December 28, 2009


The turbulent stock market of the past two years has investors and financial planners alike rethinking the way they assess and manage risk tolerance. According to a recent Brinker Capital poll, 76% of financial advisers stated that they needed to reassess how they measure risk tolerance. The flaws of a plain vanilla approach to risk management -- relying on age-based portfolios (or other products that oversimplified the issue of risk) -- have been exposed. Have you reassessed how you measure and manage investment risk?

While the plunging stock market has been painful to investors (even with the monumental rise in the market since March, we are still SUBSTANTIALLY below the November 2007 record levels), there have been some valuable learning opportunities, particularly in regard to risk management. Historically, risk tolerance has largely been established by time horizon (how long do you have until retirement to ride out the ups and downs of the market?). The assumption was that if you had enough time, you should be more heavily invested in stock (which is sound in theory). The problem? Queasy stomachs! Many people can't handle volatile fluctuations in the market and the result is selling at inopportune times. A recent Money Magazine article (November, 2009) reported findings by FinaMetrica:
Only 7% of investors can stand to have more than 75% of their total investments in stock, and only 1% can handle more than 87% in stocks! Also, according to Vanguard, 42% of their 401(k) accounts held more than 80% of portfolio in stock investments, while it is estimated that roughly 4% of investors can tolerate a portfolio that is more than 80% in stocks.

Like any other financial information, take it with a grain of salt, but it is definitely worth some thought and some personal examination of one's investments relative to risk tolerance. Consider not only how much risk you should be taking when you invest, but how much pressure can you handle before cracking? Don't put yourself in a vulnerable situation.

Some other valid points from the Money article ...

Don't take risk unnecessarily. If you are a good saver and put away a large percentage of your income, you in turn can afford to take less risk to accommodate the same goal as someone saving less money. Just because you're comfortable with risky investments doesn't mean you need to (or should) invest in that manner.

Consider your appetite AND capacity for risk. Most of the tip has addressed one's appetite/comfort with risk. To understand capacity, again consider data supplied by Vanguard ... In 2007, 35% of 401(k) participants over the age of 55 had more than 80% of their accounts in stocks. Even if we were to assume that these individuals had the appetite for risk (didn't make emotional decisions when the market bottomed), did they really have the capacity for the risk? Could they really afford to have lost 50% or more of their nest egg at that stage of their lives?

Comfort with risk doesn't mean you'll achieve your goal. Yes, it is important to find out what your appetite for risk is and invest accordingly. You need to realize that doing so, however, can wind up putting you short of investment goals if you are risk-averse. You can save more or pare down your goals ... an answer that sounds a lot like dealing with a budgeting shortfall - you can spend less or earn more money.

Unfortunately, most (easily available - online) measures of risk are not extremely helpful. They may serve to help you think about your comfort level with risk, but will not help you make decisions regarding asset allocation or appropriately managing risk. For example, Kiplingers Magazine, a very popular Personal Finance magazine provides an online tool to assess risk. If you go to the link you'll see that there are only 6 questions - the time horizon for a 25 year old and 50 year old would be treated the exact same -- 15+ years!! Not a perfect tool by any stretch ... it is free if that is any consolation. The risk tolerance quiz provided by MSN Money provides a questionnaire that is a little more in depth. Just for fun, I googled investment risk tolerance quizzes - and of the 20 that I looked at, only 3 had more than 6 questions that were posed!

How do you assess your own risk tolerance? If you work with a financial advisor/planner, how well do they understand you and your tolerance for risk ...?

December 15, 2009


There has been A LOT written in the past few weeks in financial publications regarding the opportunity for those that have been previously unable (because of income restrictions) to take advantage of Roth IRAs to now convert retirement savings (regular IRAs) into the tax free growth provided by the Roth IRA. Although the income limits on contributing to a Roth account will not go away next year, the limits on converting to a Roth will. The upside to doing so could be substantial -- tax free account growth and no required minimum distributions at 70 1/2 most notably. The decision, however, will ultimately be a personal one, dependent upon your financial situation. There are no "blanket" answers.

Some food for thought... Is it right for me?
- Do you think your tax rate will be higher (or lower) in retirement?
- Can you pay the tax 'bill' with money outside of the retirement assets?
- How long will the money be left in the Roth account to grow?
- Are your current retirement account values depressed?
- Do you have heirs you would like to leave tax free money?

Given an option that financial professionals know will likely be a wildly popular opportunity, many firms have already established helpful educational resources (including calculators) on their websites to help you dissect the issue and better understand the potential costs and benefits of the Roth Conversion. Here are a few to get you started.

Roth Conversion Resources.
---> Fidelity Resources
---> Roth Conversion Calculator
---> Schwab Resources
---> Vanguard Resources

Assuming you're not one of the 13+ million Americans that will find the Roth Conversion information applicable, perhaps you will be eligible for the TAX SAVERS CREDIT. This credit for qualified retirement savings contributions is available to people earning less than $27,750 in 2009 ($55,500 if married filing jointly). Instructions for determining eligibility and calculating the value of the credit can be found on IRS Form 8880. The savers credit reduces your income tax dollar for dollar (not less than zero, however). You can receive a credit of up to $1,000 ($2,000 if married filing jointly). Contributions to most retirement plans are eligible for the credit. The IRS has developed a brochure that outlines the details of the Tax Savers Credit.

December 08, 2009


The road to financial fitness can be a daunting one. The path is not smooth nor always the easiest path to navigate. There are unexpected twists and turns and people regularly fall asleep at the wheel. Similarities are often cast between financial fitness and personal fitness.

In either pursuit, following certain key principles has consistently proven to yield success. If you feel like you are a little financially flabby, let me offer a few tips to help you become more financially fit ...

As a financial educator, I've consistently found that this first step - developing your financial blueprint - is the hardest step. The key? Find a budgeting system/ method that will work for you and your personality. Establish goals to guide you and you'll quickly realize that meaningful, purposeful steps will make success obtainable. Numerous free budgeting resources are available - start here.

As an Eagle Scout, I was taught the importance of being prepared. There are several important areas of personal finance with which this motto will serve you well:
- Eliminate Debt
- Have an Emergency Fund
- Maintain Appropriate Levels of Insurance

Invest in yourself - make education a lifelong process. In addition, take part in personal and work retirement programs. When possible, take advantage of any company/ employer matches. Contribute to a 401(k), IRA, and/or other investment programs that maximize the growth of your money through tax free and tax deferred savings vehicles.

As I've said before, start by simply doing something. Go ahead and start small. What I've learned over time is that the majority of personal finance revolves around inertia. Once momentum starts, it tends to continue rolling... not until it starts though! As with personal fitness, the bottom line is discipline ...

November 30, 2009

MUTUAL FUNDS (Putting the Prospectus into Perspective)

While the argument for index funds is a compelling one, there will always be investors that opt for the more "tantalizing" world of actively managed mutual funds. If you find yourself in this camp, understanding the objectives and "fit" of the fund relative to your particular goals is paramount. The mutual fund prospectus will be one of your most valuable tools to address these questions. The prospectus is a summary of a funds investment philosophy, its management, its financial highlights (and lowlights), costs, etc. It is wise to spend time perusing the prospectus prior to ever putting a dollar into a fund. The prospectus ultimately helps you to "know what you're investing in" ...


FUND COSTS. One of the first things to examine is the funds cost structure. The amount of money charged in fees tends to vary dramatically from fund to fund.
Expense Ratio – Total percentage of annual assets that a fund takes to cover operational costs (i.e., marketing, etc.). Some funds have expense ratios in excess of 2%; many, however, have expense ratios at or lower than 1%.
Loads – Sales commissions tacked onto funds - come in numerous 'flavors' - front-end, back-end, level, or no-load.

FUND SUMMARY/OBJECTIVE. What is the fund trying to accomplish? What is the philosophy of the company (i.e., value, growth, etc.)? What area is the fund focusing on - a certain sector (i.e., technology, health care, etc.); international companies; small, medium, or large companies, etc.? What are the specific risks with investing in this fund? Obviously the funds objectives are critical - I should be investing in something I understand, as well as something that will ultimately meet my [long-term] investment goals.

FUND HISTORY. How well has the fund performed over the past year, 3 years, 5 years, 10 years, and since inception? How does the fund compare with its index (and "peer" funds) during that time? How did the fund hold up during the market meltdown? How has it rebounded during the market upswing since last March? Keep in mind this is a "rear view mirror" approach to performance and doesn't guarantee that it will continue to perform at the same level that it has in the past (for good or bad).

FUND MANAGEMENT. The importance of fund management seems fairly obvious. A more challenging question perhaps is ... How much of the performance should I attribute to the person(s) managing the fund? Should I sell my fund if the fund manager is no longer managing the fund? Some people prefer funds managed by a group; perhaps group management may have less volatility in the transition if someone were to leave (in theory anyway). What is the experience/ track record of the manager/ management team? Do any research on Peter Lynch during his time running the Magellan Fund at Fidelity if you don’t think the manager of a particular fund makes a difference (he averaged a return of 29% per year during his 13 year tenure)!

FUND TURNOVER. Indicates how frequently a fund buys and sells its holdings. The higher the percentage, the greater the fund's buying and selling activity. A rate of 100%, for example, would indicate that a fund essentially changes all of its holdings once a year. Typically a higher turnover rate generally indicates a more aggressive manager -- engaging in more frequent buying and selling -- a practice which has both pros and cons.

ADDITIONAL INFO. Some funds will also offer information from outside agencies. Companies like Standard & Poor's and Morningstar are independent agencies that rate mutual funds on numerous criteria and rank them relative to "peer funds." Obviously there is more to fund selection than if one of these companies suggests the fund is good, but it is one more thing you can look at in the decision-making process.

I wanted to make this as easy an exercise for you as possible, so I have taken three mutual funds from three different no-load mutual fund companies and provided the links for you to be able to go directly to the funds prospectus. YOU SHOULD NOT VIEW THIS AS AN ENDORSEMENT OF THE FUNDS. I HAVE SELECTED THREE PROSPECTUSES FOR YOU TO REVIEW TO AID IN AN EDUCATIONAL PROCESS. You will notice that each fund has very different objectives.

-- Fairholme Fund

-- Fidelity Low-Priced Stock Fund

-- T. Rowe Price Mid-Cap Value Fund

November 12, 2009


Next month marks the fifth anniversary of the "free credit report" legislation (which enables all consumers to obtain a free credit report from each of the three (Equifax, Experian, and TransUnion) major credit reporting agencies annually). Unfortunately, the misleading freecreditreport.COM ad campaign has been much more visible to consumers than the legitimate free credit report site of the government, located at ANNUALCREDITREPORT.COM ...

I was pleased to see Ron Lieber's "A Free Credit Score Followed by a Monthly Bill" article in the New York Times this past week. He does a nice job outlining the pitfalls of (a "service" that not coincidentally is owned by Experian -- one of the major credit reporting agencies). Most notably, people are often unknowingly "signing up" for a $14.95/month credit monitoring service as part of their "free" credit report offer. Don't believe me? Then you must believe that their monitoring services are vastly superior to the competition's services since they own more than twice the market share of the next three largest credit monitoring players combined! In addition, although Experian doesn't share information about subscription turnover, Lieber reported that the average enrollment of a monitoring subscriber was under a year. Not the sound of an intentional purchase.

Apparently the Federal Trade Commission is not buying the pitch either. They have long believed that consumers are being deliberately led away from the "real" free credit report offered by the government and that Experian is profiting from the confusion created (somewhere in the ballpark of $700M per year; not bad given the $54M they spent on the TV and radio spots last year). Recently, to combat the catchy TV jingle, the FTC came up with their own jingles and misleading URL - freecreditreport.GOV ... Nice job FTC!!

"Other sites may turn your head; they say they’re free, don’t be misled. Once you’re in their tangled web, they’ll sell you something else instead."

Their full video ads are below...

November 03, 2009


Over time, most of the news for beginning investors hasn't been good news ... Seemingly, one company after another has raised minimum investment requirements as many companies don't want to deal with "those people." I recall about a decade ago as a Professor at Iowa State a large mutual fund company that allowed new investors to open an account with a one-time investment of $100 or an automatic investment of $25 every three months. A short while later they changed their policy and required $50/month automatically (currently one of the lowest options) or a one-time investment of $1500. When I called them to find out why they changed their policy, their answer was understandable -- they had a bunch of accounts with $100 in them. As a financial educator at the time working largely with college students, I recall the frustration as there were very few options that were viable for a college student or new grad wanting to get started with investing. Since then, the viable options have become even fewer.

There are currently a small handful of no-load fund companies that will allow a beginning investor to start with no up front money if they set up automatic investments of $50/month. T. Rowe Price, TIAA-CREF, and USAA (available to the military) are the biggest.

I was excited to learn a few months back about Schwab. Charles Schwab is a company that has been around a long time but had never excited me (until now) ... Schwab offers several low cost index funds. An account can be opened with $100. Subseqent investments can be made for as little as $1 (literally a buck - the minimum has been tested). Hearing that did excite me. I was then excited further to see the news release yesterday where they have lauched their own set of ETFs (exchange traded funds -- some homework for you if you don't know what they are) with the lowest expense ratios in the industry and became available starting today (11/3/09) with ZERO COMMISSIONS (half of them rolled out today and the other half will roll out next month). The first ETFs available commission-free. FINALLY SOME GOOD NEWS FOR BEGINNING INVESTORS!! Kudos to a financial company taking some consumer-friendly steps.

PS - If you're curious, no, I didn't go from Iowa State University to Schwab ... I'm actually currently a government contractor providing financial education to the military. Charles can thank me later for the free advertisement, although I have no problem sharing information when it's better than the competition.

October 27, 2009

OVERDRAFT FEES -- Constancy Amidst Change

If you've paid any attention to the media in the last month, you're well aware of the credit card company "ploys" that have been employed to trap consumers (i.e., changing interest rates, fees, and other information) prior to the C.A.R.D. reform scheduled to take effect on Feb. 22, 2010. Some of the recent tactics include closing card accounts, hiking interest rates on existing balances, cutting credit lines, and raising minimum payments. Think you're immune because you don't carry a balance? Think again ... B of A (which already raised rates last June) has moved onto plan B, "experimenting" with annual fees of $29 to $99 based on "risk and profitability" (meaning those of you that don't carry a balance/pay in full monthly).

If you're trying to find a silver lining, there is a small one. One of the card reforms that occurred last August now requires companies to provide a 45 day notice prior to 'significant' changes in contract terms. Accompanying the notification will be steps to take to either close the account or to opt out of the new terms and maintain the old terms (which will close the account but allow you to pay off any debt at the prior terms). The bottom line is that with all of the changes taking place, you'll want to start paying closer attention to the 6-pt font correspondence/legalese your CC company sends you.

Well, amidst all of the turbulence and change, there has been one constant ... Overdraft fees! I read a study this week that was published by the Center for Responsible Lending about the "explosion" in overdraft fees that have increased 35% in the past two years (not a bad move in revenue in recessionary times)!

Current standard practice for most banks and credit unions is to automatically enroll checking account customers in an expensive overdraft program that generally generates fees of nearly $35 per overdraft. Fortunately, this "service" as most institutions perceive them, will also be modified with the upcoming (February) reform. Consumers will need to authorize financial institutions to provide overdraft "protection" as opposed to simply letting the charge be denied. The CRL findings report that the majority of consumers (~80%), including those that have recently overdrawn their accounts, would prefer that overdrafts not be covered. Obviously this would be very easy to implement as the vast majority of overdraft fees are triggered by debit card transactions and ATM withdrawals, not by checks. In addition to authorizing the overdraft, the law also states that the fees must be "reasonable." Who knows what that means. The fact that over 25% of all debit card transactions are for purchases of less than $10 indicates that a $35 fee would not be reasonable. The fees are currently more than twice the amount of the original overdraft amount. Overall in 2008, consumers owed $45 billion for the $21.3 billion of credit that was extended. Unfortunately, the most likely to fall into this trap? Lower income groups and young adults (18-25).

To put the ridiculousness of overdraft fees into perspective, consider this. Americans will spend considerably more on overdraft fees this year ($23.7B) than books ($14.2B) or postage ($18.3B).

Additional Findings of Interest:
* 50+ million checking accounts overdrawn over 12 month period.
---> Over 1/2 of those (27 million) had 5+ overdraft incidents.
---> 18 million consumers had 10+ overdraft occurrences.

* Banks/CUs collected nearly $24 billion in overdraft fees in 2008.
---> Analysts estimate this will balloon to $27 billion for 2009.

* Banks make more on covering overdrafts than CC penalty fees.

Additional Resources:
-- Center for Responsible Lending Full Report
-- FDIC Study of Overdraft Programs
-- Overspending on Debit Cards is a Boon for Banks (NY Times)
-- Proposed Amendments to Regulation E

October 13, 2009


When I was a professor of personal finance, it continually surprised me to hear comments from students suggesting just how "convenience-driven" they were. When asked to choose between a financially prudent choice and one based sheerly upon convenience (i.e., selecting a lower interest rate at one institution vs. a higher rate with their existing bank/credit union), most selected the convenient (higher cost) alternative. Even after nearly a decade of teaching personal finance (and a degree in psychology), that frame of mind still doesn't add up for me. I personally believe that a little bit of added effort can pay big financial dividends. Let me offer a couple tangible examples ...

Auto loans can be a very 'tricky' product, particularly for used vehicles. Often, interest rates sit at double digits. Information supplied by Bankrate shows that an "average" 48 month loan for a used car is currently 7.7% (slightly lower (7.56%) for a 3-year loan). I am definitely an advocate of using Bankrate as a tool with which to compare loan offers and gauge expectations.

I've seen several references in the past few months to Pentagon Federal Credit Union and their impressive car loan rates (3.99% used auto loan rates!). The lesson here? It's more than just simply shopping to find the best rate ... I think most people would automatically discount this option assuming "I can't do this because I'm not a member of the military." Before giving up (particularly given the current economic environment where many companies are opening a back door to customers when the front door seems to be closed), look a little closer ... Not only is credit union membership [at Pentagon Federal] open to the military; but also to government employees, Red Cross volunteers, as well as members of the National Military Family Association (a group open to anyone willing to pay the one-time $20 membership fee) ... a pretty small price to pay for a sub-4% interest rate!

When our insurance renewal came recently in the mail (informing us that our premium would be increasing 20% over last year), I first called to find out why. There were no accidents, no insurance claims, no change in credit status, or any other 'logical' explanation for the increase. When they didn't have any good answers, I informed them that I'd be calling to cancel the policy in a few days. I called them later that week to inform them that I wouldn't be renewing our policy after we not only found a lower cost option; we found a policy that cost less than we had been paying the prior year! Be willing to stretch yourself and go beyond your comfort zone and you'll often find "greener grass." FYI -,, and are some of my favorite online resources for insurance shopping.

I would argue that if you look around, you'll see that a little extra effort will go a long way in your financial world ... you'll save more, spend less, and more prudently invest and plan for the future. THE LESSON?? A little bit of extra effort can pay big dividends.

October 01, 2009


I'm frequently asked to share information about good places to gather financial information. Where is a good site to find a credit card? Where would be a good place to open a Roth IRA? How do I go about freezing my credit?... etc.

This week, I have decided to share some of my favorite financial websites. Keep in mind that these are MY faves, thus the links provided are my opinions (appropriate since this is MY blog). This is designed to strictly be informational; it is not intended to be an exhaustive list by any stretch (I decided to stop after 20 topics). Feel free to share your faves (

- Credit Card Search
- Credit Freeze Information
- Credit Scoring
- Ordering Free Credit Report

- Asset Allocation
- Bonds
- Index Investing - Top 3 (A, B, C)
- Insurance Information
- Mutual Fund Analysis
- No Load Mutual Fund Companies - Top 5 (A, B, C, D, E)
- Saving For College
- Tax Assistance

- Budgeting
- Cooperative Extension
- Financial Calculators
- Identity Theft
- Interest Rate Information
- Managing Debt
- Organizing Financial Records
- Student Financial Aid

September 24, 2009


I came across several interesting financial tidbits this week in my reading - I figured I'd just informally share some of the information in a little different format than usual ...

Learning Lessons From the Market.
It would seem that the volatility in the market would have created a prime opportunity to evaluate one's portfolio, reassess risk tolerance, and become more interested in knowing what is going on in your financial world. An ideal learning opportunity! An April, 2009 Charles Schwab survey suggests otherwise. Hopefully you have taken the chance the market has provided to become more engaged in your personal finances (Source - 8/31/09 issue of Barron's). What have you done in the past two years (since the beginning of the market decline?

From the Schwab survey...
- 39% of fund investors changed their portfolio allocation.
- 45% have tried to become more knowledgeable about their investments.
- 47% aren't personally involved in managing their funds.
- 36% don't know what mutual funds they own.

Marriage and Money.
The top causes of arguments among married couples? According to research by the Center for Marital and Family Studies at the University of Denver, money is the #1 cause of arguments (although it becomes less of an issue the longer you're married); children are #2.
For those married 1-8 years, money is the source of 43% of arguments.
For those married 9-25 years, money is the source of 38% of arguments.
For those married 26+ years, money is the source of 23% of arguments.

Debt Collection.
According to the Federal Trade Commission (FTC), nearly 80,000 complaints were received about third-party debt collection agencies in 2008 (more than any other industry). The most common gripes:
- Calling incessantly (35%)
- Demanding more than the amount owed (33%)
- Failing to send the required written notice (16%)
- Calling at work after being instructed not to (10%)
- Broadcasting the problem to neighbors & colleagues (9%)

The FTC is currently seeking reform to modernize the Federal Debt Collection Practices Act. The FDCPA was established in 1977! Consumer debt, the debt collection industry, and technology look nothing like it did 30 years ago. You can read the FTC report here.

Life Insurance Awareness.
September is life insurance awareness month in Missouri. Now is a great time to review your existing coverage/needs. Complete story available here.

September 17, 2009


The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for securities firms doing business in the U.S. It is not the regulatory function of FINRA, however, with which I would like to focus ... they also happen to be huge advocates for investors and consumer protection. FINRA believes that investor education is the key to protection. They argue that by utilizing "the Internet, the media and public forums, we help investors build their financial knowledge and provide them with essential tools to better understand the markets and basic principles of saving and investing." The FINRA Investor Education Foundation is the largest foundation in the U.S. focused on investor education.

- Host educational forums offering unbiased investor resources/tools.
- Inform of potential scams & actions taken against dishonest brokers.
- Provide resources/tools to help investors evaluate products & professionals.

Informational Resources.
- Frequently Asked Questions
- Investor Alerts (via e-mail)
- Investor Newsletters
- Investor Podcasts
- News Releases
- Understanding Financial Professional Designations

Investor Tools.
- 529 (College Savings) Plan Expense Analyzer
- BrokerCheck
- Investment Risk Meter
- Investment Scam Meter
- Investor Complaint Center
- Mutual Fund Analyzer

September 07, 2009


At some point in life, all of us will find ourselves in need of some type of support or assistance - physical, emotional, educational, financial, or otherwise. This support can come from many potential sources including (but not limited to) family, friends, work, church, or community. Historically, one of the greatest challenges has been finding those resources ... no longer!

2-1-1 is a toll-free number that connects people with community resources. By dialing 211, you now have access to information on resources of all types from one central database. People are available to help 7 days a week, 24 hours a day. Calling the confidential hotline or viewing the websites (see below for each state site) will connect you with hundreds of services in your local community.

What types of community services/resources are available?
BASIC NEEDS - Food, Rent/Mortgage Assistance, Utility Assistance
PHYSICAL/MENTAL HEALTH - Health Care, Counseling, Alcohol/Drug Rehab
WORK INITIATIVES - Educational & Vocational Training, ESL, Job Training
CHILDREN, YOUTH & FAMILIES - After-School Programs, Tutoring, Mentoring
SUPPORT FOR SENIORS & DISABLED - Adult Day Care, Meals, Respite Care

This is just a small sampling of the support and assistance programs available. In addition to the free call, each state also has a useful website with a wealth of information and search tools to "find" resources. I've gone ahead and done the legwork and provided a link to each state program below for you... There is also a National Call Center.

ALABAMA, ALASKA, ARIZONA (unfunded and shut down earlier in the year),

August 31, 2009


More and more employers are passing costs onto employees. Healthcare costs which historically have had roughly an 80%/20% employer-employee cost split has now shifted to closer to 70%/30%. A study by the Government Accountability Office suggests that investment fees (fees charged by companies managing mutual funds and other products for services related to operating the fund) are now almost exclusively borne by plan participants (you and me). The impact of fees (even minimal fees) over time is a concept that never ceases to amaze me. In the GAO study referenced above, a 1% per year additional fee (which may not sound like a lot) reduced the sample retirement account by nearly 17% after 20 years!

The GAO Study reviewed the topic of Private Pensions, specifically exploring the changes that are needed to provide 401(k) plan participants better information on investment fees:

- Fee information is not provided in a standardized manner;
- Results in challenging comparison of investment options and fees;
- Suggestion that investment fees become more transparent;
- That service providers disclose compensation (& potential conflicts).

Review the funds expense ratio (the funds operating fees). This is the most effective way to compare fees. It is common for consumers to not be concerned because they assume these issues don't apply to them. With 401(k)s, it is likely the opposite is the case - poor 401(k) plans are the norm - you should be concerned! Few investment options and expensive funds (i.e., index funds with expense ratios exceeding 1%) are all too common. Take action! Poor plans will remain the norm until people push for better plans. The Motley Fool provides a great resource to help arm you in your request for change. It shares the ammunition you'll need (Your Plan's Summary Annual Report, Summary Plan Description, and/or Fee Arrangement) as well as a sample letter that will provide the factual information needed (rather than merely an emotional argument) to get things rolling in the right direction. Good luck!

August 23, 2009


Thursday of last week (8/20) marked the first wave of the much anticipated (and much needed) credit card legislative changes for consumers. Below is a summary of the credit card modifications (8/20/2009) ...

All credit card statements must be mailed 21 days prior to due date, rather than the prior 14 day grace period. The law states that a card company cannot charge late fees if statements are not delivered at least 21 days before the payment due date.

A 45 day notice prior to any increase in APR (annual percentage rate) and any "significant changes" in contract terms (as deemed by the Federal Reserve Board) must now be afforded consumers. This notification must explain the steps for cardholders to take to exercise their rights to cancel the account -- a toll free number and deadline for opting out must be provided.

Consumers will have the right to cancel ("opt out" of) a card to avoid adverse changes in terms. This would provide the card holder with the ability to repay the card balance under the original terms (hopefully this is obvious, but opting out would preclude the consumer from continuing to use the card for new purchases). There are a few key exceptions to this opt out policy:

(1) Consumers cannot opt out of increases in the minimum payment
(2) Consumers cannot opt out of rate changes on variable rate cards
(3) Consumers 60 days late (or more) making payments cannot opt out
(4) Consumers cannot opt out of reductions in credit limits

The next waves of legislative changes will take place in February and August 2010. The following link provides a helpful view of the credit card reform timeline. Also, I posted an overview of the C.A.R.D. Reform in May that discusses in more detail these upcoming changes.

August 09, 2009


This past week, I accepted the challenge of hiking Mount Timpanogas, one of the highest peaks in the Wasatch Mountains (Utah). It was a breathtaking experience! During the hike, it got me thinking about goals and the purpose of goals, specifically financial goals... Here are just a few of my random thoughts about goal setting that struck me.

- Assist in organization
- Define priorities
- Encourage self-understanding
- Enhance self-confidence
- Feed determination/motivate
- Guide behavior
- Guide decision-making
- Identify needed changes
- Improve planning
- Increase probability of success
- Keep us focused
- Provide purpose and direction

"Goals are not just the destination you're driving toward, they're also the painted white lines that keep you on the road."

Most of you are familiar with S.M.A.R.T. goals - some have suggested expanding the definition of a SMART goal...

S - Specific -- consider stretching, synergistic, and systematic.
M - Measurable -- add meaningful, memorable, and motivating.
A - Achievable -- and action plans, accountability, agreed-upon.
R - Relevant -- also realistic, reasonable, resonating, and rewarding.
T - Time-based -- timely, tangible, and thoughtful.

This quote from Alice in Wonderland (conversation between Alice and the Cheshire Cat) has always been a favorite of mine ...

"Would you tell me, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the cat.
"I don't much care where ..." said Alice.
"Then it doesn't matter which way you go," said the cat.

July 27, 2009


While the current economy has admittedly impacted people differently, one common theme has been that getting out of debt is now "in vogue." It used to be that insomniacs were the ones bombarded with all of the get out of debt "goodies" during late night TV ads; with the economic downturn, debt elimination ads now seemingly target everyone ... Debt negotiation, Foreclosure relief, Debt settlement, Bankruptcy relief, Credit repair ... the list goes on and on. Rather than focusing on the legitimacy (or lack of) with many of these types of services (which I've done in previous tips), my objective this week is to focus on debt management strategies that you can put to practice quickly, easily, and on your own.

Ultimately, most efforts aimed at eliminating debt can be summed up in two primary goals: (1) Time (getting out of debt as quickly as possible); and (2) Saving Money (paying as little in interest as possible). While there are numerous ways to work on these goals, I want to focus on just a couple simple steps that can be taken that will provide dramatic results.

Think of this as the anti-credit card payment ... credit card companies allow you to reduce your required payment as your balance decreases. A level payment suggests that you pay your current monthly payment (whatever that is) steadily until the debt is paid off.

Balance of $5,000; Minimum payment of $150; 15% interest
(Payment = 3% of balance --decreasing with $10 minimum)
REPAYMENT = 16 years 5 months, $3,400+ in interest paid

Balance of $5,000; Level payment of $150; 15% interest
(Payment of $150 until debt is completely repaid)
REPAYMENT = 3 years 8 months, $1,500 in interest paid

2. 'Power Payments'.
PowerPay, a systematic way of repaying debts that was developed over 15 years ago by Utah State University Extension. I've since heard this system of debt reduction commonly referred to as a "snowball method" of repaying debt.

PowerPay Assumption #1 - Make level payments on all debts
PowerPay Assumption #2 - Accumulate no new debts
PowerPay Assumption #3 - As one debt is paid off, that money is used to roll over to a new debt; that 'cycle' is continued until the debt "snowball" is ultimately focused on paying down the final debt.

A benefit of this program is the flexibility for you to decide how to apply the extra payments (as debts are paid off) ... should you pay the highest interest rate (to save the most money)? Or should you pay off the lowest balance which may enable you to "stick with" your debt reduction plan better (ala weight loss)? You may want to review my debt elimination post from a while ago where I addressed these issues.

The time and money saved using this system of repayment is often breathtaking. Utah State has made their PowerPay calculator available for free on their website -

Take a look at how much time and money you could save by implementing a couple of simple debt reduction strategies that don't require assistance from others or cost you a dime!

July 13, 2009


The Consumer Action Handbook, first published in 1979, is a helpful and popular consumer resource. The free guide is designed to help people find the best and most direct sources for assistance with their consumer problems and questions. Tips are offered on such topics as banking, making large purchases, protecting against fraud, insurance, and resolving marketplace problems. Thousands of contacts for Better Business Bureaus; federal, state, county, and city government consumer protection offices are also provided. Some of the resources provided are also geared toward specific audiences such as teachers and the military ...

Consumer Topics. This list of consumer topics allows you to access tips for purchasing specific goods and services, like cars, home improvement, insurance, and more. It also includes handy information about spam, identity theft, credit, travel, utilities and more.

How to File a Complaint. This is a great place to start if you have a problem with a recent purchase. This section includes helpful information about legal issues and dispute resolution.

Where to File a Complaint. This section lists addresses, phone numbers and websites that can be helpful when filing a consumer complaint.

Specific Audiences. Look here to find the most useful consumer resources for specific audiences, such as military personnel, teachers, and persons with disabilities.

Order Publications. Use this tab to order the Consumer Action Handbook and many other free and low-cost publications from the federal government.

Want More Help. If you still haven't found what you need, try these links for more great resources from the federal government and others.

Consumer News. This side box includes links to timely consumer news pieces, such as recall announcements, scam and fraud alerts and more. Each consumer topic area has its own Consumer News box. Updated often.

Feature Links. This side box contains helpful links for each of the consumer topic areas.

- Order by phone: 1-888-878-3256
- Order the booklet online
- View booklet in pdf format
- View the booklet online

July 06, 2009


This month, as student loan rates have adjusted and new legislation taken effect, issues impacting college students have taken center stage and lots of questions have surfaced (many of these issues were addressed in a blog post a couple weeks ago). Common among them are questions surrounding private student loans, particularly the issue of consolidating them [for recent graduates].

Contrary to popular belief, you can consolidate private loans (PLs). The primary question you will need to answer is whether or not doing so is in your best interest. In most cases, it’s not …


  • Cannot consolidate PLs until you’ve begun repayment.
  • Cannot consolidate PLs with federal loans.
  • Consolidating PLs will leave you with a variable rate loan.


    • Look at the benefits your current lender provides. There are very few companies (you can count them on one hand) that will consolidate any private loans [regardless of lender]. More companies will offer some type of consolidation or “refinancing” of private loans, but will require that you have loans with them to be eligible. That requirement will differ by lender; some will require that at least one loan be with them; some may require that at least 50% of the consolidated amount be with them. Regardless, researching your current lender(s) is a good place to start.
    • Shop around. As mentioned, there are a few companies that don’t have stipulations in order to use their consolidation/ refinance program. maintains the best list that I’ve come across . You want to shop closely the loan rates/terms because the lender, not the government sets the interest rates (most are linked to the Prime Rate or LIBOR Index).
    • How does your credit look? Perhaps the most important question to ask is ‘How is your credit?' and what did it look like when you first took out the loan(s). Private loans are credit-based – if you had poor credit with no co-signer, your current rate is inevitably high. [Assuming your credit has since improved] You would be the best candidate for PL consolidation. Your rate with good credit should be in the ballpark of the Prime Rate, but could be 8% or more (over Prime) with poor credit. You possibly paid fees to take the loans out initially; most companies will assess more fees (not all) to consolidate the loans (1% - 3% is common, but I’ve seen fees that approach 10%) … these fees [along with maintaining a variable rate loan] are the biggest reasons why often you’re best not to consolidate your private loans. If you had good credit all along, your loan situation is not likely to improve by consolidating. Also, keep in mind that a tighter credit environment has resulted in tighter credit scoring standards.

    June 25, 2009


    A couple weeks ago I wrote about upcoming student loan changes (to take effect on July 1st). One of the important changes that will become available is Income-Based Repayment (IBR), an option that may provide financial relief to over a million federal student loan borrowers (according to estimates by The Project on Student Debt).

    What is the new IBR?
    A new repayment option for federal student loans. IBR payments will take into consideration factors impacting payment affordability (i.e., family size, income, and state of residence). All Stafford, Grad PLUS, and Federal Consolidation Loans will be eligible for IBR (Loans in default, Parent PLUS Loans, and Consolidation Loans that repaid a Parent PLUS Loan WILL NOT be eligible for IBR).

    Calculation of IBR Payments.
    While your lender will perform the actual calculations, several calculators exist to assist you in estimating the benefits of IBR. Ultimately, if your payment (given the factors mentioned above - i.e., family size and income) would be lower than a standard repayment (10-year repayment plan), then you will be eligible for IBR. The following calculator is provided by the Department of Education. After the initial determination of eligibility, your payment can be adjusted annually (up or down) based upon changes in family size and income, however, your payment will never exceed the standard monthly payment amount (10-year plan) unless you choose to switch to a different repayment plan. As with any repayment option, it is there to serve you in addressing your repayment needs - you can always switch to a different plan if your needs change or if another option is/becomes more suitable.

    (+) IBR may allow you to pay less than other repayment options allowing more monthly discretionary income, adding flexibility to your budget.
    (-) Be careful - while smaller payments can provide short-term relief, lower payments can also result in a longer repayment period and higher interest costs.

    (+) If you repay for 25 years and meet certain other requirements, the remaining balance will be cancelled.
    (-) 25 years is a long time! This could, however, be a potential scenario for an individual with a high level of debt in a 'low-paying' career field.

    (+) Public Service Loan Forgiveness after 10 years (not 25). If you work in public service and opt for IBR, your remaining debt (if any) would be cancelled if: (a) Your 120 payments were made in the IBR program. (b) Available only if your payments were made through the Direct Loan program (an option available to you even if you have already consolidated prior with another lender - you can "reconsolidate" with the Dept of Ed (Direct Loan Program) if you'd like). More information is available at the Dept of Ed website.
    (-) If there is a negative to this program it's news to me, please share.

    More information on Income-Based Repayment is available on the IBR Info Website - ... The site also lists webinar and other free 'events' providing opportunities to learn more about IBR and public loan forgiveness.

    June 20, 2009


    GAP (Guaranteed Auto Protection) Insurance -- is a term commonly used to represent the coverage 'gap' between the amount you owe for your car and what your car is actually worth. Even if you carry full coverage (comprehensive and collision), in the event of an accident, insurance will only cover the market value of your vehicle. The market value of a vehicle in many instances is less than the amount owed [for a number of potential reasons]: vehicle depreciation; little or no down payment made; extended term loans; rolling negative equity into a purchase; leasing a vehicle; borrowing more than the purchase price (rolling tax, title, and loan fees into the loan), etc. This negative equity scenario is often referred to as being "upside down" in a loan. In this situation, you will ultimately be responsible for the loan deficiency. Unfortunately, in this difficult economy, these types of upside down situations are very common. According to Edmunds, 1 in 5 cars financed in February 2009 included debt from a prior vehicle. The amount of that negative equity rolled over? $4,676!

    Not all insurance companies will offer Gap Insurance. Not all situations will warrant having Gap Insurance. If you will never be in a negative equity situation, you will never have a need for gap protection. Before buying gap protection, make sure you're not already covered ... lease companies commonly include gap coverage in the lease agreement for their own protection. Some auto insurance policies will also include gap protection as part of their standard coverage. So read the policy and ask questions first!

    Gap Insurance can be purchased as an additional coverage on your existing policy or can be purchased as a separate policy with a different company. You should price this insurance the same way you would any other insurance product to find the best deal for your situation. Gap coverage is available in most, but not all states (not available in CT, LA, NY, VA, and WA).

    If purchased through a dealer or vendor (these are typically the most costly options), the coverage is typically a one-time charge (a few hundred dollars - often $300 - $500). If purchased through an auto insurance company, it will typically be a small add-on to your monthly premium (that you will continue to pay as long as you have the policy). Before purchasing, make sure the product would cover you in the event of any loss (i.e., natural disaster, theft, etc.) - not just an auto accident. As with any insurance, do your homework first. MSN Money recently wrote an article on gap insurance, "What a car wreck could cost you," that offers helpful information and advice.

    June 12, 2009


    July 1st is always a momentous time for anyone with a student loan ... this year will be no different. There will be some important loan changes you should be aware of.

    Historically, July 1st marks the time each year when variable interest rates on Federal (Stafford) Loans are reset. This year, the rate will drop to an astonishingly low 2.48% (which you can lock into by consolidating); 1.88% if you graduate this coming academic year and consolidate during your grace period! Before you get too excited, keep in mind this is more likely to impact individuals that have already graduated and have been hiding under a rock and have yet to consolidate their loans ... for almost everyone else... remember that the legislation passed on July 1, 2006 locked all Stafford Loans taken out after that date at a fixed 6.8% rate (with some exceptions for undergrads - see next section). Thus, it is only the Stafford Loans [that have not been consolidated] that were taken out prior to 7/1/2006 that are impacted by this rate change.

    NOTE. If this rate drop does impact you, you will be wise to wait until AFTER July 1 to consolidate to take advantage of the new, lower rate. The current rate (available rate through June 30) is 4.21%.

    The fixed rate for new subsidized Stafford Loans will drop from 6% to 5.6% for this coming year (7/1/2009 to 6/30/2010). This cut only impacts undergrad students (not grad students) and only subsidized Stafford Loans (not unsubsidized Staffords). Unsubsidized Stafford Loans remain at 6.8%.

    For 2009-2010, the maximum Pell Grant (Federal Government need-based grants) award has been raised to $5,350 (from $4,731).

    I'll write about this topic separately in the next week or two ... if interested, you can read more about it and public service loan forgiveness at

    * Calculate your 'weighted' rate (if you have loans with multiple rates)
    * Extensive battery of useful student/college calculators
    * Federal Loan Info (Limits & Terms, 2009-10)
    * Look up your Federal Loans (Need a PIN?)
    * Military - New GI Bill (in effect 8/1/09)

    June 06, 2009


    In this rough economy, everyone is trying to save a buck. Finding the best deals on travel (i.e., airfare, hotels, rental cars, etc.) is something that has become easier for consumers thanks to the internet. Expedia, Hotwire, Orbitz, Priceline, and Travelocity are a few of the more popular travel comparison sites. Numerous other online resources [perhaps less familiar] are available - here are just a sampling for you to peruse ...

    * AIRFARE WATCHDOG. Register to receive alerts [as regularly as you'd like] for air deals from your selected airport(s).

    * BIDDING FOR TRAVEL. A rookie to online travel bidding? Will help you understand the process and become an 'informed bidder.'

    * KAYAK and MOBISSIMO. Searches hundreds of travel sites, providing a larger array of options (Mobissimo includes int'l travel).

    * LAST MINUTE TRAVEL. Have some flexibility in your travel dates? Some of the best deals are available to 'last minute' travelers.

    * SKYSCANNER and WHICH BUDGET. International discount flights.

    * STUDENT UNIVERSE. Discounted travel options for students.

    * YAPTA

    Hopefully you'll find some of my favorite travel resources helpful. I'd also be interested in learning about your favorite travel sites as well.
    E-mail me at

    May 29, 2009


    With interest rates near historically low levels, the recurring question homeowners are asking - 'Should I refinance my mortgage?' Answers will vary depending upon individual factors. A few common reasons to consider include available interest rates (potential rate relative to current loan rate), current loan (i.e., Adjustable Rate Mortgage), how long you anticipate remaining in the home, direct costs associated with refinancing (i.e., fees/closing costs), etc.

    The most common method of assessing the potential benefits of refinancing is a break-even analysis. This is a process that estimates the amount of time it will take (through interest savings) to "break even" on the upfront costs associated with refinancing the loan. Obviously, in order to justify refinancing, the benefits need to outweigh the costs. Several [free] online calculators are available to assist you in breaking down (and simplifying) this analysis - Dinkytown, Fair Isaac, and Zillow are popular examples.

    Although interest rates have crept up in the past couple of weeks, interest rates are still very favorable (under 5% on 15-year mortgages). is a great tool for finding current rate information. The rate available to you will depend upon your creditworthiness/credit score (a score over 740 will get you the best rate).

    Many consumers view loan costs as fixed. If you go in with this mindset, you will wind up overpaying for your loan. Some simple tips: (1) Get a quote from your current lender, they will obviously have less "work" to do to qualify you than a company with which you've never done business; (2) Get quotes from multiple companies - you will be amazed at the variability in fees from company to company; the information you'll obtain will provide leverage in working with your ultimate "choice," and; (3) Get a quote from an online company; see #2 above. Information is power, but in this instance, the difference in fees is often amplified as online companies can typically offer lower fees because they don't have the same costs that a brick and mortar lender would have. Use this leverage to your advantage!

    If you are in a situation where you may not meet ideal refinancing conditions as defined by a lender (owe more on the home than it is worth), you may still be able to benefit from the current interest rate environment. Pres. Obama has passed "Homeowner Affordability" initiatives to aid homeowners in refinancing unaffordable mortgages. If you are not eligible for a government-assisted refinance, you may be eligible for a loan modification. Information on the current government programs is available at:
    -- Government Refinance Assistance
    -- Making Home Affordable (eligibility requirements)

    May 20, 2009


    Changes to current credit card practices are imminent. On Tuesday, the Senate approved CARD (the Credit Card Accountability, Responsibility, and Disclosure bill) by a 90-5 vote; today (Wednesday), the House voted 361-64 in favor of the legislation which would alter many of the credit card practices that have commonly come under fire. President Obama has said that he'd like to sign the bill by Memorial Day to "protect consumers and to bring some commonsense rationality to our financial system."

    While most consumer advocates are in favor of the legislation, some have questioned the delay in implementation (9 months for many of the changes). Others have begun theorizing about potential unintended consequences to "responsible cardholders" (those who pay their balances in full each month). To compensate for lost revenue, some have predicted a resurrection of annual fees and an end to many card reward programs.

    Summary of the CARD bill.
    * Some of the changes are already on track to take effect in July 2010 under the Federal Reserve regulations that were established last year. The CARD legislation would uphold the outlined Fed changes and provide additional restrictions on card policies.

    - 45 day notice on rate hikes and certain contract changes (15 prior).
    - Eliminates fees charged for processing payments.
    - Eliminates over-the-limit fees.
    - Eliminates universal default.
    - End to double-cycle billing.
    - Mandatory 5 year life for gift cards.
    - Rates cannot be raised for the first year after an account is opened.
    - Reasonable payment allocation (Apply payments to highest rates).
    - Restrictions on interest rate increases of existing debt.
    - Restrictions on late fees.
    - Statements must go out 21 calendar days in advance of the due date.
    - Tighten issuance of credit cards to those under age 21:
    --> Must have a proven capacity to repay OR
    --> Complete a financial literacy course OR
    --> Have a cosigner.

    ** Unfortunately, an amendment initiated by Senator Sanders of Vermont which would have also capped credit card interest rates at 15% was defeated in the Senate (60-33).

    May 14, 2009


    Every day we're faced with choices -- PC or Mac? Pepsi or Coke? Boxers or Briefs? Kobe or Lebron? Active or Passive [mutual fund management]? Ok, so most of our daily decisions are not life or death, but many decisions will have a direct bearing on our overall financial well-being.

    Active vs. Passive (Index) Fund Management.

    Active Management.
    Accompanying a typical [active] mutual fund are high costs/ maintenance fees (i.e., expense ratio). Why? You're paying a fund manager to select the investments (stocks, bonds, etc.) that will comprise the fund. Is it worth it? Ultimately, only you can decide the answer to that. In the final analysis, you will need to determine if the higher fund costs are yielding higher fund returns ...

    According to Morningstar Principia, a database of over 15,000 mutual funds, the median annual fund expense was 1.42%. (In addition, more than 10,000 of these funds also levy a sales charge or "load" - a topic for another day ...)

    - 42% of funds had expenses over 1.5%
    - 52% of funds had expenses between .5% and 1.5%
    - 6% of funds had expenses less than .5%

    Passive Management.
    The most common example of passive fund management is an index fund. A fund designed to track the activity/return of its underlying index (i.e., S&P 500, Nasdaq, Dow, etc.). The S&P 500, a broad market index of 500 of the largest companies in the U.S., is one of the most common types of index funds. Since the listing of those 500 companies is readily available (not stocks that would need to be 'handpicked' like an actively managed fund), you can typically purchase this type of passive management at a fraction of the cost of active management. In the listing of expenses above, index funds are going to be the prominent group with expenses under .5% ...

    While most mutual fund companies are strong advocates of actively managed funds (for obvious business reasons), more and more people are moving to passive management. In fact, some fund companies actually cater specifically to index investors - most notably, Vanguard and DFA Funds.

    The Winner.
    Every year, Standard and Poors publishes a scorecard that declares the "winner" of the Index vs. Active Management "battle" ...
    The winner? If you've done any reading in this area, you already know the answer. The winner this time around is consistently the winner [and not who most people would assume] ... PASSIVE MANAGEMENT! Over the five year market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, the S&P MidCap 400 outperformed 79.1% of actively managed mid cap funds and the S&P SmallCap 600 outperformed 85.5% of actively managed small cap funds! These results are similar to that of the previous five year cycle from 1999 to 2003. International stock funds? Same results - indices outperformed the majority of actively managed funds. In addition, S&P did not factor in the sales fees that "loaded funds" charge investors, which would have made the contrast even more startling. (Click here for an archive of past scorecards).

    According to Princeton University's Burton Malkiel, the average actively managed mutual fund has returned 1.8% per year less than the S&P 500. 1.8% per year may not sound like a big deal, but it is a HUGE deal over time. A pretty compelling argument for passive management.

    NOTE. Although index funds typically carry lower costs (and should), don't jump in without knowing what the specific costs are. While some index funds will charge as little as .1% or .2% in expenses, I am aware of a couple index funds (nothing special, just 'plain vanilla' S&P 500 funds) whose expense ratios are 1.06% and 1.50% respectively! So never assume the costs will be low merely because it is passively managed. It obviously would not make a lot of sense to pay “active management fees” for an index fund.

    May 06, 2009


    The federal government has taken several stabs at reviving the economy in the past several months. As an educator, one move I support one hundred percent is the pooling of resources to help consumers better understand and more wisely use their money.

    As consumers, we are involved in money-related activities/decisions every day. Paying bills, balancing the checkbook, shopping for loans, reviewing credit card statements, saving, investing, viewing a credit report, and simply deciding whether to use cash or to charge a purchase are some common examples of these regular activities. To aid in this daily battle, 20 government agencies (in response to the Fair & Accurate Credit Transactions Act mandate) formed a Financial Literacy & Education Commission and created a very easy to use resource with links to tools that can benefit anyone at any stage of life to manage money more effectively. Website resources include:

    - Budgeting & Taxes
    - Credit
    - Financial Planning
    - Home Ownership
    - Kids
    - Paying for Education
    - Privacy, Fraud, & Scams
    - Responding to Life Events
    - Retirement Planning
    - Saving & Investing
    - Starting a Small Business

    In addition to these "always useful" topical areas, time-sensitive resources are also provided (i.e., recent market events, foreclosure avoidance, health benefits after job loss, smart borrowing, etc.). Are you financially smart? Take the quiz to test your smarts... Do you know what our national strategy for financial literacy is? Did you know there was a national strategy??

    In addition to the online resources, you can order a free “My Money tool kit" containing information to help you choose and use credit cards, get out of debt, protect your credit record, understand Social Security benefits, insure bank deposits, and start a savings and investment plan. Simply complete the online form and they’ll send the tool kit materials at no cost or by calling toll free 1-888-MYMONEY.


    April 30, 2009


    You've likely heard of high yield online savings accounts. The best of these "high yield" accounts are currently only paying about 2% (according to, an online resource that provides aggregate interest rate data) -- pretty tough to get excited about 2%. Ironically, one of the best [high yield] alternatives currently is an option that until recently would never even have been a remote consideration - a checking account...

    These accounts, High Yield Reward Checking Accounts, are readily available through insured (e.g., FDIC, NCUA) banks and credit unions across the country and are paying upwards of 6% interest! Many of the financial institutions are small, available to local/state residents. Using a directory will help narrow the field of potential options (see list of resources that follow the tip) ... some accounts are not restrictive and are available nationwide.

    Some of these accounts require certain 'activity' in order to be eligible for the higher rates - a certain number of debit transactions, direct deposit, electronic statements - these are common examples of potential requirements. The resources below will help you navigate these "hurdles." Unlike many checking accounts, most reward checking accounts don't have monthly fees or minimum balance requirements. In an economic environment where savings accounts and CDs offer paltry yields, reward checking accounts hold a viable solution!

    - Article - 'Reward Checking Pays High Yields'
    - Bank Deals -- Best Rates & Deals
    - Checking Finder
    - High Yield Checking Deals

    April 22, 2009


    Several posts during the past couple of months have focused on consumer protection issues: Fair Debt Collection, Fair Credit Reporting, and Truth in Lending. Today I want to share some basic information about another important piece of consumer legislation -- The Fair Credit Billing Act.

    This act is designed to protect consumer rights regarding billing errors on “open ended” credit accounts (such as credit cards).

    Summary of FCBA provisions:
    * Consumer is given 60 days after statement delivery to report a billing
    error in writing
    . Common types of billing errors include: Unauthorized charges; charges listing wrong date or amount; charges for goods/ services that weren’t received or were defective; merchants failing to properly credit returned merchandise; charges being posted multiple times for a single purchase; mathematical errors; failure to post payment; or failure to send bill to correct address.

    * If your bill contains an error, the creditor must explain (in writing) the corrections that will be made to your account and must remove any late fees, finance charges, or other charges related to the error.

    * Consumer may withhold payment on disputed amount during the investigation (it can [and likely will] count against your credit limit). [Be certain to pay the portion of balance (if any) that is not being disputed].

    * Consumer must be provided a statement each billing period in which more than $1 is owed.

    * Consumer must be provided written notice when a new account is open detailing the right to dispute billing errors.

    * Creditor must resolve a dispute within two billing cycles (not more than 90 days) after receiving your letter.

    * Creditor cannot threaten your credit rating or report you as delinquent during a dispute.

    * Creditor must send bill at least 14 days before payment due date.

    ** Although the quality of goods is obviously not a “billing error,” if you use your credit or charge card to make the purchase, you can go through the same dispute process with the card as long as the purchase was at least $50, was in your home state, within 100 miles of your current billing address, and you had made a “good faith” effort to resolve the dispute with the seller first.

    ** Any violations of your FCBA rights can be filed online via the Federal Trade Commission Complaint Assistant Form.

    Consumer credit is such a vital thing for most consumers – the ability to have protections in place to help consumers protect the credit they work so hard to build and develop is critical. They are only helpful, however, if you are aware of them!

    April 15, 2009


    Awareness is pivotal in the ability to make informed decisions as a consumer. This week I wanted to post information about one of the earliest consumer laws enacted -- The Truth in Lending Act (TILA).

    The TILA is a major cornerstone of consumer credit legislation. At its heart, it is designed to guarantee accurate and meaningful disclosure of the costs of consumer credit - enabling consumers to make informed choices in the "credit marketplace." Prior to its enactment, consumers had no easy way to determine how much credit would really cost, or how to compare credit offers from various lenders. To their defense, creditors didn't have a uniform or standardized way of calculating interest or defining what additional charges would be added (which wouldn't show up in the interest rate).

    Prior to TILA enactment, a survey asking families to estimate the average interest rate on their consumer debt resulted in an average response that underestimated their interest charges by 300%! An initial reaction would likely be "what a bunch of dummies." In actuality, look at this example to see how confusing things really were at that time ...

    Three theoretical offers for a 3-year car loan:
    1. Dealer financing with a 6% add-on rate
    2. Dealer financing with a 6% discount rate
    3. Credit union financing with a 10% actuarial rate

    #2 was the option most consumers thought would be the best financial option. Seems logical, right? Remember that prior to the TILA, fees commonly weren't disclosed as part of the assessment of the "true cost" of a loan. In the example provided, the actual APRs ('true cost of the loan') were:
    3. 10.00% APR
    1. 11.08% APR
    2. 13.38% APR

    How easy would it have been to "dupe" (whether intentionally or not) consumers into an inferior loan because it was so simple to mask costs? It was for these types of reasons that the Truth in Lending Act was passed. Originally adopted in 1968, Truth in Lending recognizes "the right of the consumer to be informed - to be protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices, and to be given the facts he/she needs to make an informed choice." The act specifically states that...

    - Creditors must provide detailed information about accounts (i.e., balance, interest rate, and fees for current accounts) and must disclose conditions and terms up front (APR, dollar amount of fees, etc).
    - Creditors can't send a credit card if the consumer did not apply for it.
    - Regulates how credit terms can be advertised.
    - Sets card liability to no more than the first $50 of fraudulent charges.

    The apparent benefits of this legislation shine through for consumers during the home buying process. How much easier is it to compare apples with apples on various offers from different lenders given the fact that they are required to disclose the APR (the true cost of the loan), not just the interest rate? It allows people to much more easily shop and compare loan costs/terms and ultimately make the best, most informed consumer decision. It’s scary to think where we’d be without this consumer protection law!

    Since the original legislation became effective July 1, 1969, several amendments have been made to account for new and increasingly complex loan products (i.e., home equity loans, adjustable rate mortgages, etc.). If interested, you can view the complete TILA here.