The option to work from home has been shown to benefit employees and employers. This type of flexibility in working arrangements, when appropriate based on the employee’s responsibilities, increased productivity and retention for the employer and job satisfaction for the employee. The same benefits apply to working arrangements that include flexible hours.

As Margaret Heffernan explains in INC Magazine, “Treating employees like grown-ups made it more likely that they would behave the same way.” This treatment includes trust; if you hire the right people, you can trust them to accomplish their tasks and goals on time and under budget without worrying about the time they walk into their cubicle and the time they leave.

It’s difficult to treat employees like adults, however. At one of my corporate jobs, I joined a team some time after the management hired an efficiency consultant. The consultant sat with each employee and monitored and logged every minute of each employee’s work day in order to determine opportunities for improvement in productivity. After the study, productivity might have increased, but it most likely didn’t last long. Employees resented the requirement of tracking every minute of their days.

Around the same time, one of the supervisors made a habit of walking the floor at nine o’clock in the morning to see who was at their desk on time every day. This type of micro-management benefited the supervisor, and perhaps it gave her a feeling of control, but the employees resented the approach, even if they were at their desks on time each morning. Even when arriving on time, the employees would need to be at their desks at the moment the supervisor walked by rather than in the rest room or the kitchen area.

Thankfully, this supervisor was no longer with the team by the time I accepted my position.

A policy that includes flexible hours gives employees ownership of their roles and allows them to make decisions about the best time to do their jobs. The right people can handle these decisions without taking advantage of the employer or the flexible policies.

A flexible working hours arrangement can take a variety of forms:

• forty hours every week spread over four days instead of five
• eighty hours every two weeks spread over nine days instead of ten
• eight hours every day starting earlier or later than nine o’clock

This type of flexible working arrangement may increase productivity. Happy employees tend to be better employees, and they stick with the company longer. Long-term loyalty to a company has decreased over the years due to many changes in the relationship between employers and employees, but a policy involving flexible hours and other benefits can help reverse that trend.

Work/life balance isn’t always appropriate. I am always torn with this concept, because different goals require different treatment. When I worked for a small non-profit organization whose lofty goals were difficult to achieve on a tiny budget and a lack of resources, the expectation was to put our lives into our work. The only way to achieve greatness is to be completely dedicated to the mission, and that required making many personal sacrifices. Most jobs and careers do not work in this fashion, but in any career, this type of dedication can lead to success.

Work/life balance is a great approach for the cast majority of the American workforce that recognizes that life outside of work is important, but those whose personal mission is to become the best in the world at their job, life is just a distraction.

As a business owner without any employees, I took advantage of flexible hours. When I left my corporate job over a year ago, I experimented with creating a regular schedule for myself, but I determined — and this was something I had known since I was a teenager — that I just work better and more efficiently when I have the flexibility to work when I like.

Do you have flexible working hours at your job? Is it beneficial or detrimental to your group? If you work flexible hours, have you seen any personal benefits?

INC Magazine, American Psychological Association, Forbes

The original version of this article, Flexible Hours in Your Working Environment, is copyrighted by Consumerism Commentary.

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Not every credit card on the market today is out to provide consumers with great rewards, because not every card customer can make the most of those rewards. Credit cards are just tools, and depending on who is wielding them, they could have a positive or a negative effect on that person’s finances. Some people just use credit cards to habitually buy what they can’t afford. For them, a great rewards credit card might actually be counterproductive.

A good example would be someone who has made mistakes with credit cards in the past and is now looking for some way to get out of the debt hole. Rather than trying to rack up rewards with spending, this individual would be better off finding a low-interest card or a card with an excellent introductory APR on balance transfers that will allow him to save money while reducing his debt.

Issuers design some cards for people looking to save money on costly interest payments. Slate® from Chase – No Balance Transfer Fee has offers a 0% introductory APR on purchases and balance transfers for 15 months. This offer is for applicants with good or excellent credit; after the 15-month introductory period, the APR is 11.99% to 21.99% variable. Notably, Slate from Chase – No Balance Transfer Fee does what the offer says: It allows you to transfer a balance to the card with zero fees if you do the transfer within the first 30 days your account is open. (After the 30 days, balance transfers are assessed a fee of $5 or 3% of the balance transferred, whichever is higher.) Combined with the 0% APR period for purchases and balance transfers, this is a card that will likely save you money if you carry a balance and are committed to paying it down within 15 months. The Slate® from Chase – No Balance Transfer Fee card has no annual fee.

Slate from Chase includes a program that’s meant to help cardholders analyze and pay down their debt. The program is called “Blueprint,” and it allows cardholders to pick which purchases to pay off first. With Blueprint, customers have the option of designing their own plan:

1. Full Pay. Avoid paying interest by paying off full categories of your choice. Chase will separate all of your purchases into different categories.
2. Split. Inform Chase how much you want to pay and to what purchases you would like it applied to.
3. Finish It. Set up a goal and a timeline and Chase will calculate your monthly payment schedule for you.
4. Track It. Check out your spending trends and see where you stand with any goals you’ve set up.

It seems like a lot of work, and most people will probably prefer to just send a payment into a credit card and have it apply to the highest APR balance regardless of what the original purchase was. Psychologically, however, there is value in understanding exactly when a particular purchase has been paid off. That theory has been used to great effect by Dave Ramsey with the Debt Snowball, and this is sort of a similar application.

That’s about all there is to the Slate from Chase. For consumers looking for a great introductory rate with features to help you keep your debt in check, this card fits the bill. Remember to keep in mind that the best offer is given to excellent credit applicants only, so anyone with average or even above average credit should avoid applying. Here’s how to apply for the card.

• Visit the secure application page for Slate from Chase – No Balance Transfer Fee.
• Provide your personal information.
• Wait a short time for a response from Chase.

The original version of this article, Slate from Chase No Balance Transfer Fee Card Review, is copyrighted by Consumerism Commentary.

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I was torn when Amazon.com, the online-only retailer for books, music, and movies, became popular. I liked the convenience, but it was clear that local brick-and-mortar bookstores would have difficulty competing with Amazon’s prices in the long term. I was swayed enough to the side against Amazon when I participated in a boycott of the company when they filed for a patent for the 1-Click ordering system.

Over the years, though, I’ve come to accept Amazon.com as a part of my life as a consumer, and I shop using Amazon.com for more than just books, music, and movies. I gave into my desire for speedy delivery and joined Amazon.com Prime, as well.

Amazon.com’s aggressively competitive tactics has extended recently to book publishing. With a book publishing arm, Amazon.com has the right to sell its own published books exclusively. With the new tools Amazon.com is offering authors, traditional publishers are having a hard time competing.

This week, I saw that Amazon.com is planning to open a physical, brick-and-mortar store in Seattle. It could be the first step to bring storefronts to more locations throughout the country, but that depends on the results of this one Seattle location. The purpose doesn’t seem to be to keep an inventory of books, movies, and other media on hand to sell, but to focus on Amazon.com’s own electronics, like the Kindle.

I was recently reminded of why I was wary about Amazon.com in the first place. I’ve seen what has happened to local book stores, some of which have gone out of business, and what has happened to Borders, with large, empty stores left in the wake. There are several local book stores that remain, but I can’t say whether the stores are thriving and predict how long they’ll last. I spoke with a book-lover who was mortified that I rarely shop in independent book stores and that Amazon.com is changing the landscape for consumers and hurting small business owners.

If Amazon.com extends its new store front model beyond one location in Seattle, the primary competitive target seems to be Apple, not local book stores. Yet, if the e-book, and particularly Amazon.com’s proprietary version of the e-book, becomes the preferred method of reading for more consumers, and these e-books could be purchased only from Amazon.com, local bookstores will be in danger.

What will a book store look like in the future? Will locally-owned book stores continue to exist as viable businesses?

Photo: shutterhacks
O’Reilly, The Globe and Mail, New York Times

The original version of this article, Amazon.com Retail Stores: Another Threat to Small Businesses?, is copyrighted by Consumerism Commentary.

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A group of fresh, unemployed lawyers have banded together to sue law schools. 73 alumni have filed at least fifteen class-action lawsuits, alleging the schools inflated employment figures and salary data to attract students and increase rankings. The real goal of the lawsuits seems to be to effect systemic change in the education industry and associations that accredit law schools, like the American Bar Association.

Schools are in the business of generating alumni, and to a great extent, use as many marketing tricks that any company uses in order to influence public opinion. It’s true that a 90% graduate employment rate looks better than a 75% rate on paper, and I’d be more inclined to choose a school with a higher employment rate, with all other factors being equal. But a 90% graduate employment rate doesn’t guarantee that I would receive the job I want after graduation, even if I were in the top 10% of the class.

Furthermore, I’ve come to the conclusion over the years that any statistic used for marketing purposes is subject to manipulation in an attempt to further the goals of marketing. Hard numbers give the impression of fact. From an early age, we’re trained to believe that one plus one equals two, in all circumstances, and numbers are truth. Statistics can be misleading in many ways, and are used more often to try to convince others of a point of view rather than quantify facts in reality.

The group of lawyers probably can’t prove that the blame for their unemployment situation rests with the law schools. There are many factors that contribute to unemployment, including the overall economy, local job markets, and the effort, skills, and self-marketability of each alumnus. It doesn’t appear as if the former students are suing to have the schools compensate them for the lack of expected income from working, but they are suing to enlighten the public to the issue of misleading statistics throughout the educational industry.

Mutual funds must advertise that “past performance does not guarantee future results.” Even if a graduate employment rate were perfectly measured and accurately reflected exactly what a potential student understood the number to be, a good rate today is no indication that the rate will continue to be high by the time the school awards a degree or certification. If my index mutual fund returned 12% last year and lost 8% this year, I can’t sue the fund manager or the stock market for not providing the dividends I was hoping for. If fraud was involved, it might be a different situation. Perhaps misleading statistics like graduate employment rates are somewhat fraudulent, but I don’t see a parallel as schools do not typically promise that students will be employed at the level they’d like after graduation — and in the case of lawyers, after passing the bar exam.

There might be better ways of raising the issue of misleading statistics in the marketing endeavors in which institutes of education engage. Using the courts to make a point is only one tool that’s available to increase awareness of an issue. When you’re a hammer, though, everything looks like a nail.

Several years ago, while I was completing my Masters in Business Administration degree, I considered attending law school. Ultimately, I decided not to pursue a law degree and to focus my energy on my business instead. I think I made the right decision.

Photo: CubanRefugee
WNYC

The original version of this article, Unemployed Lawyers Sue Their Law Schools, is copyrighted by Consumerism Commentary.

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People who borrow money generally understand that they will eventually need to pay borrowed money back to the lender. This understanding, whether codified in a contract or not in any particular case, makes lending and borrowing money work as an economic mechanism. It’s interesting that regardless of what’s written in a contract, most debt can be legally ignored. Borrowers may feel bound by their pride to honor commitments, but every state in the country has laws that prevent lenders from chasing after deadbeat borrowers after a certain amount of time.

Time-barred debts are subject to a statute of limitations. After a certain amount of time passes with a borrower unable or unwilling to pay back a loan, the lender will no longer be able to sue the borrower for uncollected debt. The lender can still contact the borrower and try to convince him or her to pay back the loan, but the lender’s legal rights to the funds are limited.

This doesn’t mean that it’s a good idea to wait for the statute of limitations to pass on all your debt in order to avoid your obligations. There are consequences if you don’t pay back debt. Most importantly, the three credit reporting bureaus will significantly decrease your credit score, and it could take a long time for that number to return to normal. This will affect your ability to qualify for more loans, mortgages, and credit cards in the future.

This is a dilemma many homeowners have considered recently; with the market value of houses sharply decreasing in the last few years, and the resulting financial reality of owing the bank more on the mortgage than the house is worth, some in this situation have considered walking away from the house and mortgage. In some cases, this could be a tactic that is more financially responsible than continuing to sink money every month into a depreciating asset. Families considering this option have to weigh the consequences, including not being able to qualify for a mortgage again for many years, against the emotion-based drive to honor financial commitments.

Although lenders are legally barred from suing borrowers after the statute of limitations for a particular debt has passed, they might still try. If you’re able to show a judge that the debt is time-barred and no longer legally collectible, you have nothing to worry about other than the consequences.

Credit cards and other open accounts like home equity lines of credit, written contracts, oral agreements, and promissory notes may have different statutes of limitations, and each differs by state, as well. Here’s a list by state of time-barred debts.

The clock starts ticking on the statute of limitations from the day you miss your first payment. The moment you send a payment to the lender, no matter how small, the clock resets. For example, if the statute of limitations on credit card debt in your state is seven years, and it’s been six years since you’ve made a payment, you may determine that it makes more financial sense to refuse to make a payment for one more year rather than negotiate with the lender. If you are in financial difficulty and don’t expect to ever be able to pay off the debt, paying even a small amount means you’ll need to wait another seven years after making the small payment before you’ll be legally protected from paying back the debt.

Not all debt is time-barred; student loans backed or issued by the government have no statute of limitations. Anything you borrow under any of the loan programs that qualify in this category can never be ignored. The lenders are often willing to negotiate the terms in order to help you make payments you can afford, but these students loans are, for the most part, legally stuck with borrowers until the lenders are satisfied.

A few questions for discussion:

• Do you think it’s right that borrowers can avoid agreements by patiently waiting for the statute of limitations to pass?
• Have you ever been sued for debt you didn’t need to legally pay back?
• Have you inadvertently restarted the clock by paying a small amount to a lender when it might have been better to wait?
• Are you dealing with the credit consequences of letting a debt expire?

Note: I am not a lawyer, and nothing written on Consumerism Commentary constitutes legal advice. Always check with an attorney before making any decisions regarding the law.

Photo: Dave Stokes
Federal Trade Commission

The original version of this article, Debt Collections: Do You Have To Pay?, is copyrighted by Consumerism Commentary.

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This is an article by Marc Pearlman. Marc is a money management professional who has been in the finance industry over 20 years, and he is the author of The Positive Money Mindset and host of the radio show, Your Money Matters.

I watched as these two were duking it out — at the poker table, that is. Fortunately for me, I was out of the hand with my lousy cards safely in the muck pile. I watched with no attachment to the outcome, but I had a prediction of who would come out the victor in this poker showdown. This young kid, probably mid to late twenties with a black hat pulled half way down his head had been quiet most of my time at the table, was squaring off with a middle aged guy. If appearances mean anything, this middle age guy was somebody of means given the designer clothes he was sporting.

Anyway, this kid makes a modest bet and the middle aged guy is quick to match it. Not only does he match the bet, he raised him with a smirk as though daring this kid to come at him again. So, the kid comes back at him with a bigger bet, and again this guy matches him. When all was said and done, both guys had all their chips in the middle and our middle aged poker wannabe had absolutely nothing for a hand. He tried to save face and belted out, “I didn’t have anything, but I couldn’t sit there and watch you walk away with it.”

Egos can be expensive that way.

All too often people make financial decisions out of emotion, which can be an expensive trap for those who have their ego firmly married to their net worth. If we look around, we can see examples of this all across the spectrum of income classes.

Years ago, I worked with a doctor who shall we say did not suffer from a fragile ego. He was interested in putting money with an institutional money manager who had a large minimum investment requirement and a lousy recent track record. I had suggested a manager who demonstrated better performance numbers and who utilized a strategy with less risk. “What is the minimum investment?” the doctor inquired. The minimum was about half of the other managers requirement, I answered. The doctor quickly rebuffed the notion.

It came out in conversation that his peers had money invested with this manager who had the higher minimum. I understood that it was important for him to be part of what he believed to be a prestigious group of investors. Making money was not his motivation, satisfying his ego is what dictated his investment choice.

Another story comes to mind. I once had the opportunity to work with a professional commodities trader. I was hired to help him with his trading deficiencies. This guy had strong opinions on whatever subject was being discussed. He could not possibly fathom that his thought process could be flawed. I introduced him to the concept that being right to him was more important than making money. He scoffed at the idea. In the end, he learned his lesson in a painful way. This trader would hold onto losing positions until he was forced to sell. He vigorously defended his position that he was right only to watch his once several hundred thousand dollar trading account dwindle to less than $20,000.

Ultimately, the ego he was trying to protect was humbled.

Here is yet another example of how our egos can hurt us financially: about a decade ago I had a wonderful client who has since passed away. Great guy, but wow, what a terrible stock picker! Honestly, someone could have made a fortune by simply doing the opposite of what this guy did. He held fifteen stocks in his portfolio, ten of which I had selected for him.Out of the five he picked, every single one was a dog. When I say dog, I mean dog with fleas. They were all down 70 to 80% within a year. I am not suggesting that every selection I made was a homerun, but we were profitable on average with my ten selections.

He would call in on a regular basis to discuss the market. He never wanted to discuss his losing stock picks. Furthermore, I knew it was taboo to mention my winning stock picks. The only subject that was not off limits was the couple of picks I made that were not working out.

When he passed, he still held those losing positions. His refusal to acknowledge his mistakes cost him well over five figures in losses, not to mention the opportunity costs associated with redeploying the money elsewhere.

Big egos often mix with money with the same cohesiveness that oil and water mix. Having an inflated ego is not necessarily the issue, but when your financial decisions are borne from ego, you are in dangerous territory.

Strong and sound financial decisions require letting go of your ego. Often, we need to admit our analysis was wrong and we need to cut losses in order to preserve our hard earned capital. Sometimes the simple truth is that keeping up with the Joneses is going to bring financial ruin.

Many times, laying down your cards is the best thing you can do for your wallet.

Photo: Ross Elliott

The original version of this article, Your Ego and Your Wallet, is copyrighted by Consumerism Commentary.

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Today on the Consumerism Commentary Podcast, Tom Dziubek talks to MD, founder of the personal finance website Studenomics.

MD talks with Tom about topics such as his inspiration for Studenomics, how he got through college without having to pay off student loans, and also about things that people in their early twenties need to consider if they’re thinking about buying a home.

Table of contents

[00:00] Introduction from Tom Dziubek
[00:36] Interview with MD
– [00:53] MD’s inspiration for Studenomics
– [02:22] The focus of Studenomics
– [03:14] MD’s college years
– [03:53] Starting off at a community college
– [06:00] The start of the blog
– [08:31] Paying for college
– [13:32] Buying a home in your early 20s: Income considerations
– [15:26] Considering your savings
– [16:37] Taking into account your relationship status
– [18:42] The need to be somewhat handy
– [20:51] MD’s current projects
[23:53] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

The original version of this article, Podcast 146: Buying a House In Your Early 20s, is copyrighted by Consumerism Commentary.

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Whether you agree with it or not, the reason this country has supported programs like welfare, Social Security, the GI Bill, food stamps, Medicare, government-backed mortgages, FEMA insurance, and other social programs is because a modern society benefits when as many citizens as possible have opportunities to succeed financially. Social programs aren’t perfect and don’t always provide what they promise, and there’s always a small percentage who take advantage of the system.

The push-and-pull between the focus on the society and the focus on the individual existed even before the founding of the nation, and this particular Weeble that wobbles between left and right without falling down (yet) has allowed the United States to become the biggest economy in the world in a relatively short period of time, and that’s a good thing.

From an individual perspective, it might not be that intuitive that one needs to be concerned about the “very poor.” After all, with social safety nets, one might think that the “very poor” have little to worry about. Regardless of the existence of programs — both public and private — poverty is still an issue in this country, even if you don’t see it in your daily life as you shuffle in an office building from meeting to meeting or shuttle from city to city on business trips. It’s hard to be concerned about something if you aren’t faced with it every day.

If, however, you are concerned about the “very poor,” there are ways to help, even if you don’t believe that handouts are effective. The most popular rationalization for not caring about poverty is the idea that helping another individual teaches complacency rather than responsibility, interdependence rather than independence. The incorrect assumption is that families in destitute situations have no desire to work for their money like those who have built wealth for themselves and have earned the right to let their money do the work for them and receive income from dividends and interest rather than working in the middle-class and working-middle-class sense of the word.

The real problem is tied into that psychology 101 concept I turn to repeatedly, Maslow’s hierarchy of needs. If most waking minutes in your day are spent worrying about your shelter, your food, and having a safe place to sleep, “income mobility” is a fantasy. You’re a victim of “class warfare,” but in your reality, you don’t have time or energy for political arguments about class warfare.

If you are concerned about the very poor, there are options. Helping bring attention to poverty can form provide opportunities to those without them without much sacrifice from those with opportunities.

• Give money directly to organizations that run programs focusing on providing opportunities. The top-rated charities focusing on poverty according to Charity Navigator are Direct Relief International (although International is in the name, they also work to eliminate domestic poverty, particularly in disaster-stricken areas), SOME (So Others Might Eat, focusing on the D.C. area), and the People’s Resource Center (based in Chicago). If you prefer to give a hand-up rather than a hand-out, focus on organizations that provide job training and placement, programs that expand the reach of educational opportunities, and programs that present positive financial role models.
• Volunteer with the organizations that run these programs. Build houses. Build schools. Help at a food bank. When you are actively involved, you get to experience the results of your work much more closely than if you were to send a check every month. No, you won’t get a tax deduction for volunteer work, but that’s not the point.
• Become a community leader. When people from poor communities manage to succeed financially, they often don’t return to be the role model their community needs. This is the reason financial illiteracy is a problem that will continue from generation to generation, keeping low socio-economic status communities from thriving.

Are you concerned about the very poor? Does paying your taxes and being satisfied with existing social safety nets relieve you from any other possible responsibilities for how the country fares as a whole? Do we even have any responsibilities to anyone other than ourselves and our families?

Related: Here’s how you might be able to avoid poverty for your family. Also, could you survive at the poverty line?

The original version of this article, Are You Concerned About the Very Poor?, is copyrighted by Consumerism Commentary.

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I’ve written extensively about taking control of your finances. One aspect of the ability to succeed with your financial goals is making active, thoughtful decisions pertaining to your use of money. Uptal Dholakia is a professor of management at Rice University in Houston, and he is currently conducting research pertaining to self-control and decision making as they pertain to personal finance as well as other personal issues.

I’ve always been excited to participate in academic research; I was a frequent subject for Princeton University’s cognitive psychology department when I was much younger, and I continued through college by participating in occasional research studies conducted by graduate students at my own university. In fact, when I attended a psychology class my sophomore year and was considering the pursuit of a minor in psychology, participation in graduate research studies was mandatory. Regardless of the requirement, I enjoyed it.

Professor Dholakia is inviting Consumerism Commentary readers to participate in this study. In order to participate, all that is required is to answer questions on a web-based survey.

I completed the survey last night, and it took less than ten minutes to complete. The questions were not difficult, but they did make me think about my decision-making process and how I allow myself to succumb to impulse decisions. There are some questions about demographics at the end of the survey, but the information will be held confidential and reported only in aggregate.

The professor has agreed to share the results of the research with Consumerism Commentary, so once the analysis is complete, you can expect an article discussing the findings published here.

Please help further research regarding the psychology of personal finance by completing the survey here. No electrodes need to be connected to your body and you won’t need to receive any electric shocks.

The original version of this article, Participate in Self-Control Research, is copyrighted by Consumerism Commentary.

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The financial industry has been mostly static for centuries, with companies doing business and offering services not much different from how the companies operated for earlier generations of consumers. When there is innovation in the industry, it generally comes from smaller companies and entrepreneurs looking to fill a need that isn’t covered by larger, less flexible entities.

While today’s start-up companies are changing how customers interact with their money, most of these small business owners have the ultimate goal of selling their businesses to larger, more established companies who will then incorporate these new services if the start-up companies cannot become industry leaders without help. In the mean time, start-ups compete for funding from a growing community of investors in the industry.

Here are ten customer-facing personal finance start-up companies that could help change the way consumers interact with money. Some have already been thriving for a few years, while others are new to the industry. These are not in any particular order.

BrightScope

401(k) plans are tough to evaluate from the plan descriptions and prospectuses offered by plan administrators to employees. Employees can’t always choose the best investment options for them due to limitations by plan administrators. Additionally, plan administrators often change available investment options and automatically transfer employees’ money from one fund to another without sufficient notification to the investors.

BrightScope lets employees evaluate their company’s 401(k) plan. If, for example, you have two job offers and you’re comparing compensation, you can take the quality of the 401(k) plan into account by researching these companies. Each company receives an overall rating as well as scores in important categories including total plan cost, company generosity, and participation rate. You can directly compare each company with its industry peers.

The above image shows the overall rating for MetLife. For comparison with other companies in its industry, MetLife’s score of 73 is below Morgan Stanley’s 83.8.

LendingClub and Prosper

As technology advances, it brings manufacturers and customers closer together, often eliminating the need for companies that stand in between, adding to the cost of products and services. In some ways, the financial industry is a “middle man.” Banks take deposits in the form of savings and checking accounts, and turn that money around and lend it to individuals and businesses in need of capital. Peer-to-peer lending companies like LendingClub and Prosper take deposits out of the process; lenders can choose borrowers and lend money directly or invest in a group of loans packaged as an investment product with measured risk.

State regulations prevent peer-to-peer lending from being available to all United States citizens, and the primary concern is that customers who may not be able to take advantage of loans from a bank turn to these options where they can be charged nearly-usurious rates. For many people, however, peer-to-peer lending has provided a solution that banks have been unable to fill, whether for borrowers or investors.

Jemstep

For your investments that are not locked in a 401(k) with limited options, like your personal IRA or your taxable investment account, the variety of mutual funds and ETFs available is staggering. And unless you work with an unbiased financial planner, it can be difficult to choose the investments that will give you the best chance of making the most of every dollar you invest.

Jemstep is like an unbiased investment adviser with an immense set of data available to help you make investing decisions. You can create a profile for yourself that reflects your attitudes about investing. Most online investment recommendation engines stop at risk and time profiles, but Jemstep goes much further. You can decide how important fees are, whether you’re looking for actively managed funds or index funds, and whether potential tax plays a role in your investing decisions.

After calibrating your profile, Jemstep can evaluate your current portfolio and offer investment suggestions that are better suited to you.

Today, Jemstep announced it completed its Series A round of financing. Start-up companies look for funding from outside sources to grow their businesses before the business generates enough revenue on its own to finance its own operations. In total, Jemstep has raised $10.5 million from early investors in order to fund product development and hire employees.

HelloWallet

There’s a need for consumers to better manage their own personal finances. Over the last decade, this has been the realm of software like Quicken and Microsoft Money, but the latter has disappeared from the market and the former is increasingly seen as an outdated piece of software. In recent years, a number of companies had been developing personal finance management software for a new generation, incorporating mobile options and focusing on reporting and trending rather than reconciliation, though the depth offered could not compete with Quicken. Many of these companies have disappeared, and the apparent winner, Mint.com, was purchased by Intuit, the makers of Quicken.

HelloWallet has emerged as a new competitor for Mint.com, but while Mint.com is now free, HelloWallet charges users a fee of $8.95 per month. For the fee, you can be sure that the recommendations you receive are unbiased — companies and products do not pay HelloWallet for advertising placement within the service. The goal of HelloWallet is focused more on overall financial advice than tracking. Mint.com has moved in this direction, as well, however.

Dwolla

Merchant account service is a big business rules by large companies. Each time you swipe your credit card or debit card, a number of companies get paid in addition to the retailer from which you’re buying a product or service. Small business that need to operate on tight profit margins to compete with larger businesses suffer in these situations, because a larger proportion of their revenue is dedicated to paying these fees.

PayPal entered the marketplace and attempted to shake up the industry, offering a new way for retailers to accept credit card payments and for individuals to initiate person-to-person payments without the help of a bank. Dwolla has taken this model and, rather than relying on linked credit cards, has found away to put the focus on cash. The cash focus could be more financially responsible for a large percentage of customers.

Dwolla charges lower fees and allows users to send cash from person to person or to pay for a purchase using your phone. Customers can transfer payments using e-mail, the web, or social media applications within Facebook and Twitter. By default, the $0.25 fee is paid by the store or the recipient, though the individual initiating the payment can change this option. Transactions less than $10 are free.

SecondMarket and SharesPost

The buzz today is about Facebook’s imminent initial public offering (IPO) of stock. Soon, Facebook will be a public company, and investors will be able to trade shares of the company in a liquid stock exchange. For most people, this will be the first opportunity to invest in Facebook, a company that has grown significantly over the last few years. Of course, those who own part of the company already, like early and current employees, will see the biggest benefit after an IPO, assuming the company continues to grow.

You don’t have to be an employee to own and trade shares of Facebook, however. Two companies have specialized in creating a market between a small number of common or preferred shareholders — usually employees but also capital funds — with the wider audience of investors. I signed up with SharesPost (review here) last year to gain access to Facebook shares.

Occasionally, SharesPost holds an auction of shares held by investors who wish to liquidate their holding for the best price, and investors interested in buying can participate in the auction by naming the amount of shares they’d like to purchase and the price willing to pay. If there’s a match, SharesPost handles the transfer of shares. Surprisingly, the share price for Facebook’s Class B common stock has been stable over the past year, particularly given the volume of trading is significantly lower than it would be on an open market. The price has moved from $33 to $34 per share. It will be interesting to see how the stock performs on the open market.

SecondMarket is similar to SharesPost in that it creates a market for financial products that don’t have an accessible exchange for trading. With SecondMarket, you can trade public equity, fixed income and bankruptcy claims in addition to private shares.

Google Wallet and mFoundry

With technology changing quickly, smaller companies are able to jump on new technology. Google is not exactly a smaller company, but the company’s development operations function like a start-up. Google also has the size to buy smaller companies with innovative ideas early in their development. Google Wallet, however, was developed in-house. New technology in mobile phones makes it easier to transmit information securely in close range, and retailers are using that technology to accept payments without swiping a card. An application stores credit card information, and when a receiving device is in range and the consumer initiates the transaction, his or her device sends the information securely to the retailers.

As more mobile devices incorporate this NFC technology, contactless transactions will continue to increase. This was a hot topic in the media several months ago, and I explained why Google Wallet would not catch on as quickly as people were predicting. Today, Google Wallet is still limited to using only Citi MasterCard credit cards or Google’s own reloadable debit card.

There’s a smaller company that has seemed to penetrate this market deeper from Google. Among mobile payments, mFoundry works with banks and credit unions to develop their own applications based on the company’s technology. I’ve focused on start-up companies that face the public rather than other businesses in this article, but mFoundry does both. Mobile banking has a long road to becoming a mature and ubiquitous service, but it’s these companies that will help bring the innovative services to consumers and bigger financial institutions.

There are many other personal finance start-up companies worth mentioning, but I limited this list to ten across a broad spectrum of personal finance to keep this article interesting and not too long. If you feel I’ve missed something substantial, please feel free to share your thoughts in the discussion area below this article.

Normally, I do not allow business spokespeople to promote their companies in the comments on Consumerism Commentary, but as long as it’s relevant, I’ll allow short comments intended to note companies looking for broader exposure in the personal finance space, but I still reserve the right to edit, moderate, or delete promotional content.

The original version of this article, Top Ten Personal Finance Start-Ups, is copyrighted by Consumerism Commentary.

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This is a relatively long review of TurboTax 2012 Online, software for completing tax forms and submitting them to both the federal and state authorities. I’ve updated the review to reflect the changes to the software in 2012 (for filing 2011 tax returns).

Recently, the IRS began accepting federal tax returned filed electronically. Even before the IRS began accepting returns, you could still have completed your tax forms online through software. Programs like TurboTax, H&R Block, and Jackson Hewitt have been accepting customers and holding off on filing until now. This delay affected those who had itemized deductions, claimed the tuition and fees deduction, or claimed the sales tax deduction.

Many taxpayers are just getting started with their 2011 federal returns now. I’ve been using the services of an accountant for the past few years, and he was able to cut through the more confusing tax consequences of owning a business, saving me $15,000. Before my tax situation was complicated, however, I completed my taxes online using various software. Following a series of questions, completing and filing my 1040 form was easy.

Every year, the companies that provide tax e-filing services like TurboTax and H&R Block tweak their products, not only for the latest tax laws, but to improve features, making the process of tax filing easier. I took a look at TurboTax to see what changes the newest edition has to offer.

The first thing I noticed with TurboTax is the wide variety of products they have available. There is an option that is completely free for filing federal returns, but it is limited. This free version is for taxpayers whose returns can be completed using the 1040-EZ form, a simplified version of the 1040 form. If you have deductions, investments, a mortgage, or self-employment income, or if you want a step-by-step hand-holding guide to completing the forms, you will not be able to take advantage of the TurboTax Free Edition.

TurboTax offers several flavors in addition to the Free Edition, including Deluxe, Premier, Home & Business, and Business, each to handling more complicated tax situations above and beyond the lighter editions. The Deluxe Edition focuses on capturing all of your deductions. The Premier Edition does deductions, as well, but also includes the forms you need for investments like stocks, mutual funds, and rental properties. Home & Business covers all of the above as well as self-employment income, and the Business Edition is for anyone who is a partner in or owner of a corporation.

The editions are flexible; start with the Deluxe Edition, and as you come across features you need, TurboTax will ask if you’d like to upgrade — without charging you yet — to the edition that takes all of your needs into account. I started the Deluxe Edition to see how far I could go. I saw that for the most part none of the upgrades are needed if you are confident about your tax accounting abilities and are willing to enter your information directly into forms rather than have the software hold your hand through every decision.

Get your refund in as little as 8 days. E-file with TurboTax today. It’s Easy

Here is an overview of my entire process of completing my federal and state tax returns with TurboTax.

I am a returning customer, and although I didn’t file my taxes using TurboTax last year, I did begin entering my information to test the software. TurboTax recalled last year’s information, although I didn’t enter accurate information at that time, and used it to get me started.

As you can see, some of the found information looks a little odd. If you click on the image here, you’ll see that TurboTax thinks my adjusted gross income for 2010 is a negative $106,905. This may be a result of last year’s incomplete information. Nevertheless, I continued. This year, TurboTax is no longer emphasizing the GPS device metaphor that helped guide filers through the process last year, but still retains the idea that filing your taxes is like traveling down a road.

Free tax advice from TurboTax experts

This year, TurboTax has added a new, useful feature: free on-demand tax advice from a tax expert.

While TurboTax seems to encourage users to exhaust all other options, like searching frequently asked questions and participating in the community, before contacting a live representative, this feature could prove useful for tax filers who are used to interacting with a human being to solve tax-related issues. The experts can answer questions related to filing Forms 1040, 1065, 1120, and 1120S, so even business owners can take advantage of the free advice. Be aware that by using the free advice service, you’d free TurboTax and Intuit from any liability, and are agreeing to binding arbitration if any legal issues arise from your use of the service. That’s not a customer-friendly policy, but it has come to be standard among many types of financial services.

The experts are typically seasoned tax preparers, with CPA certification and experience. When I began to initiate a chat on a Tuesday morning, there was a delay of about ten minutes before someone was available. If I were to chat over the phone rather than online, the delay would have been longer.

Income

The first step in the tax filing process covers personal information. TurboTax asks the taxpayer to check any life changes that occurred during the year from among a list to begin the section covering income.

Alongside the checklist is a link to TurboTax’s Live Community. This is a place where taxpayers can look for help from other users, the most experienced and helpful being SuperUsers, and from TurboTax employees. These guides are very helpful and thorough, but I warn anyone against making significant decisions based on answers that are not tailored to your specific situation and not backed up by a tax accountant who is familiar with you. The Live Community is great for the most typical and basic tax questions, such as, “If I became married in December, can I still file as a single taxpayer?”

If you need answers to questions specifically related to your situation, you can use the new feature mentioned above to speak to a tax expert.

After submitting my choices on the form above, TurboTax recommended I upgrade to Home & Business for an upgrade price of $45, but noted I still have the option of staying with the Deluxe Edition. Home & Business offers more guidance, but at this point, not more tax features, I opted to stay with the Deluxe Edition. I continued to enter my personal income information.

My employer — now former employer — does not seem to offer the ability to load my W2 data directly into TurboTax, so I located my form online and pulled the numbers myself, just like in the old days.

After completing my W2, TurboTax guided me through more income possibilities. For interest income, TurboTax has the ability of downloading your tax information from your bank or broker. The list of institutions offering this ability isn’t large, and many of my banks were not listed. I did give this a try with Vanguard. TurboTax asked for my Vanguard user name and password, and within seconds determined that I had dividend income of about $315 from this source. In the interest of time, I didn’t bother with any other dividend or interest income now, the software is flexible so you can return to any section at any time.

TurboTax remembered that I purchased employee stock in the past, and asked if I sold any shares, which would have resulted in income. This is a great benefit to filing your taxes with the same software each year; the software “gets to know you,” and asks the right questions based on how you’ve filed in the past. As you go through the income sections, if you state that you don’t have a certain type of income but TurboTax thinks you should, it will flag the category to let you know that you’ll need to review the section.

For my business income, TurboTax prompted me to enter the income I received on 1099 forms, stating that these forms are required for anyone who has paid the business more than $600 for services. With a corporation, I’ve found this to be incorrect, and some businesses will not send my business a 1099, and according to my tax accountant, I’m not required to send 1099s to other businesses that I pay more than $600. This rule would have changed, however, and 1099 forms would have been required, if Congress didn’t quickly repeal a much-hated provision of the health care reform law. TurboTax required 1099s in this section because this section is for “Schedule C” businesses, like sole proprietors or LLCs treated as sole proprietors. My business is an S Corporation — or, more accurately, an LLC treated as an S Corporation — so while most self-employed individuals will follow TurboTax’s guidelines for self-employment income, I would need to wait and include income from Schedule K-1, filed by my business, possibly in addition to a W-2 for the business.

As of today, the IRS has not yet finalized this year’s K-1 form, so I would not be able to submit my federal tax return yet.

After completing the income and answering questions about foreign bank accounts (I have none), TurboTax provided a snapshot of my money, and suggested I try out Mint.com to determine how I spend my money and find options for investing in an IRA. I skipped these suggestions, though I do recommend Mint.com, and proceeded to the section covering deductions and credits.

Deductions and credits

Once again, I followed the “EasyGuide” to make the most out of the suggestions provided by the software. In this section, I reviewed whether I could claim deductions and credits for mortgage interest, the homebuyer credit, the Making Word Pay credit, and more. For charitable contributions, I was easily able to enter the recurring monthly payments I made to non-profit organizations as well as the lump sum payments I sent to charities.

After completing the questionnaire, TurboTax performed an integrity check to ensure I captured all the deductions and credits I could be entitled to. When the analysis was complete, TurboTax offered some suggestions for possible missed credits. TurboTax was under the impression that I may qualify for credits I didn’t take, like the Earned Income Credit for children.

After I reviewed my final federal tax numbers, TurboTax transferred the relevant information to my state return. After a few state-specific questions, I was able to claim a property tax credit — homeowners and renters both qualify for a credit of some sort. When the process was complete, TurboTax reviewed my information and determined my risk for an audit was low, but noted two warning flags:

• I included Schedule C income.
• I had more than $100,000 in business income.

Both of these might increase the chance of being audited. In the final return that I file with my accountant, I won’t have Schedule C income. I won’t be filing my finalized return through TurboTax this year, as I prefer to work with an accountant. The Schedule C income above was is included here just as a test. The entire process was not without some confusion.

Error checking and support

Last year, after TurboTax reviewed my federal return and suggested child-related deductions and credits, I tried to determine why. It looked as if TurboTax was assigning me a credit for adopting a child — a credit I didn’t enter. I reached out as many customers do in the Age of Information: on Twitter. The customer service account is @TeamTurboTax, so you can mention that account in a message on Twitter to get their attention.

It wasn’t long before I received responses, most from people recognizing that I did not, in fact, adopt a child:

The official response from Customer Support came only a few minutes later. We discussed the issue through private messages on Twitter before I realized that I was looking at the wrong column. I expected the final page listing income, deductions, and credits, would compare the previous tax year with the current tax year, as I believe they software had done in the past, but the first column represented the current tax year and the second column listed the difference between what I was claiming and the maximum I’d be allowed to claim for each credit and deduction. TurboTax properly listed $0 for the adoption credit. That’s a big relief in many ways.

I appreciate the quick response from Intuit’s Customer Support via Twitter, and this is a feature that helps TurboTax rise above some of their competitors.

Printing and filing the returns

You have the option of filing electronically or by mail, but electronically is almost always the better option. If the government owes you a refund, you will receive it much faster, particularly if you have a bank account for direct deposit. You must pay before printing your return for filing by mail or filing electronically. I completed by entire return using the Deluxe Edition, for $29.95. The New Jersey state edition added an extra $36.95 to that total, the most I’ve ever paid to file a state return without an accountant.

On the payment screen, I noted that TurboTax guarantees their calculations; if the IRS or your state charges you a penalty due to TurboTax’s error, they will pay the penalty and interest. It’s not hard to calculate numbers correctly; the danger is in entering them correctly in the first place — and human error is not covered under this guarantee.

Once you submit your return for electronic filing, TurboTax will send you updates to let you know when they are accepted by the IRS and your state’s tax authority. After that point, you can check the status of your federal and state refunds.

Conclusion

I was surprised how easily TurboTax, even the version just one step up from the Free Edition, handled my complicated tax situation. If I had finished my corporate tax returns first, I would have had everything I needed to finish my personal federal and state returns in under a few hours. It’s important to have all your forms together before you sit down to get started. Even though TurboTax lets you stop and return to the place you left off at a later time, it’s generally to focus and get everything done as soon as you have everything available. These days, you’ll probably receive some tax forms online and some in the mail, so it’s getting more difficult to keep track of everything. The more organized you are, the smoother the tax filing process.

Consumerism Commentary is an authorized affiliate of Intuit. Intuit did not compensate Consumerism Commentary for this review.

The original version of this article, TurboTax 2012 Online Review, is copyrighted by Consumerism Commentary.

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It may be illegal for states to print money for commerce, but local communities have no such restriction from the federal government. And in some communities, local currencies have been successful, at least in gaining the support of some retailers and consumers.

There’s no law of nature that says that an economy functions best when the broadest number of people use one currency exclusively. Currency is just a placeholder that creates efficiency. Without it, we’d have to barter for products and services. Without currency, a tailor would need to trade his services whenever he wanted to buy food for his family. In a free market, theoretically, anything could be used as a currency. The government or quasi-government organizations help by establishing a currency as a standard, so there is faith in its consistency.

Not everyone is satisfied with this solution, however.

A community may start its own currency for a few reasons:

• Local currencies can help keep more funds invested in the community instead of helping national or global companies profit. When you buy a light bulb at Home Depot, part of that profit goes to the headquarters, and eventually shareholders, including global investors. When you buy a light bulb at a local hardware store whose owners live within the community, more of that profit stays in town — but not all unless the light bulb supplier and manufacturer is also in town.
• When companies pay a part of their employees’ salaries in local currency, or when a consumer participates in a community marketplace by selling their items or services while taking payment in the local currency, the profit stays in the community.
• A town or city bonded together by a unique currency builds the sense of community and encourages businesses to work together, not just for the greater economic benefit of the town, but to ensure that all consumers and retailers engaging in economic activity using the currency remain good citizens and fair businesses.
• Local currencies present an alternative choice for people who believe the federal government cannot be trusted with the responsibility of ensuring economic stability through monetary policy. A community-based financial system can help people in the community feel better about threats of inflation or devaluation.
• With local currency in hand, a customer will peruse the directory of merchants accepting the currency and make purchasing decisions based on this list, effectively ignoring companies whose profits benefit those outside the community.

In Philadelphia, the “equal dollar” is a local currency that has flourished for over a decade. Philadelphians can earn equal dollars by volunteering in the community or by selling items. There is a $10 (USD) membership fee and a =$50 (equal dollars) sign-up bonus for individuals; merchants can join for a $25 (USD) fee and receive a =$125 (equal dollars) bonus. It’s unclear how many merchants accept equal dollars, but those who do often require the bulk of the transaction to be in U.S. dollars.

This system isn’t too far removed from certain gift cards. Replace the idea of the community with a mall, and you’ll recognize the paradigm. One of my local indoor malls is owned by a national mall company. They offer gift cards that can be used in any store within any of this company’s branded malls. This is a currency as reliable as the U.S. dollar (as the value is denominated in dollars, not a separate currency of its own), but just like a local currency that ties its spending to the community, the gift cards tie spending to stores that pay rent for space in the mall properties.

Philadelphia is not the only community that has created its own currency to increase local solidarity. You can find local currencies in the Berkshire region of Massachusetts, Seattle, Portland, and Traverse City, Michigan.

I’d be concerned about counterfeit currency. Official government currency like the U.S. dollar is though to counterfeit effectively due to a large number of security measures, but it seems to me that this technology is not readily available to whatever printing services are used by communities that offer their own currency. Of course, since the U.S. dollar is incredibly popular, more counterfeiters aim at overcoming the security measures. Thus, popular currencies may be subject to fraud more than a community currency, but the concern still exists.

Would you use a local currency to replace some or all of your U.S. dollar use in your community?

Images_of_Money

The original version of this article, Local Currencies to Replace the Dollar in Communities, is copyrighted by Consumerism Commentary.

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Using cash back credit cards is rewarding in two specific ways. First, you’re earning money when you spend. That’s the obvious part. But when you know that you’re getting a rebate when you use your credit card, you also feel better about spending than you would otherwise. Feeling good can be dangerous, as you might make mistakes like spending more than you should while chasing that good feeling.

That’s why I’ve identified ten traps for using cash back credit cards. The issuers know that many people will fail to handle their credit cards properly, and the resulting profit from customers’ mistakes helps pay for those cash back rebates.

Credit card users are generally aware of these traps and can avoiding them, but sometimes other problem occur, beyond the spenders’ control. Consumerism Commentary reader SteveDH recent encountered a problem with his cash back credit card.

Here’s his story:

When I received my last VISA statement it showed that I had redeemed $275 in Cashback awards — I hadn’t. I got in touch with my bank and also started looking at all of the web pages and we found the someone had added a “Transfer Account” from GE Capital Retail Bank in Draper Utah to the redemption page and apparently requested the redeemtion. The information that they had to enter was the ABA number and account number. That’s how I know which bank it is even though only the last four digits of the account number were there. How they got to the redeemtion page without going through my login (which my bank says wasn’t compromised) is a mystery.

Although my bank killed the credit card and promised to apply the missing money to the new VISA card, I’m stilling waiting for final resolution. I download into Quicken almost everyday but I hadn’t even thought of checking rewards balances. In fact I’m amazed I noticed it on the statement this month. Yet another example of the crooks out there — some are pretty darn creative.

This is insanity. Cash back rewards should be something consumers should be able to forget about; they should be able to trust that each purchase earns the correct cash back amount (it occasionally doesn’t) and that the cash back will be there when you retrieve it. It’s a mystery how this redemption bank account was added to the cash back rewards page without SteveDH’s account being compromised. Perhaps it was an inside job.

I confess that I rarely look at my accrued rewards balances. As I primarily use airline miles rewards cards now, I generally see my rewards only when I visit Continental’s and United’s websites. The miles I earn from spending are deposited monthly, and I’ve not yet noticed any discrepancies. Cards that earn cash back, however, can be less organized.

Since cash back information is not downloaded into Quicken or reported in other software like Mint.com, it takes extra effort to verify your cash back is accruing correctly and is available according to the rules of your agreement. Don’t forget to check once in a while. You won’t be able to prevent every problem, but you’ll be able to report it to your issuer promptly, and hopefully have the problem resolved without difficulty.

Thanks for staring the story, SteveDH. If any other readers have stories to share, please contact me.

The original version of this article, Cash Back Rewards Stolen, is copyrighted by Consumerism Commentary.

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Today on the Consumerism Commentary Podcast, Tom Dziubek talks to Jenny Kerr, founder of The Jenny Pincher.

Jenny talks with Tom about how married women can better prepare themselves financially for a divorce. Some of the items she discusses are keeping individual checking accounts, knowing where the money is and being prepared to start a new job.

Table of contents

[00:00] Introduction from Tom Dziubek
[00:38] Interview with Jenny Kerr
– [00:49] Jenny’s inspiration for article
– [03:15] Individual bank accounts
– [05:34] The need for a joint account
– [06:13] Funding the individual account
– [07:33] The individual account for emergency access
– [08:57] Know where the money is
– [10:27] Keeping your resume current
– [12:06] Part-time work
– [14:21] Understanding the necessities
– [15:24] Knowing what benefits are tied to your spouse
– [16:40] Identifying policies your spouse could benefit from
[19:13] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

The original version of this article, Podcast 145: Protecting Individual Finances in a Marriage, is copyrighted by Consumerism Commentary.

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Do people have any kind of control over whom they fall in love with? Perhaps Cupid’s arrow strikes randomly, and there is no choice but to obey the heart — or chemicals in the brain — or sexual urges. But once that initial response has subsided, if you and your partner are headed for a life-long or major long-term relationship, there should be some discussion about money.

What role does that discussion have in determining the path of your relationship?

A recent study explains that opposites don’t attract in relationships. If you’ve ever looked at relationships where each member of the couple is on a different side of a money-related philosophy, you’ve probably suspected this to be the case. A habitual spender in debt and a frugal saver could have a relationship full of conflict; or, if to avoid conflict money is never part of a conversation, the financial damage could be worse in the future.

Avoidance of tough discussions about money, deliberately hiding financial problems, and outright lying about a financial situation could be more damaging than the financial problems alone. When everything is out in the open, and the couple is fully aware of their individual finances, would a difference in philosophy be enough to curtain the relationship before it progressed to a more serious state?

Ginger, who wrote a guest article for Consumerism Commentary, argued that smart women should marry for money. Although the article was misunderstood by many readers, she was not saying that women should marry for quantity of money, but for their approach to money. A smart, independent woman shouldn’t need to take care of a husband as if she were his mother. The same may be true for men, though traditional sex roles tend to make the man-supporting-woman paradigm more acceptable.

There is more that goes into a successful relationship that being financially compatible. Differences in religion, social issues, values, and goals are important to address. This is a financial website, though, and readers are generally focused on their thoughts surrounding money. In planning to move a relationship forward, how important is a compatible philosophy of money when compared to other matters that define compatibility? Would you be willing to accept a difference in opinion about a divisive political issue before you accept someone who doesn’t share the same financial values? Or do you feel that you might be able to sway your partner’s approach to money more easily than changing other philosophical differences?

I’m interested in hearing opinions from every reader. What was or should be the role of money in choosing a relationship? Leave your comments below.

Photo: Dragunsk
Wired

The original version of this article, The Role of Money in Choosing a Relationship, is copyrighted by Consumerism Commentary.

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There’s a chance you could become a multi-millionaire after repeatedly slamming your head into other people and suffering through the resulting mini-concussions and minor brain damage, but not everyone can be a professional football player in the NFL. There’s a safer and less harmful path toward financial independence.

Cognitive ability is an important part of your human capital, and your human capital measures, among other things, how likely you’ll be able to support yourself financially, particularly through difficult economic times. Cognitive ability is important because many jobs requiring intricate skills and the best careers that offer opportunities for advancement require the ability to learn and adapt, and that’s the core of cognition.

The ability for the brain to process information changes throughout one’s lifetime, and without stimulation, cognitive ability can decline. When companies like Google or SAS ask puzzling interview questions, they’re testing, among other things, cognitive ability. To be hired as a software engineer, you would need to show that you have a strong command of whatever primary programming language is popular at the time, but in an industry that changes so quickly, strong cognitive ability will show that you can learn and adapt to the changing environment.

The key is instilling cognitive ability in children at an early enough age. As we get older, we can continue to refine cognitive ability, but only to a small extent. These tactics may no longer work for me; the best adults can generally do to keep cognitive skills sharp is to get enough sleep and exercise, and eat nutritious food.

If you’re interested in helping your child prepare for a life full of challenges, there are some tactics you can employ.

Learning a new language

As a child, I enjoyed learning languages. I never became fluent in anything other than English, but I enjoyed the process of learning the rules. As a kid, I was fascinated by languages, and spent time learning a little bit of as many as possible. Like many kids, I learned a little Spanish from Sesame Street. I learned Hebrew and tried to teach myself Yiddish. I studied Latin in middle school, was taken out of usual classes to study Greek independently, and took five years of German. I learned programming languages like BASIC, Pascal, lisp, and C. And as a younger kid, I dabbled with creating my own languages and codes.

Music and mathematics have features in common with languages, as well. Music, particularly learning to play an instrument instead of just listening to Mozart, has been shown to improve cognitive ability.

As an adult, learning a new language or a musical instrument is a time-consuming task. There are programs that help frequent travelers learn languages quickly, but you could get a bigger cognitive benefit by learning a language through a more academic curriculum or through immersion. Rather than focusing on key phrases that help you get by in a foreign land, incorporating a new language into the way you think can help keep your brain active. On the other hand, young children, even those learning their first language or languages, can often learn multiple languages concurrently without being confused. Language skills not only improve cognitive ability, but they can make someone a more marketable employee around the world or increase the chance of international success in their own businesses.

Completing puzzles

Elementary school is a great time to focus on solving puzzles whose solutions require thinking “outside the box.” I seem to remember this being called “lateral thinking” when I was younger, but I don’t know if that term is widely used today. These are the types of puzzles that stymie job applicants at companies like Google. But puzzle solving as an adult won’t have the same impact as puzzle solving when the brain is at its most impressionable.

• Logic puzzles are kind of like the game Clue. You often have two or more dimensions to work with, and the goal is to pair each of the dimensions together based on a limited number of clues. A grid helps eliminate incorrect pairings to discover what’s correct. The more dimensions included in the puzzle, the more brain power necessary to solve the puzzle.
• For a child, a Rubik’s Cube can be an engaging puzzle. While the answer now comes packaged with the toy, and there are numerous Youtube videos describing how to solve the puzzle in about twenty moves, the cognitive challenge is in working to find patterns of movement that move closer to the result.
• Text adventure games open up a child’s mind to being able to control their environment. Video games have changed since I was a kid, but I enjoyed the early text adventure computer games like Scott Adams’ Adventureland. (Classic game lovers can play Adventureland here.)

Reading and writing

Reading and writing help develop important cognitive skills focused on processing information the same way they’ll need to make sense of problems as adults. Writing, particularly creative writing, improves the command of language and can help children find clarity when expressing their ideas. Writing is a skill that will easily set someone apart from the competition, as might be necessary in tough job markets. I’ve personally seen atrocious written communication among co-workers throughout the many jobs I’ve had. I will never say I’m a great writer, but these skills are lacking in my former non-profit and corporate environments.

When I compose a well-worded communication, the supervisors shouldn’t be surprised. Every employee with a college education should be able to express himself or herself somewhat eloquently.

These cognitive skills nurtured at an early age can help prepare children for financial success in life. The best careers need smart and flexible employees to take on unforeseen challenges. People often predict what the hottest careers may be one generation from now, but the specific opportunities are irrelevant if children are prepared today to handle any problem that presents itself.

What did you do as a child to improve your cognitive ability? If you have children, how are you helping them prepare for the future?

Photo: Don Wright

The original version of this article, Improve Your Child’s Cognitive Ability for Income Potential, is copyrighted by Consumerism Commentary.

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Cash back credit cards can help consumers practice responsible spending while earning a little extra for their efforts when used properly. It wasn’t long ago that the best cash back credit cards were offering rewards as high as 5% for all purchases, but that is unfortunately no longer the case.

Today’s cash back credit cards are all similar in nature, generally offering 1% cash back on all purchases. However, if you look hard enough, you’ll find a number of credit cards with higher cash rebates than just 1%. This article lists the best cash back credit cards you can find today, and I update the article when there is new information to share. Along with a brief description of each of these best cards, I have included the cash back percentages and any tiers or restrictions, so there are no surprises if your cash back credit card isn’t earning as much as you first thought. Keep in mind that in order to make credit card with rewards program worthwhile, you must avoid interest charges and late fees by paying your bill on time and in full every single month.

Editor’s choice

Chase Freedom® Visa – $200 Bonus Cash Back. The Chase Freedom Visa – $200 Bonus Cash Back offers a standard 1% cash back on all purchases, as well as the opportunity to earn 5% cash back on select purchases throughout the year, subject to a maximum. Every three months, the categories in which you can earn 5% cash back change, so for example January through March could be gas stations and Amazon.com, April through June might be grocery stores and movie theaters, July through September could be gas stations and restaurants while October through December could be hotels, airlines, Best Buy and Kohl’s. In order to qualify for the 5% cash back, you must have an account in good standing and follow the terms and conditions set forth by Chase. Categories will be announced to cardholders before they happen, so look out for updates from Chase.

The Chase Freedom® Visa – $200 Bonus Cash Back also offers up to an additional 10% cash back (up to 11% total cash back) on purchases made at select merchants when you shop online through the Chase website. The card also carries no annual fee. To qualify for the $200 cash back, you must spend only $500 during the first three months, making it the easy choice for best cash back credit card.

Chase Freedom® Visa – $100 Bonus Cash Back + 0% Intro APR. Like the above offer, the Chase Freedom Visa – $100 Bonus Cash Back + 0% Intro APR offer combines a powerful cash back program with a strong introductory offer. In order to qualify for the $100 bonus, new cardholders must spend $500 during the first three months. The bonus will be supplied in the form of 10,000 points, and these points can be redeemed for a $100 check. The card also offers a 0% APR for an introductory period of one year for balance transfers and of six months for purchases. After the introductory periods, purchases and transfers are subject to a variable APR currently between 11.99% and 22.99%.

The cash back program is identical to the program provided with the first offer listed here, and is standard among all Chase Freedom offers.

Discover® More Card – 18 Month Promotional Balance Transfer. The Discover® More® Card has a tricky cash back rewards program. For the first $3,000 in purchases, cardholders will earn 0.25% cash back then 1% on all purchases after that. Just like the Chase Freedom® Card, the Discover® More® Card offers 5% cash back on rotating categories throughout the year, but there is a cap on the amount of money you can earn with 5% cash back. If you’ve reached your limit, you will only receive 1% on all remaining purchases. If your account is inactive for 18 months or you fail to make your minimum payment for two consecutive months, all rewards will be forfeited. Finally, warehouse purchases (like Costco or Sam’s Club) will always earn 0.25% cash back, no matter what spending level you have reached.

This version of the Discover More Card comes with a 0% introductory offer on balance transfers for 18 months, one of the longest offers available, and there is no annual fee.

Discover® Open Road – $150 Restaurant.com Gift Certificate. After earning 0.25% on the first $3,000 spend using the Discover Open Road Card, cardholders begin earning 1% cash back on all purchases. Gasoline expenses and purchases in restaurants, on the other hand, earn 2% cash back for the first $250 spent in those categories. If you live your life on the road, traveling from town to town and paying your credit card in full every month, this could be a beneficial offer. For a limited time, Discover is offering new approved members a $150 gift certificate for Restaurant.com.

Discover® Motiva Card. The Discover Motiva Card offers a cash back program similar to the Discover More Card. Earn 0.25% cash back on the first $3,000 spent using the card and 1% cash back thereafter. There is a unique twist; 5% of any interest charges are credited back to your account. For example, if you pay a $10 interest fee one month, you’ll receive $0.50 cash back. Keep in mind that cash back reward programs are most effective when you do not carry a balance from month to month, but if you’re working on paying down a large balance, this could help reduce your interest cost.

Citi® Dividend Platinum Select® Visa® Card – $200 Cash Back. The Citi® Dividend Platinum Select® Visa® Card is a close runner-up to the Chase Freedom Visa for best cash back credit card because it includes a $200 cash bonus after spending $500 in purchases during the first three months. The card offers something very similar, with 1% cash back on all purchases and 5% cash back on rotating categories. You may earn up to a $300 annual maximum but note the $100 cash back offer as well as cash back earned on purchases through the Citi Bonus Cash Center are not subject to your annual maximum. There is no introductory period with lower APRs on purchases or balance transfers with this version of the Citi Dividend Platinum Select Card.

Discover® More Card – $0 Balance Transfer Fee. This offer is identical to the Discover More offer listed above. Discover is offering the same rewards program. Rather than an extended introductory period for balance transfers, this card eliminates the all-too-common balance transfer fee. With most credit card offers today, a balance transfer fee prevents cardholders from using balance transfers as arbitrage, earning interest on borrowed money from card issuers. This is still a difficult game to play, but for cardholders interested in paying off significant credit card debt, transferring the balance to a 0% APR credit card could save hundreds or thousands of dollars in interest. With this offer, the 0% APR introductory period for balance transfers is only 12 months.

Citi® Dividend Platinum Select® Visa® Card. Like the Citi Dividend Platinum Select Visa Card offer described above, this card offers 1% cash back on all purchases and 5% cash back on rotating categories throughout the year. The cash back is limited to $300 annually, but this offer includes a $100 bonus after spending $500 during the first three months of owning the card, which is earned above and beyond the cash back. This is less than the $200 offered above, but this card compensates with a 0% introductory offer on purchases and balance transfers for 12 months and carries no annual fee.

Blue Cash Everyday℠ from American Express. Of all the cash back cards available, this offers the possibility of earning maximum rewards. The Blue Cash Everyday℠ from American Express Card offers $100 cash back bonus after spending $1,000 in eligible purchases in the first three months as well as 3% cash back on supermarket purchases, 2% cash back on gas and department store purchases and 1% cash back on everything else. This card is a new version of the standard Blue Cash Card and it even offers a $25 referral bonus. Blue Cash Everyday℠ from American Express also includes a 0% introductory offer on purchases for 12 months and carries no annual fee.

True Earnings® Card from Costco and American Express. The True Earnings® Card from Costco and American Express has a tiered cash back program. Cardholders can earn 3% cash back on gasoline purchases, 2% cash back on travel and restaurants, and 1% cash back on everything else, including warehouse clubs like Costco. Once you’ve spent $3,000 in annual gasoline purchases, your rebate falls back down to 1%. There are no limits to cash back received on restaurants and travel. In addition, the card comes with an introductory rate of 0% on purchases for six months. If you have a Costco membership, the True Earnings® Card from Costco and American Express carries no annual fee.

IBERIABANK Visa® Gold Card. The IBERIABANK Visa® Gold Card made this list for a few reasons. First, the card offers a flat 1% cash back on all qualifying purchases. Second, there is no annual fee associated with this card, so it’s an inexpensive option. Lastly, this card offers a low interest rate. Customers receive an APR of 9.25%, 12.25% or 15.25%, which is about as good as you can do these days. The IBERIABANK Visa® Gold Card is a plain cash back credit card, without anything special, just a very solid offer.

PenFed Visa Platinum Cashback Rewards Card. The PenFed Visa Platinum Cashback Rewards Card offers 5% cash back on gasoline purchases paid at the pump except fuel purchases for airplanes and boats which receive 1% cash back. Certain restrictions may apply. Earn 1% cash back on all net purchases. The card also has a reasonably low interest rate with no annual fee. The catch is that you have to be a member of the Pentagon Federal Credit Union. That means you must be a United States Government employee, member of the United States Military and Uniformed Services, employee or volunteer of the American Red Cross, or a family member/housemate of a current PenFed member. Or, another option to establish your membership eligibility to Pentagon Federal Credit Union is, you may become a member of the National Military Family Association, or Voices for America’s Troop (there is a low one-time fee to join one of these two organizations).

If you’re holding on to a cash back credit card that you feel deserves to make this list, let me know by leaving your thoughts in the comments below. If the offer is good, I’ll add it to this best cash back credit cards list.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

The original version of this article, The Best Cash Back Credit Cards, February 2012, is copyrighted by Consumerism Commentary.

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It’s not often that a young, female star of music, movie, and television can avoid financial scrutiny. Tales of financial woe tend to be much juicier, anyway. It’s not difficult to remember the Britney Spears train wreck. She couldn’t handle earning more than $700,000 a month. At least her antics kept her in the news.

I’ve been recently enamored with Zooey Deschanel. She’s a fine actor and a fine singer; I own her three albums on vinyl — including a Christmas album, something of a stretch for me. But today I learned something that increased my respect for her: she spends responsibly. According to the financial disclosure she included when she filed for divorce last year, obtained by TMZ, she keeps her spending under control.

That’s not to say she doesn’t spend extravagantly. According to the disclosure, she pays $4,000 per month for a mortgage ($3,000 of which is interest on the loan), $1,000 per month on groceries, $1,000 on entertainment, and $2,600 on clothes including laundry. In all, Zooey spends more than $27,000 a month. That’s not exactly frugal living.

That doesn’t tell the full story. The actor also disclosed that she earns $95,000 per month. She owns her own businesses:

• Oscar Jaffe Productions, a loan-out company. This is a type of organization used in entertainment so that when a film or television producer hires an actor like Zooey, the production company pays the actor as a corporation, not as an employee. Since the actor wouldn’t be an employee, it reduces the tax liability for the company producing the show or movie (all other things being equal).
• She & Him LLC, a music licensing company. Again, with a corporation owning the licensing rights to her music, there might be some tax advantages above and beyond what might be the case if Zooey were to own the licensing rights herself.

From the earnings of these two businesses, she passes $95,000 to herself as income. All of Zooey’s expenses, including debt, add up to less than 30% of her pre-tax income. That’s not bad — but it’s not too hard to accomplish when you have $95,000 per month to work with.

Photo: breezy421
TMZ [pdf] via Well Heeled Blog

The original version of this article, She Spends Less Than She Earns: Zooey Deschanel, is copyrighted by Consumerism Commentary.

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While the mainstream financial industry has faced a dizzying array of government and quasi-government regulations through most of the last one hundred years, non-bank financial products have, for the most part, evaded regulations. Catering to lower-income communities, payday loan storefronts and check cashing establishments have managed to justify their business models. The more desperate you are to pay your electricity bills and your rent before your power is turned off and you’re evicted, the more likely you are to willfully ignore the fact that the companies helping you are taking advantage of you in ways that a traditional bank would never be allowed to do.

The Consumer Financial Protection Bureau (CFPB) is now charged with recommending new regulations that go beyond retail banks, thrifts, investment banks, and credit unions into the murky world of non-bank financial products.

If you compare a short-term payday loan with a loan from a bank, you might see that the payday loan’s equivalent interest rate (APR) is 450% or even higher. Mortgages tend to be 3% to 7%, business and personal loans could be 5% to 10%, and credit cards are 10% to 20% unless you default. Anything higher, and the loan might be considered usurious. So how do payday lenders get away with charging 450% or more?

Well, these lenders frame what they charge as a flat or sliding fee, not interest. The loans are typically due in two weeks, the expected arrival of your next paycheck. It might not be fair to compare these fees with interest rates, because the borrower doesn’t hold onto the loan for a long time.

Or does he? There’s some evidence suggesting payday loans create a cycle; rather than paying off the loan when the next paycheck arrives, lenders offer an enticing deal to encourage borrowers to begin the next loan. The two-week cycle repeats.

The CFPB wants to hear from people who have had experiences with payday lenders. In order to get a good grasp on how non-bank financial products can and should be regulated, the organization is seeking comments from the public. What have been your experiences with payday loans? Feel free to share here on Consumerism Commentary, or tell the CFPB your story directly.

Photo: bigburpsx3

The original version of this article, Consumer Financial Protection Bureau Wants Payday Loan Feedback, is copyrighted by Consumerism Commentary.

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Airlines Reporting Corporation (ARC), a company that processes airline transactions for travel agents and consumers, has analyzed 144 million transactions for domestic flights in 2011 to better understand airlines’ pricing schemes. The study found the lowest fares were available six weeks in advance of the departure date.

I’ve always been under the impression that the earlier you can purchase tickets for a flight, the better, but buying far in advance does not seem to be the best option when looking at the data. The study makes the case for planning ahead, but not too far in advance. The data also show that waiting until your departure date is just three weeks away can be financially damaging. Prices incline steeply once your departure date is three weeks away. The fare paid according to the study features another, steeper increase seven days before travel date.

Customers who purchased their airline tickets six weeks in advance received an average discount of about 6 percent off the average fare paid for that flight.

Not everyone has the luxury of planning six weeks in advance for a trip. Businesses often need to respond to changing travel needs, and are more likely to pay higher prices for a flight than a family planning a vacation.

I purchased tickets to my most recent round-trip flight, traveling from the east coast to the west coast for Thanksgiving, only seven days in advance. The flight cost $419 including all taxes and fees. It wasn’t the most expensive fare I’ve paid for this type of trip, and there was at least one slightly less expensive option available if I were willing to fly at an inconvenient time.

I haven’t done a great job of planning in advance. It could pay off to know where I will want to go six weeks in the future. I’ll try to keep that in mind if I intend to travel this spring. How far in advance to you plan your travel?

ARC [pdf]

The original version of this article, Buy Airfare Six Weeks in Advance, is copyrighted by Consumerism Commentary.

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For almost as long as I’ve been living without a human roommate, I’ve enjoyed the company of my cat, Rupert. I adopted Rupert from my friend who determined his newborn daughter was allergic to cats. He had already owned Rupert for a long time, and I knew I’d be the cat’s new owner for the second half of his life.

Rupert was fifteen or sixteen years old when I brought him to the veterinarian to have him put to sleep this weekend. His quality of life had been worsening over the last year, though trips to the vet didn’t indicate why he was unhappy or having health problems, nor could the vet offer any suggestions to help. His suffering seemed to increase in the past weeks, and I had to make the difficult decision.

For most of my years with Rupert, I commuted to my place of work every weekday, and I knew that he would be waiting for me when I returned home. In recent months, as I’ve been working from home, Rupert kept me company when he wasn’t sleeping during the day. There were times he was a pest, but overall, he was a very sweet cat who was always happy to provide companionship. I may find a new cat sometime in the future, but not until I can settle other aspects of my life.

Here are some articles from around the web that piqued my interest lately.

Are discount grocery stores worth the savings? The overall question is whether it’s always better to buy the least expensive option. Unless you need to budget down to the penny to avoid going into debt in the short-term, a long-term view of paying the best price for the most acceptable level of quality makes more sense.

How to find unlisted jobs and win every salary negotiation. Ramit Sethi offers advice on these issues millions of unemployed people are facing in today’s job market. The tips boil down to effective networking with potential colleagues and going above and beyond what’s required to show that you’re not just another candidate in a large sea of potential employees.

JT McGee offers 12 personality types of passive investors, modeled after Carl Jung’s work on personality types, as well as after David Keirsey’s combination of Jung’s work with theories of temperament dating back to classical Greece. The types suggested by JT aren’t necessarily related to the psychology of the investor, but they do help to categorize the various ways an investor can take a hands-off approach to investing.

Always be the underdog to get ahead. Financial Samurai offers advice: don’t make too big a deal over yourself, and you can take your goals — or, I suppose, your enemies — by surprise.

Suze Orman’s Prepaid Debit Card: A Lesser of the Evil Prepaid Options. In this article for GoBankingRates, I look at the Approved Card, marketed by financial guru Suze Orman, as a product on its own. It’s not the best option for its intended audience, but it certainly isn’t the worst, either. Suze received backlash because as a personal finance expert she should “know better.” Here’s my original evaluation.

The original version of this article, The Lonesome, Pet-Free Life, is copyrighted by Consumerism Commentary.

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An elegant answer to the over-complicated tax system is to shift the basis of the system from income to spending. There have been a variety of proposals to make this happen. It’s the core of the so-called Fair Tax and Herman Cain incorporated its concept into his 9-9-9 tax plan. Other proposals have called for a value-added tax similar to the system in the United Kingdom.

Working to earn a living contributes to society, as does investing in businesses. Taxes on income, whether wages or dividends, could discourage this type of economically-beneficial activity. Consumer spending also benefits the economy, though, and if this tax system discourages spending, it might have a negative effect on the economy initially.

Also, lower-income households and those who live paycheck-to-paycheck would bear a higher burden. When almost all of a family’s income is spent, this family would be taxed on a high percentage of their income. On the other hand, a corporate executive earning more than a million dollars does not need to spend all of his money. His tax burden is more affordable. Under today’s tax environment, someone with the means might put money into real estate, invest in businesses, and shelter assets in offshore accounts. Under the new system, a wealthy individual might stay away from buying houses if those transactions are taxed, while bringing more offshore assets back to the United States.

Rather than adding a national sales tax to determine consumption, one solution is to report all income, as is currently done, as well as all contributions to savings, just like what is done for IRA and 401(k) accounts. The difference between income and savings would be the basis on which the government levies the consumption tax. There could be a high standard deduction applied to the difference, so that lower-income families who are struggling to save do not need to pay an unaffordable tax bill, and so that the system remains progressive.

Reforming the tax system away from income tax is a tall order. Thanks to deductions for tax-advantaged savings, the income tax system has already begun to shift towards a focus on spending, but if you believe that the system could be vastly improved by focusing solely on consumption, the system has a long way to go before workers and savers aren’t punished by a tax collection system.

Would you prefer a tax system based solely on consumption?

Photo: exfordy
New York Times, Slate

The original version of this article, Fix the Tax System By Taxing Consumption, is copyrighted by Consumerism Commentary.

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Today on the Consumerism Commentary Podcast, Bryan J Busch talks to Andrea Woroch, consumer savings expert.

They discuss when and why it can be smarter to shop for certain items during the winter.

Table of contents

[00:00] Introduction from Bryan J Busch
[00:33] Interview with Andrea Woroch
– [00:51] Big appliances
– [02:42] Christmas wrapping, decorations and lights
– [03:18] Using and selling gift cards
– [05:06] Linens and bedding
– [05:45] Motorcycles
– [06:28] Suits, prom dresses and spring formal dresses
– [08:28] Video games and TVs, and consider ditching cable for a Roku player
– [12:55] Winter coats and winter sport essentials
– [13:50] Jewelry
– [14:58] Furniture
– [15:45] Don’t shop for the current season at the beginning of the season
[16:36] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

The original version of this article, Podcast 144: Best Things to Buy During Winter, is copyrighted by Consumerism Commentary.

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This is a guest article by Phil Cioppa of Arbol Financial Strategies, LLC. Phil has over 10 years of financial service experience and specializes in asset management strategies, insurance planning and taxation issues. A budget is an important part of any financial plan, and right now is the best time to take another look at yours.

Do you feel like your dollars don’t stretch as far as they used to? No, it is not your imagination. They don’t, because we are experiencing some of the most difficult economic times since the gas lines of the 1970s and the Great Depression in the late 1920s and early 1930s.

What does this mean for you? It means that it’s time to revisit your household budget to make sure that you are living within your means, that you are not wasting your hard-earned dollars on items you don’t need, and that you are setting money aside for what is really important.

What is really important? No, it’s not having the latest high tech gadget, a flashy new car, or more clothes to hang in your closet. It’s building and maintaining an adequate financial safety net for yourself so that you have the money you need to pay for setbacks and emergencies. For example, you lose your job, your employer decides not to continue paying for your health insurance, your car dies and you need to replace it, your child has an unexpected medical problem, your home needs an expensive repair, and so on. Without an adequate safety net, you may have to use credit cards to fund the unexpected, which could be devastating to your finances.

Saving for retirement is also really important. No matter how far away you are from retirement, if you don’t begin planning for it now, your inaction will come back to haunt you. No matter what –- put money aside for the future! When that future becomes “now,” you will be glad you did.

I know that doing all of this may sound like a tall order, but it’s non-negotiable. To start, re-evaluate your financial priorities, study your budget to figure out how your spending and your priorities line up, and then reduce your spending as necessary so that you can begin building a financial safety net as well as a retirement fund. And yes, doing this may require some sacrifice on your part.

If you have to spend less, examine your essential expenses, like food and other day-to-day costs of living. What can you reduce? Also look at the fat in your budget –- the stuff that you enjoy or think is nice to have, but that you really don’t need. What are you willing to give up?

Here are just a few of the kinds of questions you should ask yourself as you rework your budget:

• Is your current cell phone plan truly the best deal for you?
• Can you save money by bundling your phone, Internet and cable service? You’ll usually find that new account holders get the best deals so you may want to change providers.
• Have you explored whether you could purchase your electricity or gas from a less expensive source, assuming those services are deregulated in your state?
• Do you really need all of the TV channels you are paying for? If you changed to a cheaper package, would you miss the channels you eliminated?
• Are you paying too much for your insurance? Ask your insurance broker to evaluate your insurance needs and explore whether you could save by consolidating all of your insurance with one company.
• What about your vehicles? Can you get rid of one or them? And, how often do you use the motorcycle or boat you pay to insure?
• How much are you spending each week on restaurant meals, happy hours, and coffee drinks? If you take the time to add up those expenses, you may be surprised at your final total. Take the money you are spending on such nonessentials and use it to pay off your debt faster, or to increase the amount that you save each month.
• If you’ve been dropping thousands on vacations away, take vacations closer to home or even consider a vacation at home. Given rising airfares, you could save a bundle.
• Refinance your home. With interest rates at all time lows, you could realize a substantial savings by getting a new mortgage loan and paying off your current one.

Nobody likes to change their lifestyle, but nobody likes to be broke either or to come up short when it’s time to retire! The key to surviving and even flourishing in a down economy is to be realistic about your spending, to decide what your financial priorities and needs really are, to give up some of your creature comforts if necessary, and to save, save, save. It’s essential if you want more money in your pocket for today and for tomorrow.

The original version of this article, How Is Your Budget Doing These Days?, is copyrighted by Consumerism Commentary.

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There were rumors and predictions for a while, but today it’s official. Kodak, the company that revolutionized film photography and adopted digital photography early, has declared bankruptcy. The company has been struggling since the 1980s; I’m surprised it survived this long without filing Chapter 11.

That’s what the company chose to do today, with debt adding up to $6.75 billion.

I’ve been a fan of photography for many years, and I’ve begun taking this interest more seriously in the past few. I’ve taken a number of eight-week photography classes offered by a local arts organization, and the classes have been helping me improve my art. They have also inspired an interest in old-fashioned film photography. While I still use digital cameras (mostly a Canon 1D3, purchased used), I also use a Mamiya RZ67 Pro II medium format film camera, also purchased used. Just in the last month, I decided it would be more frugal and more fun to develop black-and-white film myself instead of spending the money to a professional lab nearby.

Despite owning all the equipment I have — in addition to various cameras I have studio equipment like lights and backdrops — my struggle is to find the time to focus on photography.

While Kodak will continue to operate during the company’s Chapter 11 reorganization, the future of some of the best Kodak products is uncertain. There is no great alternative for photographers who like using Ektar and Portra color film and Tri-X black-and-white film; competitors’ products, like those produced by Fuji or Ilford are different. Now could be a great time to stock up on Kodak film; if it becomes difficult to purchase, the value could increase. Film has a short shelf-life, but many photographers are fine with purchasing expired film.

CNN

The original version of this article, Kodak Files for Bankruptcy, is copyrighted by Consumerism Commentary.

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During the recession, my employer, a firm in the financial industry, eliminated raises for employees at the Vice President level and above for one year. The company, although continuing to perform well compared to its peers, cut back bonuses and other benefits. It’s easy for employers to demand higher productivity for less compensation when the job market is stagnant and the economy is threatened.

“You’re lucky to have a job” was the prevailing attitude. Many of my co-workers had family members or knew people who were out of work during the recession, and there was a lingering fear that, particularly after some internal consolidation, any of us could be out of our jobs at any time. Some were holding onto their jobs for dear life.

The power balance between employer and employee is always tilted in companies’ favor, but never more than during a period when the economy is falling apart. Unemployment may be at 8.5%, lower than during the height of the recession, but this is still high, and employees are still willing to put up with cutbacks just to keep their jobs.

What appears to be a short-term gain for an employer — reducing expenses in human resources, salaries, and benefits — can be a long-term loss. The recession ushered in a period of New Frugality. Consumers used credit cards less often and companies cut back spending and hoarded cash. The corporate balance sheet was important, and companies appeared stronger by reducing expenses to ensure profits for shareholders. Employees suffered as a result, and the stagnant — or in some cases, decreasing — compensation will not easily be forgotten.

Eventually, the job market will swing in the other direction. The top talent will feel no loyalty to the company that didn’t respect its workers during the recession, and they will leave for greener pastures.

The Wharton School highlights several recent surveys, showing that the short-term gains companies achieve by neglecting the benefits of their employees will likely result in long-term difficulties.

• 36% of workers want to leave their companies.
• 43% of human resources managers are concerned top employees will leave.
• 35% of companies in the United States have smaller staffs than before the recession.
• Companies have replaced full-time staff with temporary workers.

Companies cut compensation more for lower-level employees than higher-level, because executives view the average working middle class employee as easier to replace.

A company’s employees, literally its “human resources,” are the most important assets that a company can invest in. Proper handling and training will present a great return on investment. Spending money to support and enhance the lives of and benefits for employees keeps them engaged. If an employee believes he or she was treated well and respected during a time of economic upheaval, when employees at other companies are sharing their stories of frustration, the employee is more likely to appreciate the employer.

How has your employer treated you over the past few years? Have your compensation and benefits been scaled back? Will you stay when you know it will be easier to find a job?

Photo: dslrninja
Wharton School of the University of Pennsylvania

The original version of this article, Frugal Employers Will Lose Their Talent, is copyrighted by Consumerism Commentary.

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It’s no surprise that politicians have difficulty relating to their constituents. When Mitt Romney was asked about his finances, he admitted two facts that would sound strange to most listeners.

• Romney considers what he earned from speaking fees in one year, $362,000, as “not that much.”
• Like most individuals who earn most of their income from investments, Romney’s effective tax rate is closer to 15 percent.

For Romney $362,000 may not be that much. His net worth is estimated to be between $85 million and $265 million. The most that income from speaking can increase his net worth each year is by 0.4%. That is a drop in a very large bucket. I can understand why Romney would say that this amount is not that much. For him, it’s practically nothing.

For most people, though, $362,000 is a significant amount of money. This small portion of Romney’s annual income could support ten families or more of four members for one year. “Not that much” is relative.

When President Obama proposed the Buffett Rule, a tax on millionaires to pay a representative share of the tax burden, he had people like Romney in mind. Buffett has pointed out that his effective tax rate is lower than his secretary’s, and this happens when most of an individual’s income comes from investments. Investment income, like dividends, as well as carried interest, is taxed at a 15 percent rate rather than the sliding scale used in the tax brackets for ordinary income. People who earn high enough salaries and wages pay higher tax rates than individuals who make a living off investments.

To compare Romney with his political peers and competitors, Governor Rick Perry has indicated his effective tax rate in 2010 was 23.4 percent, and that rate is closer to what most middle-class Americans might pay in any one year. Rick Perry is the least wealthy of all the presidential hopefuls, with a net worth between $1 million and $2.5 million. President Obama and his family paid an effective tax rate of 25 percent in 2010.

How does your effective tax rate compare to Mitt Romney’s?

Update: ABC News just broke the story that Mitt Romney has made judicious use of an offshore tax haven in the Cayman Islands to shelter his assets from the U.S. Treasury.

Tax experts agree that Romney remains subject to American taxes. But they say the offshore accounts have provided him — and Bain — with other potential financial benefits, such as higher management fees and greater foreign interest, all at the expense of the U.S. Treasury. Rebecca J. Wilkins, a tax policy expert with Citizens for Tax Justice, said the federal government loses an estimated $100 billion a year because of tax havens.

Christian Science Monitor, ABC News

The original version of this article, $362,000 in Income: Not That Much for Mitt Romney, is copyrighted by Consumerism Commentary.

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Financial planners just love promoting 401(k) retirement plans. They have quite a few benefits, notably a tax deduction for contributions as well as a tax deferral for contributions and earnings. They’re also one of the most popular vehicles for introducing the working middle class to the stock market, something that might not have been accessible to this group in the decades before the 401(k) plan was established.

In addition to financial planners, fund management firms and plan administrators love 401(k) plans, and their love knows no bounds. Companies pay significant fees to other companies that operate and manage 401(k) plans. More fees are embedded in the funds within the plans, benefiting each fund’s management team.

The tax advantages, as well as a potential matching contribution if an employer offers one, offset some of the drawbacks of 401(k) plans.

1. Fees.

As already mentioned, most 401(k) plans are subject to fees, many of which are not immediately apparent to the investor. If you bother to read the prospectus associated with each fund you choose to invest in, you may find an expense ratio listed. If you do, there’s a good chance it’s higher than a comparable index fund. My former employer included investment choices that were annuity products disguised as mutual funds, and these didn’t have expense ratios listed. It was nearly impossible to determine how much of my investment I was losing to funds each year.

While fees are higher with 401(k) plans than with pensions, pensions offer a stable, predictable return. 401(k) performance depends on the investment choices and the associated markets. Pensions, when they are fully funded, tend to be more stable.

2. Employers are hands-off.

As the popularity of 401(k) plans grew, pension plans disappeared. A 401(k) is considered a “defined contribution” plan, while pensions are considered a “defined benefit” plan. That comes from the idea that the 401(k) balance is affected each payroll period by a contribution from the employee, while the pension balance increases at regular intervals by a contribution from the employer — a benefit of working at the company.

The value of a pension also tends to increase as the length of service at one company increases. As the popularity of pensions and other loyalty benefits decreased over the last couple of decades, employees had a decreasing incentive to stay at one company for their entire career. With pensions being a smaller part of most employers’ benefits, they do not need to worry as much about the solvency of these accounts. At the same time, it is up to the employee to make the right investment choices in a 401(k).

3. Automatic enrollment.

The advent of 401(k) programs brought on an increase of the nation’s wealth tied up in the stock market. That’s more income for money managers. It also creates a higher demand for investments, raising prices somewhat artificially. But there has also been a more recent increasing trend of employers automatically enrolling new employees into 401(k) plans once they are eligible. It’s a great idea to stimulate a better possible retirement outcome, considering many employees might not bother to elect to invest in a 401(k) immediately, even if they intend to.

Usually, any mechanism that automates your finances is a good thing. But too much automation can create complacency. It’s important to be aware and know what’s going on with your finances rather than blindly accepting what someone creates for you. You might be better off with an increased deferral rate than the default, or you may need to cancel your 401(k) contribution before it begins to improve your cash flow for necessary expenses.

4. Automatic allocation.

Like automatic investment, automatic allocation can be a trap. Some plans will, if the employee doesn’t elect specific investments, direct all contributions to a money market fund. Any investor could probably be better off in a high-yield savings account than a money market fund managed by a large investment house, even taking into the tax benefit of a 401(k) plan.

Furthermore, some plans will automatically invest your funds in a mix of stocks and bonds, with the percentages based on your age or your expected retirement date. This may or may not be appropriate for your situation, and importantly, it doesn’t take your outside investments into account. For example, if you plan on retiring 35 years from now, your 401(k) plan might recommend an investment of 90 percent stock funds and 10 percent bond funds, but if you already have a significant investment in stocks, your overall portfolio may be closer to 95 percent stocks and 5 percent bonds.

5. Loans.

With a 401(k) plan, you can loan yourself money. This sounds like it should be a benefit. In some cases it is, but often 401(k) loans end up being detrimental to someone’s finances. If there is an emergency and you cannot pay back the loan either on time or at all, you can face fees and penalties. If you lose your job with a loan outstanding, the entire remaining loan balance could become due immediately.

Overall, 401(k) plans can help the working middle class retire somewhat comfortably. And there is the possibility for investors to succeed financially significantly more than they might have with a comparable pension. The burden for performance has shifted from the employer to the employee, and that requires a little bit of financial education that might not have been as necessary (though still beneficial) in the heyday of pensions.

Photo: Yo Spiff

The original version of this article, 5 Reasons to Beware 401(k) Retirement Plans, is copyrighted by Consumerism Commentary.

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This is a guest article by Jennifer Calonia, Junior Editor at GoBankingRates. In the article, the author encourages couples in failing relationships to break-up before holidays and their obligatory expenses are imminent.

While it may sound like the antithesis of romance, calling it quits with your other half before the Valentine’s Day can be advantageous to your heart and your checkbook. Gift-giving and travel (if your significant other is across country) on Valentine’s Day is poised to destroy the savings of those who are too apprehensive to raise the white flag of surrender when it comes to their dead-end relationship.

According to a 2010 report by graphic designers Lee Byron and David McCandless, more couples break up toward the end of the calendar year–peaking two weeks before Christmas and the month after Valentine’s Day.

The data were gathered by conducting a year-long search on Facebook statuses which included the words “break up” or “broken up.”

Many argue that data used by Byron and McCandless is drawn from a highly defined sample pool, noting that most Facebook users are younger in their years. Despite that limitation, this study raises significant questions for those in the midst of a turbulent or stagnant relationship.

Break up to save money on gifts and travel

As the saying goes, “breaking up is hard to do,” but it could be a wise financial decision to opt out of your relationship if it’s already hit a brick wall. Instead of waiting for the report’s break-up peak after Valentine’s Day, why not face reality before February lands on your doorstep?

Observances like Valentine’s Day are among the highest-rated gift-giving holidays among couples next to birthdays. According to the National Retail Federation, in 2011, the average expense on Valentine’s Day gifts to a significant other was $68.98 — a figure that is on the rise.

Further, all of the subsequent holidays in the year (i.e. Thanksgiving, Christmas, New Year’s and a sprinkled birthday) present an open door for extra out-of-pocket travel expenses when planning to attend your partner’s family gathering or scheming a romantic getaway.

At the risk of being denounced as cold-hearted or even cheap, severing strained relationships before Valentine’s Day is at minimum, a savvy move for your wallet.

Broken heart: better investment

Seeking out and fostering a relationship with a partner is at its root an effort in finding a spouse. Stringing your significant other along when you don’t see a future ahead is not only by many people’s standards cruel, it’s a fruitless investment. Whether you’re dealing with emotions or finances, keeping long-term goals in sight are an important aspect of achieving success and happiness, overall.

Struggling relationships may not see another opportunity to break up until March, and time is money. There is never a “good time” to break-up, so biding one’s time after the holiday season and into Valentine’s Day is not the most effective approach in the long haul.

Break up with civility before February 14 comes around and open yourself up to a well-rounded year of improvements in 2012.

Editor’s note: I can’t say I’m a fan of making relationship or romantic decisions with finances as a trigger. Personal finance experts tend to see the world in terms of money; if you’re a hammer, everything looks like a nail, or so the saying goes. Obviously finances must be a consideration in major decision-making, and ending a bad relationship earlier rather than later is a better choice than lingering. The worst case scenario is losing a quality relationship over the cost of a bouquet of flowers or a meaningful gift.

The original version of this article, Save Money: Break Up Before Valentine’s Day, is copyrighted by Consumerism Commentary.

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Opinions are generally clear about why such a large percentage of the American population winds up in financial jeopardy. There’s no formalized way to learn how to use money properly and with the best results; most people learn by experience. It would save a lot of headaches if we could somehow warn people in advance that they’ll need to consider finances in their choices in their life in order to build wealth over time, and that lesson would have more meaning if we could somehow extol the virtues of financial independence.

Financial literacy advocacy programs try to address this problem. Encouraging good behavior with money at an early age could help increase the probability of achieving financial success in the future. With efforts conforming to this principle, some high schools offer money management classes while some companies like ING Direct offer tools to help younger students learn about money management. Neither of these approaches have been proven to have any long-term positive effect.

I’ve previously discussed the limitations with money management classes in high schools. First of all, if a child doesn’t receive the first lesson with money until he or she is a teenager, the student has already formed an attitude about money that will define the relationship during the important formative years when he or she later begins earning money for living for the first time. At the age when children are forming their money personalities, they are most influenced by parents. If the parents aren’t making an effort to set a good environment and example for handling money, it will negate any effect by a money management class as a teenager.

Most teachers are not trained in personal finance, so they cannot provide the best instruction. And without mandatory money management classes, only a small percentage of students will choose this class as an elective. Those who choose this class make this choice at the expense of other possible electives, many of which enrich the mind rather than purport to enrich the wallet.

At the same time, society can’t rely solely on parents to transmit good financial habits to their children, even if the right tools are provided by outside sources to help those parents.

The problem of poor money management skills manifests itself in lower-income communities more than middle-class areas. Change, in the form of professing the opportunities that one can enjoy through financial independence, must come from within the community. It’s important for successful individuals to be involved with the community, serving as a role model, particularly when parents don’t have the skills or resources to serve in that role. Poor financial management and a lack of economic mobility can become a cycle. As a child grows up without a great financial role model, he or she will continue to be poor role models to his or her children.

The only way out is to break the cycle, and the only way to break the cycle is for successful individuals to assume the job of parents as financial role models.

Photo: Pink Sherbet Photography

The original version of this article, How to Solve the Financial Literacy Problem, is copyrighted by Consumerism Commentary.

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Today on the Consumerism Commentary Podcast, Bryan J Busch talks to Kathy Pickering, Executive Director of H&R Block’s Tax Institute.

They discuss the difference between smart investments vs. emotional decisions, the importance of financial planning, and how most people are better off just buying an index fund and ignoring investment gurus.

Table of contents

[00:00] Introduction from Bryan J Busch
[00:34] Interview with Kathy Pickering
– [00:48] Do an annual review of life changes
– [01:26] Extending the Payroll Tax Holiday
– [02:43] Federally declared disasters and casualty losses
– [04:39] Energy efficiency credit (check the list at energystar.gov)
– [05:51] American Opportunity Credit for college students, tuition and fees deductions, and the Lifetime Learning Credit
– [08:16] Tax credits for adoption
– [11:10] Credit for some plug-in cars
– [12:10] Brokers are now required to report cost basis of the sale of stocks and securities
– [12:59] Health care reform affects on individual and small business taxes
– [17:59] Expired hiring credits
– [18:55] Changes to be aware of for 2013
– [21:31] E-filing is heavily encouraged and improved
[23:56] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

The original version of this article, Podcast 143: Tax Law Changes in 2012, is copyrighted by Consumerism Commentary.

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Here are a few articles I’ve spotted recently.

Are you superstitious? Superstitions can extend into your finances; the belief that the stock market’s performance on January 1 signals the performance for the entire year can be classified as a superstition. Frugal Zeitgeist offers a compilations of several superstitions and their origins.

I’m a customer of Amazon.com’s Prime service. It provides free two-day shipping on all items, not just those priced at $25 and above. A myth is circulating that Amazon Prime members are shown higher priced items by default, resulting in these customers spending more money than those without Amazon Prime. Money Beagle debunks the Amazon Prime myth.

Get Rich Slowly offers advice on fending off financial trolls. It seems like there are always some people who insist on attempting to sabotage your ideas, your reputation, or your finances. I like the way J.D. presented the idea that we have internal trolls, as well. Sometimes we must battle ourselves.

Krantcents explains how access to information and entertainment is ubiquitous.

My choices for the best credit cards in 2012 and thoughts on industry trends for the year was included in the latest Carnival of Personal Finance at Wealth Pilgrim. If you’re a blogger interested in hosting the Carnival, find out more here.

With the results of a customer satisfaction survey, Insure.com has developed a tool that lets you browse insurance companies to determine how they compare with each other from the customers’ perspective. The companies are rated on a five-star scale among several different criteria, including claims processing, customer service, and value. The tools covers auto, home, life and health insurance.

The original version of this article, Weekend Reading, is copyrighted by Consumerism Commentary.

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When politicians are campaigning, some try to reinforce the idea that they are similar to most Americans. Candidates for President of the United States try to avoid being labeled as elitist, because some sort of connection and kinship with their constituency is important for winning the favor of voters who aren’t already entrenched with a Democrat or Republican ideology.

Of course, the attempt to be viewed as an “average American” is nothing more than marketing and public relations. In order to find one’s way into the political arena at that level, you need to carry something that sets you aside from most Americans. And while money doesn’t guarantee a victory, it doesn’t hurt.

CNN has reported the net worth and income of the Republican presidential candidates as well as President Obama to see how they compare with each other. Like most Americans, they generally have wealth tied into their homes, but their investments, and in some cases, major liabilities and use of blind trusts, show that this crew lives in a world unfamiliar to most Americans.

Mitt Romney’s net worth is between $85 million and $264 million. This is a wide range; with lenient reporting requirements, it’s difficult to be specific. He earns most from dividends and interest on his investments as well as from speaking engagements. Romney includes horses and gold among his investments. According to the Federal Election Commission, Mitt Romney has raised $32 million for his campaign as of September 2011 (the latest data).

Jon Huntsman’s net worth is between $16 million and $72 million. CNN points out that Huntsman’s father is one of the richest men in the world, as has donated more than $1 billion to universities and medical research. Huntsman has raised $4.5 million for his campaign as of September 2011.

Newt Gingrich’s net worth is between $7 million and $31 million. Last year, Gingrich earned $2.4 million from his own company, Gingrich Productions, and most of his assets are tied to this company. He also has listed up to $1 million in liabilities in the form of a line of credit with Tiffany and Co. Gingrich has raised $2.9 million for his campaign as of September 2011.

Barack Obama’s net worth is between $2.8 million and $11.8 million. Thanks to sales of his books, Obama can count himself among the richest politicians. He also earns a $400,000 salary as President. Obama has raised $88 million for his re-election campaign as of September 2011.

Ron Paul’s net worth is between $2.4 million and $5.4 million. This includes a five-year personal bank loan of up to $500,000. As a fan of gold, Paul has major investments in companies involved with gold and silver mining. Paul has raised almost $13 million for his campaign as of September 2011.

Rick Santorum’s net worth is between $1 million and $3 million. Santorum’s wealth is in rental real estate properties. He also has mortgages comprising debt of up to $750,000 on properties with a value of up to $1.25 million. He earned $1.3 million from January to August 2010 as a contributor on Fox News and from the Ethics and Public Policy Center think tank. Santorum raised $1.3 million for his campaign as of September 2011.

Rick Perry’s net worth is between $1 million and $2.5 million. The “poorest” of all presidential candidates, Perry receives a $133,000 salary as the governor of Texas. He has a diversified portfolio of stock investments. Perry raised $17 million for his campaign as of September 2011.

Should the individual who represents the United States of America domestically and globally be a reflection of American society? Does wealth tie into that equation?

Photo: Maassive
CNN, Federal Election Commission

The original version of this article, How Rich Are the Presidential Candidates?, is copyrighted by Consumerism Commentary.

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Although the home mortgage interest deduction is one of the most oft-cited benefits of owning a home, most taxpayers don’t take advantage of it because it requires itemizing taxes. If itemized deductions including mortgage interest paid throughout the year exceed the standard deduction, a taxpayer can take advantage of the benefit.

The benefit isn’t as great as it sounds. If you pay interest, it certainly does help to get a tax benefit, but it rarely tips the balance of the long-term financial effects of renting vs. buying a house. Don’t let the real estate industry sway your opinion about owning a house through this faulty rationale. And certainly don’t decide to take out a mortgage if you were intending to buy with cash. Since this is a deduction, your taxes are reduced by only a percentage of the interest you pay, related to your tax bracket.

The home mortgage interest deduction is currently endangered. The Obama administration and Congress are looking for ways to cut spending, and this tax deduction is on the table for consideration. Some estimated put the cost of this deduction at $100 billion each year.

Despite the cost and its overstated effects, the tax deduction has helped convince renters to become homeowners — at least among people I have spoken with. In other words, for the cost of $100 billion, the economy has seen the benefit of a growing real estate market for many years. This law has made the National Association of Realtors, a lobbying group for the real estate industry, very happy, and they are working hard to prevent the government from eliminating the tax deduction.

There are many rules that determine whether you can claim the interest you pay on your mortgage for a tax deduction. The rules help ensure that the benefit goes to home owners rather than “investors” who earn a living from flipping houses, though due to market conditions the past few years, that activity has been less of an issue.

The interest you pay for construction, purchasing or improving your primary or secondary home, whether through a mortgage, home equity loan, or home equity line of credit, qualifies. There are limitations, though. You can deduct interest paid on up to only $1,000,000 of home acquisition debt. For home equity debt, which is any loan that was taken not to construct, purchase, or improve a house, you can deduct interest paid on up to only $500,000 of this debt or the fair market value of the home, whichever is less. For taxpayers who are married, filing separately, each of these limits is reduced by half.

Normally, the total of all of your itemized deductions are limited by income, but that income limitation was lifted in 2010. It could be lifted again if the benefit is not eliminated.

Question for homeowners: Do you take the home mortgage interest deduction? Question for everyone: Should this deduction be eliminated for the sake of reducing the national budget deficit?

Photo: Wonderlane

The original version of this article, Home Mortgage Interest Deduction, is copyrighted by Consumerism Commentary.

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It’s with a tinge of schadenfreude that people are fascinated with the failures and foibles of famous celebrities. Every year, the IRS chases people who evade or underpay federal income tax, and actors and popular figures in the media, who often don’t manage their own finances, make the news.

The latest is Lindsay Lohan. You may remember her from such films as Mean Girls, Freaky Friday, and Herbie Fully Loaded. TMZ has discovered that the IRS has obtained against Lindsay for almost $100,000, representing tax she didn’t pay for her income in 2009. Like many busy people, Lindsay employs an accountant to handle her finances, and she says the oversight will be handled immediately.

The sum Lindsay owes is small compared to the problems other celebrities have had with the IRS.

Wesley Snipes failed to pay up to $17 million to the IRS for his income taxes, not including penalties and interest. After his trial and a failed appeal, he was sentenced to prison for three years.

Nicolas Cage also blamed his accountant for his failure to pay a $14 million tax bill in 2010; even more recently, Nic failed to pay over $600,000 for a gift tax.

Pamela Anderson owed $2 million to the IRS and to the state of California.

Annie Leibovitz isn’t a movie star, but she is at the top of the list of famous modern photographers. She owed $2.1 million in back taxes, and pledged to sell her ownership of her photography to pay the bills.

Martha Stewart owed $220,000 to New York for taxes, but she believed she didn’t need to pay this tax because she didn’t spend time in that state.

Celebrities often have tax situations that differ from people who aren’t performers or professional athletes. They need to handle state tax returns for every state in which they’ve earned income each year, just like all taxpayers, but in any given year, performers may have earned income in a large number of states. Celebrities will almost always be too busy to handle their own tax returns, so they trust accountants to handle the paperwork and the payments.

On the other hand, it’s safe to say that some famous individual who owe the government money for failure to pay their tax bills are aware of the situation and are trying to skirt the law as much as possible, until they are forced to pay.

Photo: Rafael Amado Deras
TMZ via Don’t Mess With Taxes, New York Times, UPI, Back Taxes Help

The original version of this article, The Worst Celebrity Tax Problems, is copyrighted by Consumerism Commentary.

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I used to work for a company in the financial services industry. Another branch of the corporation I worked for is involved with institutional money management. This department manages institutional investments like company retirement plans and pensions. This is a service they provided to other companies of various types, much like Fidelity and Schwab offer 401(k) management and administration to companies. This could be considered an in-house service, so as an employee of the company, my 401(k) plan was managed by this branch of the same company.

You would think that given the company’s standing within the financial industry, the 401(k) plan would include smart investment choices. Unfortunately, most of the funds available are high-priced, actively-managed mutual funds and annuity funds. There is one stock market index fund available, but its expense ratio is significantly higher than those of the low cost index funds found elsewhere. Nevertheless, I wanted to take advantage of the company’s matching contribution — after all, that’s free money — as well as the tax savings, so I relented and participated in the plan.

401(k) plans — and 403(b) plans available to non-profit and educational organizations — suffer from poor investment choices. They are often significantly more expensive than the index funds you can find for IRAs. A fund’s expenses play a significant role in an investor’s ability to grow wealth over time. A low-cost fund could save an investor over a hundred thousand dollars over the course of a career when compared to a similar fund with above-average expenses. Even taking inflation into account, this will be a significant amount of money.

Schwab has announced that they are now offering a selection of new 401(k) investment choices designed to cater to investors who are keen on keeping more of their money in a program called Schwab Index Advantage. It isn’t clear from the announcement whether the available funds will match what’s currently available to retail investors, but if they aren’t the same funds, they should be similar in cost. The Schwab S&P 500 Index Fund has an expense ratio of 0.09%, lower than even Vanguard’s competing retail S&P 500 Index Fund with 0.17%.

The brokerage also offers companies the ability to provide employees with investment advice and planning tools for an unspecified low cost. The GuidedChoice system will help employees make ongoing decisions regarding their retirement investing, and this should help employees save more for retirement. It’s individualized advice, which isn’t common with retirement plans. Most employees are lucky if their retirement plan comes with a web application that helps them determine an asset allocation strategy; individualized advice could, if the advice is good, help investors grow their nest eggs in a way that’s most appropriate for their goals.

Are you satisfied with your 401(k) retirement plan, its choices, and its included advice?

Charles Schwab

The original version of this article, Schwab Creates Low-Cost 401(k) Fund Choices, is copyrighted by Consumerism Commentary.

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Misuse of credit can destroy a family’s financial life. A household can crumble under the weight of debt, whether it has increased from a poor house-purchasing decision, a drastic change in the real estate market, a shopping addiction, an unexpected medical bill, or the lack of preparedness for an emergency. It’s no surprise people consider debt to be “bad.”

Is there any situation where debt can be “good?”

I have a problem with the good debt vs. bad debt argument. Good and bad are polar opposites, and most issues tend to sit somewhere on a spectrum between two extremes. In fact, issues don’t often sit; they can shift position. The requirement to declare anything, particularly “debt” as a concept, as either good or bad is oversimplification. There’s a tendency to want to make issues simple. Catchy soundbites reducing issues to the most basic terms attract people, and no one ever won a Presidential election while talking about nuances.

People who are looking to sell you something, like car salesmen, college recruiters, investment professionals, and real estate brokers, are more likely to be willing to point out how debt can be used effectively.

• In real estate transactions, debt allows more families to afford a house, and in some cases, that could mean a healthier environment for raising children. Leverage also helps you reflect a higher rate of return if your home value increases and you decide to sell.
• If you can borrow money at a low interest rate and use that cash to invest at a higher rate of return, you are using someone else’s money to benefit yourself financially. You can pocket the difference in interest rates or rates of return.
• Getting a college education increases your lifetime earning potential, and going into debt for a bachelor’s degree could pay off.
• If you work in a career where image is important, a higher-priced and otherwise-unaffordable car could help you succeed in your business.

Risk makes debt dangerous. There’s a risk that house prices go down. Since the housing bubble burst, that risk should be more apparent. Leverage may amplify your return, but it also makes losses more severe. You could lose your house. If your hot investment doesn’t pan out, you might not be able to pay back your borrowed money. If you find yourself in a career not earning much money, you could struggle to pay off your student loan debt. Using debt to focus your image doesn’t always pay off.

You can only determine whether a risk, like borrowing, is worthwhile after the fact. Hindsight provides perspective. If borrowing allowed you to triumph financially, it was “good” debt. If the debt was unmanageable or caused financial ruin, it was “bad” debt. Taking on debt to purchase an asset that increases in value would always be “good,” while using debt to finance an asset that decreases in value would always be “bad.” The problem is being able to accurately predict the future. The assets we hope will increase would be a house, an investment portfolio, lifetime earning potential, and career opportunities.

The determination of whether debt is “good” or “bad” also depends on the individual or household involved. What could be a good use of debt for one family might not be a good use for another.

There are often other options rather than increasing debt. While it may be expensive to attend an out-of-state private college, you could save money by enrolling in an in-state public college or by taking advantage of grants and scholarships. The Consumerism Commentary Podcast interview with Zac Bissonnette, author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents, can offer more insights on how to obtain a valuable college degree without going into debt.

If you are able to postpone desires until you’ve diligently saved for a purchase, you can avoid debt and its possible pitfalls. Not everyone has the opportunity to save, though. A college graduate without any money might need to buy work-appropriate clothing in order to get a job. The credit card comes out, and she buys a week’s worth of outfits to get her to the first paycheck. This may not be “good” debt, but if she didn’t earn and save enough money while achieving her degree, it could be a short-term necessity.

Then again, another way to look at this need for credit to prepare for the first week in a professional environment is an excuse for not following a solid financial plan over the course of her higher education and the start of her life as an adult.

In another example, a savvy investor could use borrowed money to invest in a business that succeeds. Financial analysts can often determine whether a risk is acceptable, and individual investors can use the same approach. For example, if you could borrow a sum of money at an introductory rate of 0% APR on a credit card for 12 months with no fee, as new customers of this Discover More Card offer can do right now, deposit that in a savings account with 1% interest, you can keep the proceeds as long as you pay the credit card bill on time each month and in full by the end of the introductory period. Back when interest rates were higher, this “credit card balance arbitrage” was a more worthwhile endeavor.

Today, however, most investments that would make borrowing money from a 0% APR credit card worthwhile are riskier than a savings account. Even when the safe interest you could earn was more favorable, there was always a risk of missing a credit card payment and owing penalties and interest to the issuer. If you completed the arbitrage scheme and succeeded in increasing your bank account balance, you’d consider that debt to be good. If not, the debt would be bad.

Do you believe that all debt is bad debt, or are there some situations where it’s worthwhile to pay interest and accept the risk of defaulting?

The original version of this article, Good Debt and Bad Debt, is copyrighted by Consumerism Commentary.

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A recent article in Fortune Magazine predicts that one of the hottest jobs ten years from now will be data scientist. If this prediction is true, parents of teenagers in their first year of high school and their parents might consider encouraging their kids to develop the skills necessary to be in high demand by the time they earn their bachelor’s and master’s degrees.

To excel at data science, which is currently a growing field, though I’ve more often seen it labeled information science, students should develop strong skills in mathematics and technology.

In the Bakken area of North Dakota, the hunt for oil has created lucrative jobs today. There is a need for just about every type of career at this location, from burger-flippers to geologists. Unemployed people have been relocating their families to North Dakota in search of well-paying new jobs.

From a financial perspective, it could be beneficial to be aware of what the market needs and fashion your career path in that direction. The flexibility to react to the economy is a human capital strength, and will help ensure you can generate income regardless of the strength of the broader job market. Today’s popular careers may be short-lived, however. While there’s an oil rush today in North Dakota, a longer career path may involve environmental science or alternative energy.

Attempting to predict hot careers in the future is riskier than chasing today’s in-demand careers because you could spend years of your life preparing for a specific job function. If that career doesn’t prove to be as necessary as previously thought, and you’re unable to find a job in that field, you might consider many years of your life wasted.

I lean more towards looking within when determining the career or jobs best suited for an individual. Skills and interest pay a large role. If you are able to make a career out of something about which you’re passionate, you’re more likely to succeed. Working will be enjoyable, and you’ll likely be more dedicated to your job. There’s a good chance, however, unless your passions coincide with a high-paying field, that following your passion is a luxury; it may not be a path that proves to be lucrative.

People in tougher financial situations need to be practical. Many parents have encouraged their children to develop skills in practical fields that have a chance of surviving any recession, perhaps due to experience living and struggling through recessions of the past.

Would you change your career to something popular now to try to improve your financial situation? Would you consider planning a career path based on what might be needed in a future decade?

Photo: lindsey gee
Fortune, CNN Money

The original version of this article, Choosing a Career Path By Chasing Hot Jobs, is copyrighted by Consumerism Commentary.

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As Ron Lieber reported in the New York Times, personal finance guru Suze Orman is launching her own debit card brand, the Approved Card, following in the footsteps of music mogul Russell Simmons and his Rush Cards. Suze Orman’s debit card will be a prepaid debit card, ensuring customers using the card can spend generally only what they have available.

As a benefit to customers, and in keeping with Suze Orman’s focus on helping consumers build stable credit histories, the card will offer unlimited, free credit reports. She also worked out a deal with Transunion whereby her branded debit card, unlike most other debit cards, will report consumer spending information to the bureau, theoretically helping customers build credit.

While a consumer’s ability to use debit card spending as a way to build credit, I can understand why the reporting agencies don’t normally consider debit card activity to be relevant to a credit score. With a debit card, you can pay only what you have in the bank, or in the case of a prepaid debit card, only what you have on deposit. Debit cards do not provide a consumer with the opportunity to be tested with credit, and there is no monthly bill to pay. The type of behavior required to use a debit card successfully does not equate with the behavior required when borrowing money.

Prepaid debit cards are notorious for their fees. Suze has pledged to keep the Approved Card’s fees low, but the card still features a $3 monthly fee, taken from the balance deposited on the card. Prepaid debit card fees are paid by consumers who have no interest in a traditional checking account held at a bank, or, for whatever reason, can’t qualify for a bank account. This unbanked population consists primarily of households in the lowest socioeconomic status and of minorities. This puts these products in the same category as payday loans and check cashing outfits. Services the middle class doesn’t need or can find for free are more expensive in less affluent communities.

While the fees for Suze’s product may be less than those for competing products, there could be a view that this product, just like others like it, takes advantage of consumers who have fewer options for payment options. View the fee schedule here; there are quite a few fees that most consumers who haven’t used prepaid debit cards might consider extraordinary.

Does Suze risk credibility by offering her own financial product? She has established her Suze Orman brand as a no-nonsense voice in helping people make smarter financial decisions. Her television and radio shows have attracted a wide audience, particularly through the recent recession. She has been a spokesperson for General Motors and TD Ameritrade, aiding the executives of those companies in associating their brands with wise personal finance decisions.

While the New York Times article indicates that Suze will not mention her Approved Card in her shows to avoid a conflict of interest, isn’t in reasonable to expect that every time she mentions prepaid debit cards, she could be creating or strengthening a cognitive link in the listener or reader between her advice and her own product?

On the other hand, Suze sells books, seminars, and kits, and her media appearances help to move her products and, eventually, generate some of the income she receives each year. (I would assume that most of her income comes from sponsorship, show production, and media appearances rather than from her products.) A prepaid debit card is not really much different from the other products she sells. Diversifying income streams is a great way to increase the probability of long-term success.

What do you think about Suze Orman’s new Approved Card and the potential conflict of interest arising from her public appearances and media presence?

Update: As news spread of the Approved Card throughout the blogosphere, the card’s terms and likely ineffectiveness in improving users’ credit scores led to outrage. Suze Orman responded to critics via Twitter by calling them idiots and ignorant. Critics of the card were mostly fair — at least they were level-headed and, for the most part, they avoided personal attacks on Suze — but it’s easy for privileged bloggers like us to misunderstand the needs of those in low socio-economic communities, where the banking industry is mistrusted more than middle class “Main Street” communities mistrust Wall Street.

Yes, as I’ve mentioned above, there is something about fee-ridden prepaid debit cards that enables investors and the wealthy to take advantage of people who either don’t or believe they don’t have better financial options. There is also a cost to businesses who take on risks by offering services to a segment of society that may have financial trouble, and fees help defray that risk. Compared to other prepaid debit cards, the Approved Card isn’t horrible. It certainly isn’t the worst. If Suze’s name weren’t attached to the product, bloggers might put the card towards the top of the list of best prepaid debit cards. But her public identity and crusade for positive financial education makes the product antithetical.

At the same time, it’s not much different than the seminars that most of the top financial gurus run, charging tons of money with promises to help people earn more money, get rich through real estate, or sell a multi-level marketing scheme. The business is in the selling, and convincing the most vulnerable people that you are there to help them (for a price). Not that that’s good, at all — it’s just expected.

Photo: david_shankbone
New York Times

The original version of this article, Suze Orman’s New Prepaid Debit Card: The Approved Card, is copyrighted by Consumerism Commentary.

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This is an article by Gerri Detweiler. For the past twenty years, Gerri has been an advocate helping consumers find reliable answers to their credit questions.

Just as student loans can be “good debt” or “bad debt” depending on how they are used, they can be good or bad for your credit scores, depending on how you handle them. Obviously, they can help your credit scores when you’re able to pay them on time, and hurt them when you can’t. But there are important nuances that can make the difference between earning a great score and a mediocre one.

When student loans = good credit

A student loan can provide a student’s first credit reference. That’s especially true now that the Credit CARD Act makes it more difficult to load up on credit cards before you turn 21. Student loans differ from credit cards in an important way, though; they are installment loans, not revolving loans like credit cards. That’s a plus when it comes to building a well-rounded credit file. “Our research has shown that (all things being equal) consumers with a wider range of credit experiences tend to be better credit risks than those with only limited credit experience,” says Anthony Sprauve, public relations director for FICO.

What about the fact that many students graduate with not one, but many, student loans? Unlike maxing out a bunch of credit cards, the fact that your report lists multiple student loans is not necessarily harmful. That’s true even if the balances are high. “While having many revolving type accounts with high balances can hurt your score — even when paid on time — the FICO scoring formula doesn’t place nearly as much importance on the debt amount and the number of loans when considering installment loans,” says Sprauve.

But, of course, it can be hard to keep track of due dates on multiple loans, so the greater the number of loans, the greater your risk that you’ll miss a payment. If you consolidate some or all of your loans it will be easier to keep track of your due dates, but don’t expect a boost to your credit scores. “Typically (consolidation) wouldn’t have a major impact on the score because it’s installment credit and the amount you owe is still the same,” says credit scoring expert Tom Quinn.

When student loans = bad credit

Missing payments on your student loans hurts your credit scores. If you pay a few days late, say on the 5th of the month when the loan is due on the 1st, it’s unlikely the loan will be reported as late. But once a payment is thirty days late, it will likely be reported to the credit reporting agencies, and your scores will suffer as a result.

If you can’t make your payments, check out flexible repayment options, such as the Income Based Repayment Program (now dubbed “Pay As You Earn” by President Obama), graduated repayment, or income-contingent repayment. Or find out if you are eligible to put your loans in deferment or forbearance. Repaying your loans through one of these programs is not likely to hurt your scores, says Quinn.

But be careful. Some students who apply for deferment or forbearance think it’s a done deal and stop paying, only to discover it was not finalized and they are considered delinquent on their loans. Make sure you have something in writing from your lender before you reduce or stop making payments.

Quinn also warns about a common misconception that loans in deferment or forbearance are ignored when credit scores are calculated. “It’s still considered because you are obligated to pay it,” he says, adding that, “Delinquencies are reported even if the loan is deferred.”

What if damage has already been done? Late payments can stay on your credit reports for up to seven years and simply paying the past due amount won’t remove those late payments. But if your federal loan goes into default, you may be able to improve your credit by rehabilitating your student loan. You’ll have to make nine monthly payments on time over a nine to ten month period, depending on your type of loan. Once you do, you can apply for rehabilitation and, if successful, the notation that your loan was in default will be removed from your credit reports.

More student loan and credit scores tips

• Feel free to prepay. Pay off your student loans early and you’ll save money on interest. Doing so shouldn’t hurt your credit scores, though, Sprauve warns that without other installment loans you could see your scores drop slightly.
• Keep meticulous records. From the time you take out your first student loan, you should start a file and keep copies of loan documents, statements, etc. This documentation may prove to be invaluable if you experience payment problems.
• Pay on time. This can’t be emphasized enough. If you move, notify your lenders of your new address. A statement that goes missing does not let you off the hook for a payment. Never heard from a lender about a loan you took out? Track down the lender and find out when payments are due.

Photo: a_mina
Department of Education

The original version of this article, How Student Loans Affect Your Credit Scores, is copyrighted by Consumerism Commentary.

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Today on the Consumerism Commentary Podcast, Tom Dziubek talks to Consumerism Commentary founder Flexo about New Year’s resolutions.

Flexo discusses several tips to addressing New Year’s resolutions including performing an honest self-assessment, setting goals that are meaningful to you and breaking them down into more manageable chunks.

Table of contents

[00:00] Introduction from Tom Dziubek
[00:35] Interview with Flexo
– [00:46] New Year’s resolutions
– [02:05] Setting the wrong resolutions
– [03:00] Self reflection and assessment
– [05:42] Setting meaningful resolutions
– [07:43] Staying away from “S.M.A.R.T.” goals
– [09:02] Creating smaller goals
– [10:51] Rewarding yourself
– [12:44] Visualizing your goals
– [15:00] Taking action
– [16:43] Tom’s & Flexo’s resolutions
[21:19] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

The original version of this article, Podcast 142: New Year’s Resolutions, is copyrighted by Consumerism Commentary.

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In my review of the best credit cards for 2012, I lamented the fact that for the most part, no credit cards waive balance transfer fees in their introductory offers. In years gone by, some cards offered no-fee 0% APR introductory offers on balance transfers, and offers like these can, if used properly, go a long way to save customers lots of money while climbing out of debt. Savvy financial mavens also used these opportunities for free money. They transferred a balance to a credit card with the offer, but the other side of the transfer was a bank account. With savings interest rates as high 5 percent, they borrowed money at a 0 percent interest rate, kept the 5 percent interest, and paid back the balance to the credit card.

The balance transfer fees all but stopped that practice. Even with a 3 percent fee, however, people getting out of debt could still save money compared with the 10 percent or 15 percent they were paying on another card.

Last year, card issuers began competing diligently to attract new customers, and, although it was rare, a few cards offered relief from the balance transfer fee coinciding with 0% APR introductory offers. Early last year, Discover was the first card brand to eliminate the balance transfer fee in a special offer, but it was only for a limited time. Until recently, the only card continuing a reprieve from the balance transfer fee was Slate from Chase, but now Discover’s offer is back.

The Discover® More Card – No Balance Transfer Fee offer provides consumers with a 0% introductory APR on both purchases and balance transfers for 12 months. While that introductory period may not be as long as other offers available today, this card does not charge a balance transfer fee. If you have $5,000 to transfer, that’s exactly what you will pay to Discover over time. You will have 12 months to make interest-free payments, potentially saving thousands of dollars.

This free balance transfer offer is scheduled to end on January 31, 2012. It could be extended if it proves to be successful for Discover, but it’s too early to say.

This card comes with a rewards program, available during and after this limited-time offer. Discover includes a great rewards program, with 5% cash back on several expense categories that change throughout the year. This type of offer, with rotating categories, is currently standard practice. In addition to the 5% cash back you’ll earn on spending within those categories, you will earn 1% cash back on all purchases after spending $3,000 annually. If you don’t meet the $3,000 threshold, you will earn 0.25% cash back rather than 1%.

The standard APR on this card after the introductory period has expired is a variable rate between 10.99% and 19.99%, depending on the applicant’s credit history.

Additionally, there is no annual fee on any version of the Discover More Card, making this brand one of the best around today. This deal is scheduled to expire January 31, 2012, so take advantage of the Discover More Card – No Balance Transfer Fee offer now.

The original version of this article, Discover More Card No Balance Transfer Fee Offer, 0% APR, is copyrighted by Consumerism Commentary.

If you enjoyed this article, follow @flexo on Twitter and visit Facebook for more updates.

This is a guest post by Forest from Frugal Zeitgeist. Forest writes about frugality, finance, minimalism and lifestyle. In this article, Forest shares his experiences in the kitchen. Cooking great meals is a great way to save money and stay healthy, but it’s a skill that I haven’t developed for myself. Passion can boost motivation, though, and this article might help me find that passion about preparing meals.

When Flexo wrote about alternative financial resolutions he mentioned the idea of cooking more often at home. Cooking at home is often described as a way to save money. It will do that if you replace your dining-out habit, but it does much more than just improve your finances. Cooking can quickly become an enjoyable hobby, and when you get into the groove you can even use it to impress your friends. The health aspects cannot be overlooked, either. Replacing processed foods and restaurant foods with home-cooked versions, where you know the ingredients, will affect you and your family’s diet in a positive way.

But you can’t just expect to fire up the stove and produce an award-winning dish. Learning to cook takes time and patience. You will fail, and you will find that at times cooking isn’t as economical as you originally thought it would be. Investing in a stock of spices and speciality ingredients can quickly blow a shopping budget!

In this post I want to share my journey into the wonderful world of cooking at home and then hopefully convince you to make it a regular activity and a beloved hobby.

How I found my passion in cooking

I never learned to cook anything as a kid. My kitchen wizardry stopped at being able to “cook” a perfect slice of toast and heat an egg in hot oil. Sometimes I would experiment, but I’ll skip the tales of my candy-bar sandwich and curry hot chocolate. When I moved out of my parents’ home at the age of seventeen, I sucked at cooking.

Luckily I had a corner store within twenty seconds of my house. I became a wiz at putting plastic-wrapped steak bakes and hamburgers into the microwave, and later I even progressed to turning on the oven to warm up a frozen pizza. Breakfast cereal was a favorite dinner of mine too. Cheerios for dinner! Yum!

This went on for quite some time. When I turned eighteen and started to throw regular pints of beer into the mix, my belly decided to grow big and round. Through the age of twenty, not much changed apart from my pants size.

Weight is easy to put on and reasonably easy to fix, but the bad habits had been affecting another aspect of my life, something not immediately apparent to most around me. As my belly grew, so did my overdraft. My money situation wasn’t going too well.

In addressing the cash flow problem, I knew I had to make all sorts of cut-backs. It wasn’t exactly a secret to me that my processed food habit was costing me a lot of money and I decided to tackle it by learning how to cook at home. This was also around the same time that I became vegetarian, which seriously reduced the selection of ready-made foods I could purchase at the corner store.

One of my first trips to the supermarket after the decision involved me stocking up on spaghetti, cans of tomatoes, dried basil, salt, pepper and lots of fruit.

I remember throwing myself head first into cooking, just like the way I refused to read instructions when I got a Transformer for Christmas. I didn’t read any cookery books.

For one of my first home cooked meals, I threw a few cans of tomatoes into a large wok with a little oil. I tossed in a load of basil, a little salt and let it simmer for quite a few hours. The result was better than you may think for a first attempt, and although the work was minimal, I enjoyed throwing some stuff in a pot and coming out with an edible meal. I was intrigued enough to learn more.

I continued to develop my “tomatoes and stuff in wok” speciality and would try adding different veggies and herbs. One important thing I did do was learn the basics. This included cooking eggs in their various forms, the basics about herbs, simple stir fry, fried rice, stews and chilis. Occasionally I would follow a recipe.

The big change for me came when I quit my job and moved from England to Canada. I found food to be even more expensive in Canada, and my budget was very thin. I had left behind a high-paying job in London and was now washing dishes in a pub kitchen. Of course being around cooking all day was part of my inspiration, but working out how the hell to feed myself on minimum wage was the real kick in the butt.

I started to buy a lot of raw ingredients and had moved in with my girlfriend. A student and a kitchen boy needed some entertainment and that was where Manjula came in! We enjoyed making dinner together, even though it was stir fry most nights. Cooking with your family and friends can be a lot of fun and a motivation to push yourself forward. We both enjoyed curry so we learned how to cook it properly. I started to search for recipes online, and I discovered Manjula’s Kitchen on Youtube. Manjula cooks a lot of great Indian dishes and her lackluster commentary creates a homey, “I can do this” vibe that I found quite warming. After my first Manjula curry I was hooked.

I was being reeled into this cooking thing.

When you make that great meal, something you never thought you could make, it’s like you finally get it. Cooking can be drudgery, especially when you have to cook for many and you just don’t enjoy it. I look at it like painting. Painting a house is boring as hell, and the outcome is nice, but nothing special. Paint a picture and you enjoy the whole process and the outcome immensely. If you approach cooking like painting a picture you’ll enjoy it very much.

Next up for me was my other favorite food, bread. I had a drunken conversation with a Mexican lady who convinced me tortillas were just flour and water cooked in a flat pan. I had flour and water at home so a day or so later I mashed them together into a dough, rolled them into tortilla-shaped discs using a Snapple bottle, and fried them in a hot pan. Like my very first tomato experiment, it worked again — not perfect, but within reach of being able to be called bread!

This put me on a bread kick and I turned to the internet for a real loaf. The first recipe I ever used is one I still use today, and variations on the dough are easy to experiment with. There is something calming about kneading dough and something very satisfying about eating it hot out of the oven.

Where I am today?

I cook almost every day. Cooking is a hobby and something I do almost without thinking. I’ll happily tackle any kind of cusine and challenge myself to new recipes on a regular basis. I’m not afraid to pick up something I have never seen before and experiment with it. I still make a lot of mistakes but that is half of the fun.

Along with my confidence, my knowledge of food sourcing and nutrition has increased. I try to buy in-season foods and balance my diet with meals that contain the right amount of carbs, proteins, good fats and all of that stuff.

I absolutely adore cooking. Food is something we all need, but good food is something we all love. The smugness and satisfaction from being able to match meals at your favorite restaurants is unbelievable. Cooking isn’t an art or skill that only a few people have, it can be learned. If you keep at it, you will learn. You’ll want to share your new-found love with friends, and they’ll get the bug too.

Tips to start cooking

Starting off any new endeavor that you hope to grow into a hobby can be tough work. If things don’t work out the first time, it is easy to give up. Often, fear of failure, poor early results and lack of time push people back to TV dinners and prepared meals. Like any feat you want to achieve, you need to go in knowing that you will fail, you will make terrible food, and your journey from a person who reads recipes to a full-fledged cook will not be linear.

Making failure part of the learning process will guard your self-esteem enough to help you get through the rough patches. Set goals and make time for cooking. Instead of going to the pub, stay home and follow a recipe, bake a cake for the family, or go shopping for a cook book.

I would suggest you set goals centered around being able to cook your favorite meal or a favorite meal for your family, learning to cook a few dishes of a certain cuisine, or replacing a regular store-bought item with a homemade alternative. The goal should be something that matters to you and keeps you focused. A solid option is baking bread that is better than the store variety. It’s not easy but a skill that is a lot fun — and messy — to learn.

As your cooking progresses something will happen. Your lack of confidence will subside and you’ll fall into the groove I mentioned earlier. For me, indicators of this were being able to add ingredients without measurement and being able to open anyone’s pantry and put together a meal without a recipe book. At this stage, you won’t be a master chef, but you’ll be competent and confident enough to take on any recipe.

Experimentation is very important and is key to discovering the joy of cooking. If you think chocolate and chili pepper would be good on pork, try it. If you are bored at home, just grab some random ingredients and see what you can cook up.

Make cooking social

Keeping cooking a lonseome pursuit could stop it from progressing into a full-fledged hobby, so it’s important to share. Sharing the cooking and eating experience with friends and family is one of the best parts.

I remember baking cakes as a young kid with my grandma, and I think baking and cooking with kids is a great learning tool. I wish cooking with my parents had been a part of my whole life. Cooking with your partner also brings in a new intimacy to a relationship and shares a responsibility that is often left to one person, most often the woman.

Expanding beyond family, it’s great to host potluck meals or host a dinner party on rotation. Friends of mine set up a little club where four couples set four Saturday nights aside. Each Saturday night, the eight people would all visit one house, and the hosts would cook a three-course meal. The result was that it pushed everyone in that group to try to up their cooking game, and it was somewhat competitive. The dinner parties were successful enough that they have all improved their cooking skills.

Get started

I hope I have you convinced to give it a try and I hope you have overcome any apprehension. You may not even enjoy cooking at first, but you’ll enjoy the challenge. Here are some tips to help you get started. Please come back to let us know how it went.

• Cook a basic flat bread that can be used for lunches, side dishes and more.
• Bake a real loaf of bread. This is the very first basic bread recipe I ever used, and it’s good.
• Find an online video recipe for your favorite restaurant meal and try to make it.
• Use the ingredients in your pantry and create a random meal. It doesn’t matter if it turns out bad, just mess around!
• Try another favorite dish or two from another part of the world.
• Invite a friend over for dinner and you cook. They can bring the wine.

Good luck with your new money-saving, healthy hobby.

Please don’t hesitate to ask any questions, or ask for any resources, ideas or anything that comes to mind. If you love cooking, what inspired you to start?

Photos: John McClumpha, jeffreyw, woodleywonderworks

The original version of this article, How to Love Cooking, is copyrighted by Consumerism Commentary.

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As many Presidents of the United States have done, President Obama avoided confrontation with Congress by appointing an individual to direct a government organization while lawmakers were on recess. Yesterday, the President appointed former Ohio attorney general Richard Cordray to the long-delayed position of director of the Consumer Financial Protection Bureau (CFPB). Now that this department has a director, it can move forward in enacting regulations — not just suggestions — for non-bank financial entities.

Lately, the CFPB has been working on simplifying customer agreements for financial accounts. A great example is this redesigned credit card agreements. The new design highlights the important terms of the agreement, describes financial terms in plain language, and helps consumers increase awareness of their obligations and rights. The bureau is currently working on a similar resigned agreement for mortgage contracts.

Without a director, none of these recommendations would be required to be enacted by financial firms. Some banks have already taken steps to improve communication, but banks are also regulated by the Federal Reserve. The Fed issued some regulations as part of the Credit CARD Act of 2009, but the regulations do not extend to non-bank financial firms.

The CFPB may face legal challenges from industry groups who insist that the bureau can have no power to issue regulations.

Who is Richard Cordray?

When Richard Cordray was the attorney general in Ohio, and when he was Ohio’s treasurer before assuming the role of attorney general, I would receive marketing emails from him every couple of months. He championed pro-consumer causes and worked to ensure the public had a better understanding of predatory financial arrangements. His emails were directed at the press to help raise issues in the media. For example, he campaigned for closing loopholes that allows payday lenders to practice predatory tactics and he warned consumers of scams related to the Cash for Clunkers program. Cordray lost in his campaign to be re-elected attorney general in Ohio.

Cordray wasn’t without enemies in the banking industry. He filed a lawsuit against Bank of America and its executives in 2009 on behalf of Ohio’s state pension funds related to the acquisition of Merrill Lynch.

Cordray is also a five-time champion on Jeopardy.

In general, judging by his past actions, Cordray appears to be comfortable with a position strongly in opposition with Wall Street interests, which is a change in direction for Washington politicians for as long as I’ve been an adult. Clinton, Bush II, and Obama have all, despite occasional moments of pro-consumer rhetoric, appointed Wall Street insiders to major financial roles in government and pseudo-government agencies.

There is some validity to that philosophy, after all, Wall Street executives have the connections and relationships with other Wall Street executives, and these connections are necessary for the government to operate efficiently with one of the largest driving forces of the American and global economy. The government, however, can’t be expected to issue effective regulations if it needs to stay on Wall Street’s “good side,” however.

It’s a tough balance to manage, and it’s one of the many reasons why I avoid politics.

Photo: Richard Cordray

The original version of this article, The Consumer Financial Protection Bureau’s Director, Richard Cordray, is copyrighted by Consumerism Commentary.

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I’ve spent the last decade of my life focused on my finances. I started because I had no money and a job that was taking more from me than it was providing in income. I knew I had to make some changes if I wanted to build any kind of future for myself. Soon into this journey, I founded this website, where I’ve written about my own financial situation and tracked my balances on a monthly basis.

Over the years, my financial situation has improved. Rather than focusing on and tracking every cent as I was doing in 2003, a necessary step to train myself to save money and value everything I was earning, I now am significantly more relaxed. I still track my bank account balances. Eventually, I stopped tracking every cent I spent with cash. Cash spending became such a small percentage of each month’s income that it became unnecessary for me to enter every receipt (or every remembered transaction for those where no receipt was provided) into Quicken. I have been using credit cards for most expenses. (I was using credit cards to take advantage of rewards, which I didn’t start doing until I was out of debt, spending less than I was earning, and making conscious spending decisions.) The credit cards helped me carefully track my expenses.

My ability to improve my financial condition has been partly due to my public tracking. When my numbers are published online, I have to admit to my mistakes and accept criticism from readers when it’s due. Knowing that I will be reporting the details of my bank accounts helps me to continue making good decisions with my money.

At the end of the year, I take the chance to look at my life from a broader perspective. I now have ten years of history in my Quicken file. I’ll be thirty-six years old in a couple of months, so my finances have been a focus for almost all of my adult life. And for those of you, readers, who know me only through this site, only as “Flexo” or Luke Landes, you may think that an obsession with personal finance rules my life. The good news is that this isn’t true; outside of Consumerism Commentary, when I see my friends and family, personal finance is not usually a topic of discussion.

With ten years of history in Quicken, I can easily see my own financial progress over time. At the end of 2001, the world was still shaking from terrorist attacks in New York and Washington, D.C., and my life was uncertain. With no money, no job, no girlfriend, and no place to live, I knew I needed to make changes in my life. That’s what I did.

Continue reading to see the numbers.

If you click on the above image, you can view a larger version of the chart, but you’ll need a wide monitor to see the entire ten-year history.

I recently changed the way I historically report my balances so I no longer include business-related accounts. While this does grant me some flexibility in reporting; theoretically, I could take as much or as little money from the business as necessary as until recently I was the sole owner. As a result of the flexibility to withdraw money from the business, I believe it has become less necessary for me on a personal level to report my finances on a monthly basis. There is nothing related to the business included in my net worth reports other than what I’ve taken as a salary.

Moving forward in 2012, I plan to keep an eye on my spending and income, as I will no longer have the flexibility of defining my own salary based on business performance.

Assets

The Cash in banks category represents any money I have in personal savings accounts, checking accounts, and money market accounts. Over the years, I’ve opened many accounts primarily to review for Consumerism Commentary. Over the last few months, I’ve spent some time consolidating the scattered banks and accounts that I’ve collected. I’ve closed my accounts at Ally Bank, Discover Bank, EverBank, HSBC Advance, FNBO Direct, Sallie Mae, SFGI Direct, and Zions Bank.

Additionally, I merged many of my subaccounts at ING Direct. The bulk of my Cash in banks funds are held there, the same online bank I started with many years ago. My primary brick-and-mortar bank is the descendant of the same bank I started with even earlier. I do plan to move money out of Wells Fargo within the next few weeks, however, due to their new policy of eliminating customers’ rights.

My Investments are held mostly at Vanguard, though I also have active accounts at ShareBuilder and Scottrade. At Scottrade, I’ve been holding an investment in AIVSX that was originally a UGMA. Aside from a small period of time about nine years ago when I thought it would be a good idea to automatically invest more money into this fund — and due to the front-end load fee of 5.25% it was a poor, uninformed decision on my part — this account has been stagnant other than moving from Wachovia to Scottrade when executives the large brokerage decided to begin charging inactivity fees. In ShareBuilder I’ve been holding small investments funded by sign-up bonuses.

I also have accounts at Zecco, Betterment, and Lending Club, but I haven’t done anything with these accounts. I have some company stock with my former company held at E*TRADE, and I’ve been waiting for the share prices to improve before selling.

I keep most of my Retirement accounts at Vanguard. I rolled my old 401(k) and pension over into Vanguard, and this past year, I opened an Individual 401(k) there.

When I first started investing for retirement almost ten years ago, rather than save up the money to reach one of Vanguard’s minimum investment amount, I started smaller with TIAA-Cref. This was perhaps a mistake. It’s possible that what I have is an annuity, although that was certainly not explained to me in language I understood at the time, and it’s still difficult to determine whether what I own are in fact pure mutual funds. I do know that transferring money from this brokerage to Vanguard is not as simple as filling out a form. Additionally, I encountered problems investing with TIAA-Cref, and hundreds of other customers have had complaints to share with other Consumerism Commentary readers over the past few years.

Liabilities

As I mentioned above, since the beginning of my trek to improve my finances, I’ve only used credit cards for everyday spending. I haven’t paid any interest or late fees over the last decade. I’ve spent only what I could pay off when the bill arrived. I have, however, decided it was worthwhile to pay an annual fee for a credit card that provides rewards that make that fee worthwhile; although the Continental Airlines OnePass Plus Card carries an annual fee, it has paid for itself in free checked luggage. I travel to visit family on the west coast and usually need to check bags. Paying the annual credit card fee (and the fee was waived the first year) has been a smaller expense than checked bag fees would have been.

I bought my 2004 Honda Civic new (though it was already an old model, as the 2005 editions had just arrived). That may have gone against most typical financial advice, as gurus often suggest you should buy used. In my case, I knew I liked the long-term reliability of the Civic, and a new car was only slightly more expensive than a slightly used car in great condition. As I was teaching at the time, I needed something that would be reliable as long as possible. I borrowed money from my father rather than seeking expensive financing from a bank, and paid off the loan as quickly as possible.

My student loans hung over my head for a long time. This wasn’t helped by the fact that I decided to pursue a Master of Business Administration degree at the University of Phoenix Online. My job paid for 90% of the tuition, so I figured it might have been worthwhile, particularly considering my earlier exposure to online learning as it was being developed at my undergraduate university. Unfortunately, I let the University of Phoenix financial adviser talk me into using loans to pay the tuition and using my company’s reimbursement checks to pay off the loan rather than to pay the tuition directly. While the loans ensured I didn’t need to use any of my own money up front while waiting for the reimbursement checks, I didn’t consistently use the reimbursement checks as I should have.

Nevertheless, I paid off the last of my student loans, including the graduate degree and remnants of the bachelor’s degree, about a year after I received my MBA and about ten years after I received my undergraduate degree.

This year, I’ll once again need to change the approach to my finances. I’m in a different financial environment now, and it will be important to ensure I continue to make decisions that take the reality of my situation into account. My monthly reporting will take on a new form this year, as I publicly report my expenses rather than my net worth. So once again, I will be more carefully tracking my cash, but not to the point where it is something I am obsessed about.

How as 2011 for your finances? Did you progress as expected? What are you looking forward to in 2012?

The original version of this article, Year-End Personal Balance Sheet, December 2011, is copyrighted by Consumerism Commentary.

If you enjoyed this article, follow @flexo on Twitter and visit Facebook for more updates.

New Year’s resolutions have become so cliché that the process of making them has become a joke. People settle for mundane goals for the year like “losing weight,” “quitting smoking,” and “getting out of debt.” These are great goals, of course, but most who think about these only when the calendar changes soon forget their plans, continue their lives as before, and lament their failure when they reflect as next year approaches.

Part of the problem is that these goals are not specific enough for anyone to take seriously. Gurus and bloggers write all the time that goals need to be “SMART” — specific, measurable, achievable, relevant, and time-based — as if it’s a new concept. This is a helpful way to look at your resolutions if you want to approach your life as a project manager. A better approach is to realize that time moves very fast, and with busy lives it’s better to make modest goals and focus on each small step that moves you in the right direction.

The most popular New Year’s resolutions are tiresome. It’s no wonder people don’t keep them. Few people can be passionate about losing weight or getting out of debt, and even if they are, it will take a lot of work to change the behaviors (or medical conditions) that caused the circumstances needing improvement. These can be multi-year goals, and if your entire success relies on completion within 365 days (366 in a leap year) you’re setting yourself up for failure.

Here are some different ways at looking at financial resolutions that are not only achievable within the year but are more interesting than what you may typically resolve to do. While there are twelve listed here, consider you’re more likely suited for success if you focus on one. The year will be over before you know it, but your resolutions should always be aligned with long-term goals for yourself.

1. Spend money on things that are important.

Your spending habits reveal what is important to you. If you spend more money buying video games than you spend going out with your girlfriend or wife, you have decided on some level that you favor your time with a computer game more than your significant other. The higher value each dollar has to you, with the importance of one dollar related to your level of disposable income, the bigger the importance of whatever you choose to spend that dollar on.

Look where your money goes. You may need to track your spending if you’re not sure. You’ve defined what’s important to you by your expenses. Your shelter (rent or mortgage) and food are obviously important and form the basis of your expenses, but beyond that, you can rate how important any activity is to you by comparing your level of spending. If you don’t like what you see, resolve to spend your extra money — after you cover necessary expenses and saving — on the things you want to be important to you.

2. Create something every month.

The culture in this country is one of consumption. We consume food, media, and resources. In order to consume, we spend money. This year, change your role in society. Become a creator rather than just a consumer. You can create something that other people consume or something that you consume yourself.

• Cook more often than preparing pre-created meals and dining out.
• Create your own adventures instead of watching movies and television.
• Write in a journal rather than reading a best-selling novel.
• Engage your mind creatively, taking photographs, making art, or performing music.

3. Learn a new skill.

This could be the year you focus on trying new things. The best new skills to learn would be those that are related to your interests and passions. Here are a few examples, but think about the things that make you happy and decide on a skill that enhances your attitude.

• If you’ve had a favorite vacation destination in mind in a foreign country, start learning the language and culture.
• If you like running but haven’t taken this type of exercise seriously yet, train yourself for a 5K race.
• Learn how to play the piano.

Many new skills can take more than a year to learn, but the idea is not to consider your year a failure if you don’t complete your mission. Keep taking small steps that move your life in the right direction, and whether you complete your goal within one year is less important.

4. Earn money from your hobby.

Turning your hobby into a business is a tricky subject. Consumerism Commentary started as a hobby, but after a while, it became apparent that writing could also be a business that generated income. In some cases, though, turning a hobby into a business can turn an enjoyable activity into a chore. This has to be a personal decision. If you like collecting coins, do you want to be a coin dealer? If you’re particularly skilled at photography, do you want to market yourself and compete with professional photographers? Perhaps you can keep your marketing to a minimum and work just for your friends and friends of friends.

Not everyone wants to start a business, but keeping your activities small can keep the business aspect of your hobby to a minimum. Strike the right balance between hobby and business so you still gain a maximum amount of enjoyment from the activities you enjoy.

5. Start a blog to track your finances.

I have first-hand experience about how helpful it has been to publicly track my own finances. This is a great way to maintain focus on any goal. By making your progress public, you are holding yourself accountable for your success. And if your goals are interesting to others, even strangers, they can join you in your quest and offer support — and more often, criticism — when you need it.

Rather than using a blog to track your success, allow the blog to be your success. Start a website using WordPress or Tumblr and write anonymously about the financial issues in your life. You don’t need to be a great writer, but if you continue, your writing will improve. Don’t be concerned about building an audience or earning money. Writing for its own sake helps clarify financial issues, particularly when you read what you’ve written over a period of time.

Tracking your finances in software like Mint.com or Quicken isn’t always enough. When you look at your finances with the intent of writing about them, your brain performs at least a minimum amount of analysis, and this is a step further than most people take with their finances.

6. Support local businesses.

Emily Guy Birken wrote recently about the 3/50 Project, an initiative that encourages consumers to spend $50 among three local businesses each month. Keeping your money local helps improve the economy in the community where you live, and it helps you build relationships with your neighbors near you and across your town.

Following an initiative can provide extra motivation for achieving a goal, but you can do this without an initiative as well. Supporting local businesses is a possible resolution that most people don’t consider. Usually, people resolve to save money, and that could mean shopping online or visiting big-box or warehouse stores. Spending money in these locations does not help a community thrive — at least, not directly.

The same is true about local community banks and credit unions. By moving your money away from big banks, you are taking a financial action that is more beneficial in the area where you live. This is a simple, achievable resolution for the new year.

7. Sell or give away your stuff.

This could be the year you focus on decluttering your life. When I moved into my current apartment a few years ago, I seemed to have so much space available. I fell into the typical habit of expanding the way I live to fit into my new environment. If you look around your living space, you can probably find a number of things you don’t need. Here are just a few suggestions of where to start:

• Look through your closet and give away the clothes you no longer wear.
• Sell your old games, electronics, movies, and books on eBay or Amazon.com.
• Organize your papers and shred old documents you no longer need to keep.

This sounds like a good weekend project rather than a New Year’s resolution, so to make this worthwhile, consider running through this process on the first Sunday of each month. Each time, you’ll find more to eliminate. If unchecked, “stuff” can take over your life. If you have so much it’s burdensome, your possessions can own you rather than the other way around. Reduce and eliminate your dependency on things that take up space.

8. Spend more time with activities that make you happy.

I mentioned above that you can determine what’s most important to you by following the money. The same thing is true about time. If you were to analyze every waking minute of my day, you’d see that I spend most of my time working on my business and most of the rest of that time with my girlfriend. Or that’s what I’d like to believe. I, for one, spend a good portion of time entertaining myself with movies and television. Productivity nerds would fairly criticize me, but I do find value in resting my brain by allowing a local grumpy doctor solve medical mysteries so I don’t need to or by watching a clever con game unfold.

But buy spending my time this way, I’ve traded my enjoyment in creativity, like photography and music, for sitting in front of a television. Decide what’s important to you and schedule time to dedicate to those activities. I’m not a fan of keeping a schedule, but when you can schedule activities you enjoy rather than scheduling corporate meetings, you will end the year happier and more fulfilled.

And the reason we make resolutions at all is because we are unhappy with something in our lives. If we can spend more time on enjoyable activities, we won’t be nearly as unhappy.

9. Volunteer with an organization that matches your values.

Until the government decides to offer a tax deduction for volunteer work, this potential resolution won’t have a direct effect on your finances, but it could inspire you in ways that do affect your money. The first step is creating a mission statement for your life. In fact, defining your mission can be a complete resolution itself for the year, as defining a meaningful mission requires thoughtful self-reflection that goes beyond the confines of a lunch break at work.

Once you have an accounting of your values and life goals, it’s easier to determine what organizations share your view of the world. Spending time with these organizations and the people who share your philosophies can be rewarding. Often, the reward is through personal satisfaction and pride but there can be a financial aspect, as well. You may decide that you want to use your wealth to improve life for a community, or you may decide that you would like to motivate yourself harder to build your own wealth to help you complete your life’s mission.

10. Be happy with what you have.

The drive to want more for ourselves creates motivation to move forward, to earn more money, and to improve our financial habits. When there’s a mission behind this drive, a purpose in life, it makes that motivation more meaningful. Your should also stop wanting for a moment to consider that if you are reading this article, you were most likely lucky to be born in a situation or community where wealth-building, education, and even sanitation are possible. The “pursuit of happiness,” along with life and liberty, concerned the founders of the United States, but happiness is easily within reach.

Resolve to consider all the positive things in your life: your family, your wealth (no matter how bad your financial situation is, it could be worse), your friends. Consider the opportunities you’ve been given that helped you achieve what you have so far as well as the work you’ve put into shaping your life.

11. Don’t settle for low-quality relationships.

Unfortunately, there are often people in your life who bring you down. You don’t want to surround yourself with yes men, but if you look at your extended circle of friends, chances are you have a few with whom spending time makes you feel good and a few who often dampen your mood. While you don’t want to eliminate relationships with people from whom you can receive kind criticism, it is beneficial to reduce time with people who consistently have a negative attitude.

I’ve discovered this over a long period of time. I’ve always held onto friendships, regardless of the quality, because I believed that every close connection was as important as another. Perhaps I grew up, or perhaps I just had less time to spend with people. Perhaps there have been a few events where I had placed faith in a friend and had been disappointed, and another friend advised me I shouldn’t have such “high” expectations for my relationships. There are enough great people in the world not to have to settle for mediocre people in your life. If you feel you are consistently lowering your expectations, it may be time to spend time with others — as long as you are doing as much as possible to be a good person, yourself, in your inter-personal relationships.

This is the age of Facebook. People brag about how many “friends” they have, and it’s more of a thrill of collection than an enjoyment of real connections. Resolve to enhance the quality of your relationships rather than quantity. Although this goes against most “networking” advice for professionals who want to advance their career, it’s an approach for people who want to advance their life.

12. Let go of your grudges.

Just like it will benefit you to reduce your exposure to people with negative attitudes, consider expelling the negative feelings you’re harboring towards others. I don’t believe that positivity in itself brings about wealth — you can’t increase your bank account by just thinking about how nice it would be to have a bigger bank account, regardless of what New Age aficionados tell you — but letting go of thoughts that prevent you from accepting opportunities and greeting the world optimistically will help put you in a better position to take advantage of good things that come your way.

The above resolutions are not specific. You can use them — or better, just one or two — to guide your thoughts and attitude for the coming year, or you can use them to create a basis for measurable targets that come December 31 you can say you reached. Some tie directly into your finances, and others are related laterally. All of them can help you go beyond the typical neglected resolutions like “losing weight” and “saving money.”

Do something worthwhile and meaningful with your self in 2012.

Photos: L. Marie, Ancient Art, LizMarie_AK

The original version of this article, 12 Alternative Financial Resolutions for 2012, is copyrighted by Consumerism Commentary.

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This is a guest article by Aloysa, a creator of My Broken Coin. In this article, Aloysa offers five conversation starters for couples considering moving in together.

Based on my own personal experience I can tell you that expectations of your significant other change as soon as you move in together. All of a sudden, you expect him to make the bed, walk your dog, wash the dishes, and put the toilet seat down. He wants you to cook him breakfast and dinner, pack his lunch, buy a six-pack on the way home from work, and listen to his rants about his favorite football team.

But what about your financial expectations of each other? How often do you discuss them?

I strongly believe that when people decide to move in together, they should know as much as possible about each other finances: bank account balances, when the car will be paid off, how much money you both earn, what monthly bills you have to pay including alimony and/or child support.

If you don’t know that much, you really don’t know anything about each other and should stop reading here.

Conversation #5: What are you waiting for? Pay it already!

What is your bill paying style? This is something that can be very important in your life together. Let’s say you pay bills in advance, but your significant other waits till the last minute. Potentially it can create a problem for both of you. One gets nervous that a bill is not paid yet, while the other is stress-free till the “payment due” date.

Resolution: sit down together, go over your bills and figure out what needs to be paid. Make a spreadsheet or a schedule with the due dates for payments, decide when the bills are expected to be paid, and, most importantly, don’t forget to stick to that schedule!

Conversation #4: Who is paying for that dinner?

The complaint that I often hear from my cohabitating friends is related to a very trivial but tricky question: who should pay for nights out, especially if expenses are split 50/50?

Most of the time my romantic girlfriends expect that dates will be covered 100% by their partners. Some of my pragmatic guy friends assume that if they are splitting everything else 50/50, date nights should also be split the same way. Unfulfilled expectations could cause tension in the relationship, and feelings can get hurt.

Resolution: Nothing can kill romance in the relationship faster than resentment caused by money issues. You have to decide together what is expected of each other when you go out. If you expect a romantic dinner that he covers, tell him about it. If you want her to pick up her portion of a tab, talk about it.

Conversation #3: You owe how much?!

Your relationship should be open and honest. There should not be any hidden surprises such as your credit card debt, taxes you owe to the IRS, or student loan balances.

One of my friends was shocked when she found out by pure accident that her boyfriend, with whom she was living for about a year, owed $70,000 in credit card debt. When she confronted him about it, his response was, “It is my debt. Don’t worry about it.” His debt became hers when they started looking for a house together and could not qualify for a house they wanted because of his credit card debt.

Resolution: Pull a free credit report for each other, and be open about your debts. I know that not everyone would agree with this idea, but if one day you decide to get married, have kids, and buy a house, you will be glad you did it.

Editor’s note: There’s a related discussion that’s worth mentioning, as well. Before you begin cohabitation, it may be a good idea to discuss whether you and your significant other should be considering combining financial accounts now, later, or never. Depending on the state where you live, there may be statutes that define how individual property may become common property regardless of whether you combine your accounts, but it’s a discussion that should also come sooner or later.

Conversation #2: I need some cash! Please?

Both of you are individuals with different interests, life views, expectations, different bank accounts and different bills. Bills change over time. Your bank account can get overdraft fees. Or you simply spent more than you expected.

One of my friends came back from work to find out that the water was turned off in the house because her live-in boyfriend did not have the money to pay the water bill. He did not dare to ask her for help, and they ended up with no water for a few days.

Resolution: It can be difficult at first but it gets easier every time you do it. Ask for help if you need it. The worst that can happen is you will have to explain why you are short on cash. The best thing that can happen, you will have an uninterrupted supply of water!

Conversation #1: What are we looking for?

I have a few friends who have lived with their boyfriends and girlfriends for three, four, five years and they now feel the drive to make their relationship legal has flown the coop. Before you decide to share your lives and your bills, it is always a good idea to discuss how both of you see the future.

Do you know what his or her timeline is for marriage? Do you even want and plan to get married? If you don’t discuss it early on, she might start thinking that he is with her because it is convenient and cheap. He might think that she is using him as a stepping stone until someone better comes along.

Resolution: Just because you are moving in together, don’t assume that you both have the same intentions and share the same goals. Relationships tend to stall and drift. Natural progression stops, and you are left guessing what the future life holds for the both of you.

Talk long and hard before you make your final decision to move-in, ask questions and please, never assume anything.

What discussions do you expect to have or have had prior to moving into the same living space as your significant other?

Photo: gareth1953

The original version of this article, Five Conversations Before Moving In Together, is copyrighted by Consumerism Commentary.

If you enjoyed this article, follow @flexo on Twitter and visit Facebook for more updates.

I’ve exchanged some of the stress and risk in my life for a more comfortable situation.

At the end of October, as some readers have been aware, I relinquished my ownership of Consumerism Commentary. There was an announcement in the Wall Street Journal that I’ll link to below for those who are curious about some of the circumstances. Despite no longer owning this website, I am deeply involved in its operation, particularly from an editorial standpoint, though not limited to just the articles. I still write all the articles published under the names Flexo and Luke Landes and oversee and edit any content by other contributing writers such as Ellen Cooper-Davis.

Very little on Consumerism Commentary has changed or will change from a reader’s perspective due to this shift in ownership. It does change my immediate financial outlook, however.

Although little has changed about the way I work from day to day, I am technically an employee. This arrangement has benefits as well as drawbacks. I have better health insurance coverage than I had with COBRA coverage with my old employer’s plan, and it’s certainly better and much more affordable than I would have had with individual coverage. I don’t need to worry much about the effect of changes in a competitive marketplace on revenue because my pay check is consistent. Theoretically, a large company has the resources to grow this website’s presence larger and more quickly than I might have been able to accomplish on my own, and I can focus on more important things, like writing, without spending much time on other business matters.

On the other hand, I have ceded some of my independence and must now create a new strategy for moving to the next step in my life.

I don’t intend to go into much detail about the change in ownership, a change that has been in development for well over a year, but it is worth mentioning due to its effect on my finances in the future. I’ve used Consumerism Commentary as a way to share the details of my personal finances through monthly reports, goal sharing, and other articles wherein I discuss very personal matters, and I plan for this to continue. If I weren’t to mention this change, it would make it difficult for me to share my goals for the future in context.

I will offer my specific goals and resolutions for the new year soon, as I’ve done in many recent years.

You can read more about this on the official release on the Wall Street Journal, and I’ll have more to share from a personal perspective in the coming months.

The original version of this article, A Different Environment for 2012 Goals and Resolutions, is copyrighted by Consumerism Commentary.

If you enjoyed this article, follow @flexo on Twitter and visit Facebook for more updates.

Many people begin a new year with goals, resolutions and targets that define what they’d like to change within the next 365 days (or 366 days in a leap year). While most people fail to achieve these goals and resolutions, just the process of making resolutions and the self-reflection required can be helpful towards improving a life.

The ability to make and achieve goals relies on the belief that one can control an outcome, in this case an improvement in one’s life, by changing behavior or attitudes. One reason resolutions fail is that some are no entirely convinced they have control.

There is a tendency in American culture, due its focus on the strength of the individual over the strength of a community, for people to take credit for success but look for external causes for failure. This tendency is apparent even in the choice of words; in the previous paragraph, I wrote “resolutions fail” rather than “people fail at achieving resolutions” without thinking about the possible causes. There are other examples:

• Good performance in a portfolio is due to the investor’s own stock choices while bad performance is caused by market forces or the failure of a system.
• A promotion at work is due to one’s own hard work and accomplishment while a lack of reward or being laid off is the result of having a bad boss or the economy.
• A business’s success may be caused by the owner’s or CEO’s strategies, while a business’s failure would be the result of a competitor’s tactics.

Over the last decade, I’ve come to increasingly realize that I have more control over my life. My actions and choices — and sometimes, lack of choices — have a bigger effect on the outcome of my life than external factors. I haven’t quite fully accepted this in all aspects of life, but I’m getting there. With the knowledge that I am in control, there are certain ways I can exercise this control to affect the way my life moves forward.

Making active decisions. There was a time I avoided decision-making, particularly regarding important changes in my life, as long as possible. There are some decisions that can difficult due to the way a choice will affect the rest of one’s life, and like many people, I often preferred to ignore the need to make a decision in the hopes that someone else — or society itself — would make that decision for me. This is a great way to cede control of my life. Yet, I would still be responsible for the outcome because not deciding is a choice. It’s just a cowardly choice.

Impermanence. I often remind myself that life is short, and that is an idea that keeps me afraid to make mistakes with my big life decisions. I don’t want to make a decision and later discover that two decades or more of my life were wasted on an ultimately unsatisfying path. One way I can motivate myself to make decisions is to remember that almost every choice is not permanent, and I can change my mind most of the time.

Being able to change your mind and find a new path is a great benefit of life. Without some flexibility, it would be impossible for young people to choose life-long goals. Inevitably, external factors do influence our lives, and the ability to react and change course if necessary is key for maintaining control.

Accepting what is beyond control. I can’t control other people’s actions, but I can control how I react to them. I have no control over terrorist attacks, acts of nature like hurricane Katrina, or the day-to-day swings of the stock market. The best I can do is reasonably limit myself to potential exposure. I can prepare for the worst without sacrificing my needs for today and the future.

Being positive, friendly, and happy. While I wouldn’t want to be that annoying friend who is perpetually in a great mood, it is empowering to be able to remain positive in bad circumstances. Having a generally kind disposition can encourage others to be kind as well, though it can also encourage others to try to take advantage of your good nature. Find balance between kindness and strength to keep bullies at bay (adults can be bullies, too — not just kids). Choosing happiness allows you to survive and thrive in tough times and emerge a better person.

The points above are all aspects of life I try to remind myself in an effort to move my life in the right direction. It can be a struggle to accept blame and avoid frustration with the world. It’s still a struggle for me to make important decisions with my life. But these are all aspects of my life I’ve improved over the last decade, and this shift in personal philosophy has helped me arrive at the point of my life where I am now — a state where I feel generally successful and happy.

Photo: Ciaran McGuiggan

The original version of this article, You Are In Control, is copyrighted by Consumerism Commentary.

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Today on the Consumerism Commentary Podcast, Bryan J Busch and Flexo speak with Carl Richards, author of the book The Behavior Gap.

They discuss the difference between smart investments vs. emotional decisions, the importance of financial planning, and how most people are better off just buying an index fund and ignoring investment gurus.

Carl has offered ten 8×10 prints of one of his most relevant sketches to Consumerism Commentary readers and listeners. The sketch explains who to determine what issues are the most important, whether in financial planning or in life. It is a Venn diagram emphasizing the intersection of things that matter and things you can control. The print is on high-quality, thick card stock.

Here’s how to get a free 8×10 print of the napkin sketch

In order to receive a free print, email book@behaviorgap.com with a subject line indicating you’re participating in the giveaway from Flexo or Consumerism Commentary, and include in the email a proof of purchase. The proof can be a copy of your order notice from Amazon, a picture of your receipt, or anything else that shows you’ve purchased the book. Carl’s team will contact the first ten people directly to ensure the prints find their way to the winners’ hands.

Table of contents

[00:00] Introduction from Bryan J Busch
[00:33] Interview with Carl Richards
– [00:57] Explaining financial planning through napkin sketches
– [02:45] The behavior gap between smart investments and emotional decisions
– [05:08] Past performance really doesn’t predict future results
– [09:13] Start with a plan instead of a product
– [12:39] Paying off debt is a great investment, maybe even before funding a 401(k)
– [16:21] Follow Warren Buffet’s advice and buy an index fund
– [21:25] Ignore all investment gurus
– [23:42] More money doesn’t solve money problems
– [25:31] Financial plans are much less important than the process of creating one and being flexible with them
– [27:17] Tools for avoiding making financial mistakes
[31:15] End

Free Webinar

Carl is also presenting a free webinar on building the perfect investment on January 5th at 3 p.m. Eastern time.

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

The original version of this article, Podcast 141: The Behavior Gap, is copyrighted by Consumerism Commentary.

If you enjoyed this article, follow @flexo on Twitter and visit Facebook for more updates.