Sunday, April 29, 2007

Personal Finance 101 Posts of the Day 4/29/07

Thursday, April 26, 2007

Payday Loan Victims

I read the following post about payday loan victims on All Financial Matters and I have the following comments to his views:

I agree! One thing I talk a lot about a lot in my Personal Finance 101 class series is that YOU are the only person who cares about your money and YOU are the only person who is responsible for the decisions you make regarding your money. Way too many people these days blame others when realistically the problem was caused because the person was uneducated and did nothing to change that situation. Education, or lack thereof, is a personal choice but again, it's typically blamed on others.

Personal responsibility is something that is definitely missing from today's society and I see it everywhere from the cashier at CVS to my co-workers.

The only advantage is that for those of us who are responsible, we stand out above the crowd and more doors open for us.

So what it comes down to is: take responsibility for your mistakes. Admit that you made bad choices, figure out how to change things going forward, and move on with your life. It'll take time and effort and, probably, sacrifice, but it'll be worth it in the long run.

Personal Finance 101 Posts of the Day 4/26/07

Horrible about posting! :-(

I know, I've been really behind in posting lately. I spent the last week in Oregon preparing for my move and I'm really focused on that right now. I'll do my best to keep up in the future but I'll probably be spotty until mid-May. So, thanks for hanging in there and to my new readers, thanks for coming by! I promise, I'll get better soon!

pf101

Wednesday, April 25, 2007

Personal Finance 101 Posts of the Day 4/25/07

Tuesday, April 24, 2007

Personal Finance 101 Posts of the Day 4/24/07

Monday, April 23, 2007

Personal Finance 101 Posts of the Day 4/23/07

Saturday, April 21, 2007

Wednesday, April 18, 2007

Personal Finance 101 Posts of the Day 4/18/07

Tuesday, April 17, 2007

Personal Finance 101 Posts of the Day 4/17/07

Sunday, April 15, 2007

Take control of your employer retirement plan!

This post is inspired by Broke Now, Rich Later's post on getting a Roth 401k offered at his company.

I love to hear about people like BNRL who are taking control of their retirement options at work. There are too many people who are stuck with horrible investment options at their jobs but prefer to complain about it than to do anything. They just assume that since it's what's in place, it's what the company thinks is best.

In reality, what probably happened is that a representative of your company who knows nothing about benefits was sold a policy that sounded good at the time. They may not have known about things like sales loads, expense ratios or asset allocation options so they trusted the sales person to set them up with a good plan. Unfortunately, what likely happened is that the company got stuck with an expensive plan with bad investment options (like the one I saw recently with no international but 5 bond funds) and, that's what will reamain until someone who knows better comes along and makes an issue out of it.

You should be that someone. For your benefit and the benefit of others in the company.

Will it be easy? Nope. It will take time, effort and persistence. And, it may never happen. But you don't know if you don't try.

If you are going to go down this path, there are things you should be prepared for.

  1. Whoever chose the plan, if they're still there, probably won't like that you're trying to change it because it will make them look bad. So, be *very* delicate in how you approach this. Don't make them wrong, just point out alternatives.
  2. You should be willing to do this on your own time unless your company assigns this to you as a project.
  3. You'll get much further if you have people standing behind you so rally the co-workers but don't be obnoxious by complaining about how horrible the benefits plan is. This will not make you any friends in management and those are the people you need to convince.
  4. People like numbers but they like charts and graphs too. This is a sales pitch and you should treat it as such. Offer concrete examples and run the numbers of how this will impact the company and each investor bottom line. For example, if the cheapest fund in your selection is a S&P fund with a 1.15% ER (don't laugh, this is a real example) then run the numbers. Show the difference that a 1.15% ER will have on $10k invested over 30 years. Compare that to $10k invested in VFINX (Vanguard's S&P fund) with an expense ratio of .18% and you will have a nice fat number to show them.
  5. Follow the chain of command. Nothing will tick people off more than if you skip them and they hear about it from someone else.
  6. Provide expert commentary. If your company is ok with it, find a consultant to hire to set up the new plan. If you're flying solo and have to convince them, do your homework and bring in supporting documentation from known sources.
  7. If at first you don't succeed try, try again. If you're automatically shot down, then you need to really rally the troops. Start a grass roots campaign for financial education and get a petition going. Make your point clearly and without emotion. Whatever you do, don't lose your cool.
There are other things, but that should get you started. I'm hoping that BNRL will post about how things are going for him so others can get ideas to use.

If you do decide to go down this path and they agree to change the plan/policy/whatever, see if you can shoot for the stars and get them to implement an auto-enrollment policy. I am a huge supporter of these for two main reasons (the first one is most important to me).
  1. It will get the people who otherwise wouldn't enroll on their own to start investing. People don't enroll for lots of reasons, most of which are excuses so if you make it opt-out instead of opt-in, most people won't complain. True story: Recently I was presenting a basic financial education seminar at a local small business. At the end of the seminar I did a little poll to see how many people in that office were enrolled in the 403b plan which had just started a matching program. I was not surprised to learn that a full 2/3 of the people attending the seminar were not enrolled in the plan. ALL of them intended to enroll but just hadn't gotten around to it or didn't understand the process. The solution: everyone got their forms, sat around the table and we got them all enrolled right then. If that company had an auto-enrollment program, all of those people would have been participating the whole time (some had been there for 3 or more years) and they would be much further along the road to retirement.
  2. It will benefit the company by getting more money into the plan. This will do a few things: 1 - they will probably get better deals on plan fees. 2 - it will help with non-discrimination testing. 3 - it will allow highly compensated employees to contribute more if they've been phased out.
If you decide to take this all on, then good luck! If you have any questions, just ask I'll be happy to help in any way that I can.

Saturday, April 14, 2007

Personal Finance 101 Posts of the Day 4/14/07

Friday, April 13, 2007

Personal Finance 101 posts of the day 4/13/07

Thursday, April 12, 2007

Personal Finance 101 posts of the day 4/12/07

Wednesday, April 11, 2007

Personal Finance 101 Posts of the Day 4/11/07

Tuesday, April 10, 2007

Personal Finance 101 posts of the day 4/10/07

Monday, April 9, 2007

Personal Finance 101 Posts of the Day 4/9/07

Credit reports. What's on yours?

Oh Cash has a good post about what's included in your credit report and how you can improve your score.

There's a lot of great information in this post I just have a couple of comment.

  1. It's usually not a great idea to close old credit cards. This is bad for a couple reasons. 1 - it removes that account from your average age calculation which will lower your score. 2 - it removes that credit limit from your utilization which can hurt your score. Instead, you should try to keep your oldest card open as long as possible. If you must close credit card accounts it's best to close the newest accounts with the lowest limits.
  2. Another way to increase your score is to have someone with good credit add you as an Authorized User to their account. With most companies this effectively gives you the history associated with that card which can give you a quick and easy boost. This is a better option than getting a co-signer since with an AU you are not financially tied to anyone.
The biggest thing to remember is that it's important to check your credit on a regular basis. You can get 1 report free from each of the big three credit agencies by going to www.annualcreditreport.com. I usually suggest spreading them out and getting one every 4 months. This gives you ongoing access to your report throughout the year.

Saturday, April 7, 2007

Personal Finance 101 Posts of the Day 4/7/07

Friday, April 6, 2007

Thursday, April 5, 2007

Personal Finance 101 Posts of the Day 4/5/07

Tuesday, April 3, 2007

Personal Finance 101 Posts of the Day 4/3/07

Interest Only Loans

All Financial Matters has this to say about interest only mortgages. Here are my comments on the topic.

I agree, that IO loans are a great option for people that use them correctly. I personally wouldn't invest the money in the market, though that would probably be the most financially agressive thing to do. What I would do would be to have the IO loan with the low IO payment but continue to pay as if it was the 30-year loan. This would substantially reduce the length of my mortgage.

IO loans were initially developed so people with unsteady income (sales people, etc.) could have a low fixed rate which would allow them to make minimum payment and also catch-up payments throughout the term of the loan. This would keep them on track for paying it off in 30 years (or fewer) and wouldn't be such a shock to the system when it reverted after the IO portion finished.

It was NOT intended to do what it has been used for recently (sorry commenter Joe) which is to let people get into houses they can't afford with traditional mortgages. All this new use has done is guarantee that when it comes time to adjust a lot of people are going to be in trouble and will have to sell (if they aren't upsidedown on their mortgage). It's like a credit card. If you don't make more than the minimum payment you're going to get in trouble.

Sunday, April 1, 2007

Personal Finance 101 Posts of the Day 4/1/07

Refund Anticipation Loans Part 2

In January I wrote this post about how tax prep firms were getting into the Refund Anticipation Loan (RAL) business.

Now, according to this NY Times article, fewer people are making this financial mistake. Apparently the number of these loans has decreased 22.5%. All I can say is THANK GOD! These loans made me sick because they allowed people who know better to prey on those who don't. Lack of knowledge isn't a great excuse, but there is a level of trust involved when someone hires a financial professional of any sort (tax, investment, etc.). People assume that the person they're hiring isn't going to screw them over. Unfortunately that is what often happens.

The solution? Education! Education! Education! I keep talking about it, eventually I'm going to do it. I want to start a non-profit that is dedicated to getting financial education in our school systems. Until that happens though, I call on all of you! Particularly those of you who have kids. Get involved with your kids school and get the parents together to lobby for financial education requirements. The squeeky wheel gets the oil so come on people! Squeek loud!