May 24, 2008


This week I began reading again The Richest Man in Babylon, a small book my dad first introduced me to sometime during my teenage years. The easy read is a financial classic; the principles of prosperity encapsulated therein have merely been echoed over the past 80+ years (since first being introduced in 1926). None of these concepts will likely be a revelation to you, yet people consistently struggle with them. The following statement from the text is on the mark. "Deride not what I say because of its simplicity. Truth is always simple."


1. For every ten coins thou placest within thy purse take out for use but nine. Two timeless concepts are illustrated: (a) spend less than you make; and (b) save 10% or more of what you earn.

2. Control thy expenditures. Do not confuse needs with wants. "All are burdened with more desires than they can gratify." Budget - 'keep working with thy budget, keep adjusting it to help thee. Make it thy first assistant in defending thy fattening purse... like a bright light in a dark cave, a budget shows up the leaks from thy purse and enables thee to stop them and control thy expenditures for definite and gratifying purposes.'

3. Make thy gold multiply. "Gold in a purse is gratifying to own and satisfieth a miserly soul but earns nothing. The earnings it will make shall build our fortunes." It was Albert Einstein that referred to compound interest as the 8th wonder of the world.

4. Guard thy treasures from loss. "Study carefully [consult with wise men], before parting with thy treasure, be not misled by thy own romantic desires to make wealth rapidly ... Before thou entrust it as an investment, acquaint thyself with the dangers which may beset it."

5. Make of thy dwelling a profitable investment. 'Own thy own home ...'

6. Insure a future income. Suggests utilizing the benefits of the time value of money (power of compounding) to set aside [consistently] now for future years when one's earning ability is diminished. Even saving small amounts can become large sums when done consistently over a long period of time.

7. Increase thy ability to earn. "Cultivate your powers to study and become wiser, to become more skillful ... have an interest in what you do, a concentration upon your task, more persistence in effort ... and you will find your ability to earn increase. The more of wisdom we know, the more we may earn. Be in the front rank of progress and not stand still, lest you be left behind."

May 19, 2008


It doesn't seem like a week goes by where there is not bad news relating to the student loan world (which has been walking lock-step with the housing and credit 'issues' that dominate the press) ...

Most of the bad news began last year when Congress decided to do students a "favor" ... long story short, that essentially drove many lenders out of the business. As of last October 1st (2007), private student loan companies that had offered substantial, competitive borrower benefits on their federal student loan consolidation product discontinued their benefits (this took on several faces - some discontinued their federal loan consolidation product, some discontinued the borrower benefits they had offered prior, some removed all 'meaningful' borrower benefits); ultimately, the law change made it no longer profitable for them to offer these products. The good news was that State programs (that had offered good benefits all along) continued to do so - programs like North Carolina and New Hampshire [most notably] offered programs open to individuals outside of their state and offered rate benefits ranging to as much as a 2.25% reduction in interest ... You may [or may not] be aware, but during the past couple of weeks, North Carolina reduced their benefit from 2.25% to .3%, New Hampshire reduced their benefit to the current benefit norm (.25%), and others like South Carolina that had been above average have discontinued their federal program altogether. It's hard to believe that the program that for years has been one of the worst financial programs available (The Department of Education) is now in the same boat (.25% benefit) that the majority of other benefit-offering programs provide.

So, if you're graduating, seeking to consolidate your federal loans, here are a couple things to keep in mind ...

- You will still want to review your state consolidation program (there are programs like Utah [although Utah has residency restrictions] which still offer meaningful borrower benefits). This number is shrinking.

- Shop around ... the law does allow you to choose the company you consolidate with (even if all of your loans are only with one lender); do what makes the most sense financially for your situation.

- Lastly, if you have unconsolidated loans that date pre-June 2006 (back before Stafford loans came with a fixed 6.8% rate), you will want to hold off on consolidating your loans until the rate change that will take effect on July 1st. They will definitely be dropping significantly from their current 6 5/8% level ...

May 02, 2008


The Federal Reserve, in conjunction with the U.S. Treasury's Office of Thrift Supervision and the National Credit Union Administration discussed today a proposal to crack down on "unfair and deceptive" credit card industry practices. While specific details have yet to be released, it appears [based on major media reports - New York Times, Washington Post, etc.] the changes would address many widespread card abuses. Some issues the proposed new rules would curb ...

- Directing payments to a lower rate when a card carries multiple rates.
- Placing unfair time constraints on payments (payment would not be deemed late unless the borrower is given a reasonable period of time to pay, such as 21 days).
- Retroactively raising the APR on pre-existing balances.
- Unfairly computing balances (i.e., double-cycle billing).
- Making deceptive offers of credit.
- Charging fees for phone payments.

Not surprisingly, the banking industry is less than thrilled and will fight the proposals ...