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.