Ask Karen Gibbs

Veteran business correspondent Karen Gibbs answers your personal money questions and addresses current topics that affect YOUR finances on a daily basis. Karen is the financial expert in your corner--no question is too basic or too small. Karen boils down the issues simply: here's what you need to know, and here's what you need to do. Send your money questions to and post your comments below.



Spotlight on summer gas prices

Karen Gibbs

Karen, is it me or does it seem like gas prices always increase during the summer months, especially around holidays?  Why?

- Beltway Bob, Catonsville

Gas Prices
Bob, you’ve hit upon one of the basic theories of economics, price theory and the laws of supply and demand.  When there is more demand for a product than supply, prices tend to rise.  When there is more supply than demand, prices tend to fall.

Seasonally, more people are out and about during the summer months, increasing demand for gasoline.  Gasoline is a derivative of crude oil, as is heating oil. Through the refinery process, one barrel of crude (42 gallons) will make 11 gallons of heating oil and 19 gallons of gasoline.  The rest is used for diesel and jet fuels. During the winter months, refineries pump out more heating oil; during the summer, gasoline is the dominant product.

When the global marketplace is awash in crude oil (as it is now), the price of a barrel of crude will fall.  Crude oil ...

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Sharing your Legacy

Karen Gibbs

Karen, I don’t have mad bank like Prince, but I still want to leave something to my family. What steps should I take to share my legacy?

- Alonzo, Perry Hall

My Last Will text and hand
Alonzo, you don’t have to have a lot of money to leave a legacy.  If you have possessions and relatives, a plan will go a long way in giving you peace of mind while avoiding conflict among family members.

Estate planning is not only in case of death.  What will happen to your belongings if you become disabled or incapacitated?  Having a plan in place before the emergency strikes takes the pressure off of having to make decisions under stress and insulates you against those who might want to exploit your loss.

There are four documents that you should include in your estate plans.  First and foremost is your will.  How do you want your assets to be distributed?  Do you have a business?  Do you want to keep it in the family?  Do you have children from several marriages or a blended ...

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Karen, my employer is offering early retirement packages.  What questions should I consider before taking the retirement option?

- So Close to 65, Annapolis


Lady with Gray hair

Dear So Close, give yourself a gold star for thinking ahead!  Many people are so focused on their vision of retirement that they overlook some basic steps to take before retiring.

What is your vision of retirement?  How do you plan to spend your time?  Do you plan to work part-time or start your own business?  Do you plan to travel and/or spend time with the grandchildren?

Have you estimated how much you may spend in your retirement?  This would be my first step.  Create a budget detailing your monthly expenses, recurring costs such as utilities, food, gas, etc.  Then calculate how much you may want to spend monthly on travel, the grandchildren, dining out and other entertainment.  Be generous with these estimates as it is better to have more money at the end of the month ...

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Karen, I have a couple of questions about credit.  What’s the difference between revolving and installment credit?  Do I need to use my credit card frequently to keep my credit score in good standing?

- Tanisha, Owings Mills

Credit cards

Great questions, Tanisha, showing you’re thinking smart about your money.

First, revolving credit is open-ended credit.  It renews itself as the debt is paid off.  For example, your Visa card is an example of revolving credit.  You may have a $1,000 credit limit on that card.  You charge $100 this month. Now you only have $900 credit left on that card.  When you pay that $100 owed your limit goes back up to $1,000.  Other examples of revolving credit cards are store brand credit cards and HELOCs or home equity lines of credit.

Installment loans, on the other hand, are finite loans, meaning they had a definite start and end point.  Your student loan, auto loan and even your mortgage (if you have on) are ...

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The 411 on Index Funds

Karen Gibbs

Karen, what is an index fund?

- Kevin, Randallstown

Charts and CalculatorsKevin, an index fund is a type of mutual fund.  A mutual fund is a fund that pools your money with other investor’s money to get economies of scale.  You get the benefit of diversification for a fraction of the cost and none of the management worries.

An index fund is a fund that tracks or mirrors the movement of an underlying asset; it could be bonds, gold, oil or one of the major stock market indices.  This form of investing is called “passive” investing as you don’t do anything; the index does all the work.  

Index investing has exploded over the past decade as more investors sock away retirement funds with companies such as Fidelity and Vanguard.  Index investing recently has outperformed “active investing”, funds investing in a basket of assets determined by an active manager – one that picks stocks, bonds and other assets according to a proprietary model. ...

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