?

On the flip side, they'll also want to know about your expenses, especially any debt obligations. In addition, they'll want to know how many dependents you have and whether you're required to pay any child support and/or alimony.

Of particular interest to potential creditors is your debt-to-income ratio. This ratio compares your monthly recurring debt obligations to your monthly gross income. Your recurring obligations include your mortgage or rent, credit card payments, loan payments--including the one you're applying for--and alimony/child support you pay. Your income includes bonuses, commissions, and any other income you receive, such as Social Security, pensions, and alimony/child support.

Note: The debt-to-income ratio is also known as the back-end ratio. A second ratio, called the front-end ratio, compares your rent or total mortgage payment to your gross income, and is used primarily to determine whether you qualify for certain mortgage loans.

Your debt-to-income ratio goes a long way toward determining whether you are granted credit, how much, and at what interest rates. While many other factors affect your capacity to repay a loan, lenders generally consider debt-to-income ratios of 35% or less to be ideal, 36% to 42% to be manageable, 44% to 49% to be risky, and 50% or above to be unacceptable.

Character

Okay, your sweetheart thinks you're the best thing since sliced bread, and your bosom buddy knows you're one in a million. But that's not the sort of character endorsement creditors are looking for. What creditors want to know is, given that you can repay a debt (capacity), will you?

When it comes to your credit character, lenders often look for another C: consistency. Have you bounced around from address to address, or job to job? Doing so makes creditors nervous. Longevity in employment and residency indicate stability, and that's what creditors like to see.

Lenders also firmly believe that your past actions are a good predictor of your future behavior. So, they're looking to see if you've used credit before, and what your repayment track record has been like. To do this, they rely primarily on your credit report and your credit score.

Collateral

Maybe you've proven your capacity to repay a loan and your excellent character, but the lender may want something of value to secure the debt, particularly if the loan is for a large amount and/or a long term. If you default on the loan, the lender would be legally entitled to take possession of that item as a form of compensation. Tangible property used in this fashion is called collateral.

Typical examples of consumer loans that involve collateral arrangements are mortgages and home equity loans (failure to repay the loan can result in foreclosure) and vehicle loans (failure to repay the loan can result in repossession). While seizing property in the event of a loan default may not repay the entire balance due, it would at least mitigate the creditor's loss.

The "can'ts" of credit

There are some things a potential creditor can't do when considering you for credit. A creditor can't use your age, gender, marital status, race, color, religion, or national origin to:

Discourage you from applying for credit
Refuse to grant you credit if you otherwise qualify for it
Make you a loan on terms different from those granted another person with similar income, expenses, credit history, and collateral
Close an existing account

Furthermore, a creditor can't refuse to consider any public income you may receive, such as Social Security, veterans benefits, or welfare benefits.

Online banking: faster, better, and cheaper? As with anything, there are pros and cons; here are some to think about.

Pros

Convenience: Online banking sites are open 24/7. You can check your accounts and pay your bills in the middle of the night or on the weekend, all while sitting comfy in your jammies and bunny slippers.

Organization: All your account information is displayed in an organized fashion. You won't need to keep a shoebox full of old monthly statements, canceled checks, and ATM slips -- you can go paperless.

Automation: You can schedule bill payments to occur automatically, and once you've entered pertinent information, you won't have to keep doing so for subsequent transactions.

Bells and whistles: Many online banking sites offer account aggregation (managing several accounts from one site) and compatibility with money-management programs. Some also offer stock quotes, portfolio management programs, and e-mail alerts of various types.

Cons

Fear of cyberspace: Not everyone is computer literate. Setting up online banking accounts can take time, and using them requires a bit of savvy.

You still have to go to the bank: To make deposits (other than direct deposits), you generally have to mail in a check, or go to a brick-and-mortar office or an ATM. (These last two options get a little tricky if the bank is an online-only bank.)

Where's the beef?: Because online (especially online-only) banking services may not keep "real" records of transactions (and may keep online records only for a certain period), you may want to "call for backup" by printing out copies of your online statements and images of your canceled checks, particularly important ones, such as those that show tax payments. While this somewhat defeats the idea of going paperless, you may be able to get by with fewer shoeboxes.

The collapse of the subprime mortgage market and the jitters it's sending through the entire economy contain lessons for us all. Here are a few:

If it sounds too good to be true, it probably is. Based in part on wishful thinking ("housing values will always appreciate") and in part on misleading information ("that's a great rate"), many homebuyers became convinced they could afford mortgages they later found they really couldn't. Similarly, many investors were led to believe that mortgage-backed securities were all about huge rewards with minimal risk. So, the lesson here is: When faced with what appears to be a rosy best-case scenario, always remember to ask "But what if ...?"

Experience counts. When seeking a mortgage broker, loan originator, investment firm and/or fund manager, check out their credentials, and look for those with lengthy experience who are respected within their fields.

Read (and understand) the fine print. Many people, both homebuyers and investors, got burned in the subprime mortgage mess because they didn't know the details of the contracts they entered--and the devil is always in the details. Review all mortgage documents and/or investment prospectuses carefully before you make a commitment. If you don't understand the ramifications of what you've read, seek assistance from an unbiased qualified professional.

The best regulation is self-regulation. Federal regulations designed to protect the consumer cover many loans resold to quasi-government agencies like Freddie Mac, and loans insured by the Federal Housing Administration also carry strict guidelines. But oversight of these loans is not always as diligent as it should be. What's more, many mortgages are now originated by unregulated nonbank lenders. As a result, you shouldn't assume that governmental and/or institutional regulations will always protect you from getting into financial trouble. Only you can do that.

Today's teens have more money to spend and more opportunities to spend it, and if they're not careful, they can easily get into financial trouble. Before that happens to your teen, help him or her learn a few financial lessons.

Earning wages

If you think your teen is ready, encourage him or her to get a part-time job. Here are some things to discuss once your teen begins working:

• Agree on what your child's pay should be used for
• Show your teen how taxes reduce take-home pay
• Open a checking and savings account for your teen, and encourage him or her to save a portion of every paycheck before spending any of it

Keeping a balanced budget

To develop a balanced budget, have your teen list all his or her income. Next, list common expenses, such as food and gas (don't include things you will pay for). Finally, subtract the expenses from the income. If the results show that your teen will be in the red, you'll need to come up with a plan to address the shortfall. To help your teen learn about budgeting:

• Devise a system for keeping track of what's spent
• Suggest thinking through spending decisions rather than buying on impulse
• Categorize expenses as needs (unavoidable) and wants (that can be cut)
• Suggest ways to increase income (like doing extra chores) and/or reduce expenses

The future is now

An older teen should be ready to focus on saving for larger goals (e.g., a new computer or a car) and longer-term goals (e.g., college, an apartment). Here are some ways to encourage saving for the future:

• Have your teen put the goals in writing to make them more concrete
• Encourage your child to save for what he or she wants, not what other kids have
• Praise your child for showing responsibility in meeting a goal

To introduce your teen to investing, open an investment account for him or her. (If your teen's a minor, this must be a custodial account.) Look for an account that can be opened with a low initial contribution at an institution that supplies educational materials about basic investment terms and concepts.

Should you give the kid credit?

If your teen is responsible, you might consider getting him or her a credit card. Most major credit card companies require an adult to cosign a credit card agreement before they will issue a card to someone under the age of 18. Ask the credit card company for a low credit limit (e.g., $300) or a secured card. This can help your child learn to manage credit without getting into serious debt. Also:

• Set limits with your teen on the card's use
• Make sure your child understands the grace period, fee structure, and how interest accrues on the unpaid balance
• Agree on how the bill will be paid, and what will happen if your child can't pay the bill
• Make sure your child understands how long it will take to pay off a credit card balance if he or she only makes minimum payments

Last year, New York City school children went door to door collecting pennies. By asking for only 1% of a dollar, they were able to raise $1 million for charity.

Sometimes the small actions we take yield big results. Take a look at three examples of how adjusting your finances by just 1% can make a real difference over time.

Boost your retirement contribution

Making contributions to an employer-sponsored retirement account via payroll deductions can be a convenient way to save for retirement. But because these contributions come out of your salary automatically, you can easily lose track of how much you're contributing, and end up with less than you should have--or could have--for retirement.

If you're not already saving the maximum amount allowed, why not commit to steadily increasing your contributions by 1% (or more) each year? For example, if you're earning $100,000 per year, and you're currently contributing 10% of your salary to your retirement account at work, you'll have approximately $1,181,340 by the time you retire in 30 years, assuming an average return of 8%. But if you increase your contribution by 1% (to 11% of your salary), your retirement account could be worth approximately $1,299,484--10% more--by the time you retire.*

Review investment expenses

When you're focused on returns, it's easy to overlook the costs associated with investing. However, it's important to periodically review investment expenses and their impact on returns. These vary widely, but even a 1% difference can be significant over time. For example, the following table shows what a $200,000 investment might be worth in the future, assuming an annual return of 8% before expenses are taken into account. (Note that taxes and inflation are not considered.)*

Of course, there are other things to be concerned about when investing. For example, you may want to consider potential ways to generate higher returns through your asset allocation and investment management choices, taking into account your investment objectives, risk tolerance, and time horizon.

Refinance higher-cost loans

Concerns about the economy have led to rate cuts by the Federal Reserve. With some interest rates falling to their lowest levels in two years, now might be a good time to think about refinancing a higher-cost loan or mortgage. As the following examples show, interest rates don't need to fall far for you to save money. Here's what you could potentially save by reducing your interest rate by just 1%:

• Refinancing a 48-month, $25,000 car loan to reduce the rate from 6.99% to 5.99% could save you approximately $553 in interest over the life of the loan
• Refinancing a 25-year, $400,000 mortgage to reduce the rate from 6.75% to 5.75% could save you approximately $74,166 in interest over the life of the loan

*This is a hypothetical example, and does not reflect the performance of any specific investment.

Not yet. New passport rules requiring passports for all land and sea travel between the United States and Mexico, Canada, the Caribbean, and Bermuda were originally scheduled to take effect in January of 2008. But a massive backlog of passport applications (caused by another requirement that all travelers flying to these destinations have a passport by the fall of 2007) prompted the federal government to delay implementation of the new rules until sometime between the summer of 2008 and June of 2009. The precise implementation date will be announced later, with at least 60 days notice given.

In the meantime, beginning January 31, 2008, Americans traveling by land or sea to Mexico, Canada, the Caribbean, or Bermuda will need to show a government-issued photo ID, such as a license, and a birth certificate or other proof of citizenship.

And if you're planning to travel by land or sea to any of these destinations later this year or in 2009, consider applying for a passport as soon as possible. The State Department reports that the current wait time is 4 to 6 weeks, but recommends allowing 10 weeks during busier times like the summer travel season (during peak application periods in 2007, waiting times reached 16 weeks). The State Department estimates that 23 million passport applications will be filed in 2008, and 30 million in 2009. So don't delay.

For more details, visit the State Department's website at http://travel.state.gov and click on the link "Passports for U.S. Citizens," or call the National Passport Information Center toll free at 1-877-487-2778.