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Are Wealthy People Dishonest?

2009-11-05T09:00:00.002-05:00

By: Roshawn Watson

Are the wealthy dishonest? While it is certainly a fair question, it is also a polarizing one. The typical dichotomy is that there are some who feel like there is absolutely no way for honest people to get ahead financially while the wealthy often feel maligned for their prosperity.
Image credit: spock

What is Dishonesty?

It is important to clarify what is dishonesty. Some believe taking advantage of people and situations is dishonest. With this definition, many of us who do business are thereby dishonest, but the potential problem with this definition is that this behavior forms the basis of capitalism. For example, if one buys a product at a discount and sells it at a premium price, they are capitalizing 1) on their own willingness to hunt down deals to make profit and 2) on someone's unwillingness or inability to put forth the same effort. Surely reaping the rewards of this relationship doesn't make someone dishonest in itself. In fact, both parties can benefit.

Another relevant distinction is between honesty and morality. They are not always the same thing. Some are completely truthful in business and but operate businesses that many consider immoral. The classic example is the senior executives in tobacco companies. Many believe that it is immoral to prey on others addiction to tobacco for profit; however, that belief does not make it illegal nor dishonest to sell cigarettes in itself. Although honesty and morality typically go hand and hand, it is not always the case. You can be an honest bad person. A reasonable (albeit not perfect) example is Mel Gibson in the movie Payback. He plays a character named Porter, who was completely honest as an assassin. You better believe when he says you're dead if you don't give him back his money, he meant it wholeheartedly. Obviously, he wasn't a moral person but just because he was a low-life doesn't negate the fact that he honestly got his money back.

The Trust Factor

Honesty and trustworthiness is important for any brand because we want to work for and do business with honest people. People typically do not do business with someone they can't trust (the one big exception that comes to mind is doing business with car salesman). Our inclination to want to trust the businesses we deal with suggests that in order to succeed in many businesses, you have to have some degree of trustworthiness. Indeed, if people believe you to be dishonest, they will simply not do business with you. This does not suggest that everyone who succeeds in business is honest and trustworthy, but rather that it is a sweeping generalization to assume all successful wealthy people are dishonest. Sure there are some unscrupulous businesspeople who have become successful, but they are likely the exception not the norm.

There are plenty of people who have become wealthy who are of honest. Consider all of the hard-working and honest actors, athletes, musicians and other entertainers who have become wealthy. The presumption that they are somehow dishonest just because they are wealthy is unfair. Also, consider the "typical" millionaire. The typical millionaire is incognito. He probably doesn't drive a luxury car. She doesn't live in a mega mansion. Only 27 percent of homes worth over 1 million are occupied by millionaires according to Thomas Stanley. The typical millionaire lives in a middle-class neighborhood where his net worth dwarfs his neighbors. The point is the wealthy are among us, and they are downright common. Most acquire their wealth over a long time through systematic investing. It is unsubstantiated that they're dishonest just because they have been responsible with their money and caught some breaks in life.

Why Do We Distrust the Wealthy?
I am aware of two main reasons why we do not trust the wealthy. First, I do believe that sometimes the sensational media gravitates towards scandal. You will hear about Enron a thousand times more than you will read about the thousands of business owners who are operating honestly and ethically. Another reason is that it is sometimes difficult to stomach that others are just better than us at accumulating wealth. Attributing their wealth to dishonesty rather than a good business model, hard or smart work, and good fiscal management is a defense mechanism of sorts.

Of course, none of this suggests that the wealthy cannot be dishonest. Wealthy individuals have the potential to be dishonest just as anyone else. However, the automatic assumption that just because someone is wealthy they must be dishonest is wrong.

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Creating Phenomenal Wealth Over Time

Uncommon Money News (Vol. 75)

2009-11-03T06:00:00.001-05:00

By: Roshawn Watson

Brand New Post Coming Thursday Nov 5:

Are Wealthy People Dishonest?

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I have participated in the Carnival of Financial Planning 112 ed hosted at Zach Stocks and 110 ed hosted by Intelligent Speculator. Two posts were included: The Rich Get Poorer and Should You Buy a House Outright? Thanks for including my posts in your carnivals.

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your help so much! Thanks.

Business News

Home prices continue rebound

The Biggest Mistakes of Some of Today's Business Stars

PepsiCo misplaces letter, faces $1.26 billion judgment

CIT files for Chapter 11 bankruptcy protection

55.5% of Consumers "Very Unlikely" to Pay for Online Content

Economy

Weak dollar driving up gas prices

U.S. Consumer Confidence Up for First Time Since 2007

U.S. Healthcare System Wastes Up to $800 Billion a Year

Entertainment Money News

Michael Jackson's This Is It Has $101 Million Reasons to Live On

Nicolas Cage Blames Advisor for Financial Ruin

Bob Barker Donates $1M to University to Fund Animal Rights Program

Levi Johnston's Playgirl Shoot Will Show All for Six Figures

Offbeat Money News

Stressful jobs that pay badly

The 3 Biggest Money Mistakes You Can Make

2009-10-26T06:00:00.001-04:00

By: Roshawn Watson

Not all money decisions are equal. It is certainly possible to recover from some small money missteps without too much difficulty; however, there are some money mistakes that you will regret for years to come. Here are three of the biggest money mistakes you can make.

Borrowing on Your Home Equity

Perhaps this is a mute point for most due to the mortgage crunch; however, real estate is showing signs of recovery. The $8,000 tax credit is prompting many to take the plunge into home ownership for the first time. Additionally, home prices are returning, which is great news. However, in the midst of the celebration, the old admonishment still holds true: leave that equity in your home alone. By far, one of the most common reason to tap home equity is to “pay off” consumer debt through a debt consolidation loan. For the vast majority of those with consumer debt, the debt is not the problem but rather a symptom of poor financial management (or an emergency that wasn’t prepared for). Sure that’s a hard stance, but it is also true. What’s important is that we realize that one generally cannot borrow his way out of financially trouble. The debt only makes the problem worse. That’s exactly what happens with home equity lines of credit (HELOCs).

Lenders tout HELOCs as a way to pay off credit cards, student loan debt, and other consumer debt. Even some personal finance journalists promote these loans stating that you can get these loans at a lower interest rate than other loans, plus the interest you pay is tax-deductible. Americans have bought the goods too. According to SMR Research and Freddie Mac, we have cashed out more than a whopping $2 trillion between 2002-2005. It is always surprising how many people will borrow on their homes to pay Visa, Mastercard, and American “Excess.”

Unfortunately, there is a catch. Brittain associates reports that nearly two-thirds of people who borrowed against their homes to pay for credit card debts had run up more debt in two years. Instead of solving the problem, the HELOC consolidation only served to move the debt from an unsecured loan (i.e. credit card) to a loan secured by your home.

I wouldn’t even set up a HELOC for “emergencies.” Instead, I would use an emergency fund: three to six months worth of expenses in a money market or savings account. It wouldn’t be horrible to go up to eight months. Sure this is boring, but it is also responsible. Additionally, many people don’t realize that many lenders will close your HELOC at the first sign of financial trouble (i.e. missed payment), so it’s not a good financial buffer anyway since it can be closed precisely when you need the cash.

Borrowing on your 401K

Another big mistake is borrowing on your 401K. At some point, we all need to retire. If you tap your account, not only will your money not grow, but you can be subject to severe penalties and taxes. Over eighty percent of American workers with 401K accounts have the option of borrowing on their retirement account, and twenty percent of participants do just that according to the Investment Company Institute.

Many of those who do borrow on their 401K accounts consider themselves pretty savvy. After all, the interest paid back to the account is their money, so they are effectively paying interest to themselves. The problem arises if they cannot pay the money back, for example if they get fired or lose their job. Often one will have to repay the money within weeks or the loan is counted as a “premature distribution.” In this case, one would have to pay taxes on the money withdrawn from the 401K at their present tax bracket, which for many is about 25% plus get a pretty hefty penalty. For many people, they end up losing 40% of the money. That’s obviously a bad deal. Also, by borrowing, they’re putting their retirement at risk. It just not worth it unless you are facing bankruptcy or foreclosure.

Stretching to Buy A Home

Perhaps this is the most difficult not to partake in because purchasing a home is such an emotional purchase for so many people.

It is almost as if the lender and real estate broker conspire against you, so that you will purchase a home that costs more than you can afford. Of course, when you purchase a more expensive house, the real estate agent gets a bigger commission and the lender racks up more interest and fees. Indeed, 40% of homebuyers are overextended. This means that the sum of the principal, interest, taxes, and insurance exceed 28% of your gross income. This is particularly troublesome because this means that there is less money for investing for retirement, college funds, vacations, eating out, giving, maintenance on the house, etc.

Don’t mortgage your future by becoming house poor. That dream home will become a nightmare once Murphy comes to visit you.

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Falling Off The Cliff

Image Credit: Gravestone

Uncommon Money News (Vol 74)

2009-10-24T05:29:00.002-04:00

By: Roshawn Watson

Brand New Post Coming Monday Oct 26:

The 3 Biggest Money Mistakes You Can Make

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

Posts Of the Week

Latest bank fee is for paying off credit card on time every month

79.9 percent rate targets credit-challenged

Business

Latest bank fee is for paying off credit card on time every month

BofA to charge annual fees on some credit cards

Burdened by Defaults, Bank of America Misses Forecast

Where The Monetizable Clicks Are: Digg's New Ads

79.9 percent rate targets credit-challenged

Wall Street Bonuses Likely To Remain Bigger Than Ever

Economy

China's Super rich bounce back with a vengeance

U.S. Stocks Rally as Dow Hits 10,000 for First Time in Year

Initial jobless claims in surprise drop

Entertainment Money News

Wild Things is King with $32.5 Million

Madoff's Montauk mansion sells for $9.4 million

Rehab for the rich and famous

Jon Gosselin Ordered to Give Back $180,000

Offbeat Money News

Woman flashes $27,000 at Mass. bar, gets robbed

Top-paying jobs

Money Down the Toilet for Security

2009-10-16T12:30:00.002-04:00

By: Roshawn Watson

Most extended warranties are a waste of money for the purchaser and a profit center for the issuer, yet consumers still flock to them. Unfortunately, the extra security provided by the warranty comes with a hefty price tag.

Extended Warranties are Abundant

Sometimes it seems that you can obtain an extended warranty for just about anything. They’re certainly widely available for most cars (new and used), appliances, cell phones, computers and other electronics. They are big business too. Consider that in 2006, consumers spent an estimated $1.6 billion on extended warranties. Functionally, getting an extended warranty is purchasing insurance for a product.

The problem is that these extended warranties are just a waste of consumers’ money for the vast majority of items. The companies issuing the extended warranties are banking on the fact that consumers probably won’t even use the extended warranty, and they’re right. The Consumer Reports National Research Center documents the ownership experiences of millions of consumers for thousands of products. This is how Consumer Reports knows which brands are more repair-prone than others. Anyway, their research shows that most products seldom break within the Extended Warranty window -- typically three years -- and that when electronics and appliances do break, the repair often costs about the same as the cost of the warranty. Additionally, the warranty departments are huge profit centers for the issuing companies. Extended warranties can reap a whopping 50% margin or higher, which is often well more than the profit on the product being sold. That profit is made off of consumer’s desire for security, but it is just not worth it.

Just Say No
It’s their bottom lines that companies are thinking about when they are pushing those extended warranties not your happiness with their product. I was upgrading my phone six months ago, and the overall experience was low pressure except for when my salesperson got aggressive because she wanted me to purchase an extended warranty. In the end, I held firm and informed her that I would simply self-insure for the phone. She told me I would live to regret it, which I found comical. The truth is that my repeated refusal to purchase these extended warranties for my cell phones alone has more than paid for the price of several phones. In other words, I’m already ahead of the “warranty game” financially.

There was a time two years ago when I thought that I broke my palm, so I went to Circuit City to replace it. They queried me about fixing my existing one. Interestingly, they told me that even if I had purchased an extended warranty, it would have expired a few months earlier. Recall the expiration of warranties before they can be used is often the case for many consumers, which is why extended warranties are a bad product. Of course, getting that warranty from the presently defunct Circuit City would have given me indigestion too. Fortunately, it all worked out.

I have many other examples, but my point is I cannot think of a single case where I wished I would have purchased an extended warranty. I would have lost money with no added value each time.

A Note About Extended Car Warranties
Interestingly, extended appear to be on the rise. Consider that in 1999 23.5% of car buyers purchased extended warranties, and in 2009, that number has soared to 34.4%. According to the National Automobile Dealers Association, these warranties are an important source of profits for the dealerships and are typically more profitable than selling the new cars themselves. Perhaps even more vexing is that sixty-five percent of the respondents Consumer Reports surveyed said “they spent significantly more for the new-car warranty than they got back in repair savings” (WSJ, 2009)

Consider that the next time you’re tempted to waste money on an extended service contract. The better strategy is to 1) purchase quality products and 2) put the money that you were going to spend on the extended warranty into your repair savings. That way, when it is time to repair or replace the product, you will already have money set aside to do it. If you don’t need to repair it, then you’re still ahead.

In short, don’t waste any more of your money on extended warranty. Purchasing one would be the real decision that you would live to regret.

Lastly, if you like this post, please subscribe (upper left-hand corner), click here to get my eBook FREE, and Propel it, Stumble it, and tag it on Delicious.

Uncommon Money News (Vol. 73)

2009-10-10T06:00:00.003-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

This week, I participated in the Carnival of Financial Planning - Edition #109 hosted by: Military Finance Network. We have the following posts included in this carnival: Should You Buy A House Outright? and The Rich Get Poorer.

Business News

Another U.S. Bank--One of the "Good Ones"--Ready to Blow?

What Professionals Make (image)

Rupert Murdoch to Internet: It’s War!

Bye Bye Shamu - SeaWorld & Busch Gardens Sold For $2.3 Bill

Studios struggle to rein in movie marketing costs

Goldman Sachs Scandal

This company with $8B in debt and thousands of jobs and hundreds of millions in revenue lost in 2008, is set to pay its highest bonuses in its history, on the rationale that its managers will find other work otherwise. Is this a bank? No, it's a newspaper company.

Comcast may become a partner in Hulu.

Economy

47% will pay no federal income tax?

Detroit: Too broke to bury their dead

Clearly you did not represent the will of the people

Gold sets record high above $1,040 per ounce

Personal bankruptcies hits a 4-year high

Entertainment Money News
Michael Jordan's $7.5 Million pad

Nicolas Cage Owes $6.3 Million in Back Taxes

Other

21 ways to get something for nothing

Image Credit: Kirk W

A Warning to All TightWads

2009-10-09T06:56:00.002-04:00

By: Roshawn Watson

Frugality is supposed to be good; however, when taken to an extreme, it can be disastrous. Some have destroyed relationships, become selfish, and lived relatively miserable lives all in the name of saving a buck.

Frugality Is Not the Only Characteristic That’s Important
Frugality is an important proponent of almost any financial plan. As you know, there are only two sides of the money equation: income and expenses. If you have done due diligence to increase your income, then appropriately managing your expenses is a critical factor in your ability to build wealth. Nonetheless, there are other desirable character attributes that one should consider as well, such as generosity and unselfishness. Sometimes a tightwad completely ruins the spirit behind a kind gesture. For example, if the office agrees to go in on a gift together, but when it comes time to collect the funds for the present, the tightwad conveniently “forgets” to bring his money. I definitely know cases where the “money collector” for the gift tires of dealing with excuses and just uses more of her own money to make up for the lack of participation by coworkers who initially agreed to contribute. What’s more unfortunately is that cheap people are often not poor but middle-class instead. Incidently, it's their obsession with pinching pennies that strains their relationships not their lack of funds.

Just recently, I received a gift that looks like it’s been in the bottom of someone’s closet for a few years. Yes it was tacky, and no I don’t feel bad commenting on it. I would never give someone that mess.

The Problem Is Not Frugality

My intention is not to criticize frugality because I think it is inherently a good character trait. I consider myself to be frugal, and there are often misunderstandings as to what frugality really means. Frugality is concerned with trying to obtain added value. A notable distinction of frugality from cheapness is that cheap individuals are focus on saving a buck at the price of quality, relationships, or time. A frugal person may not always buy the cheapest version pair of jeans because the quality may be poor. Instead, the frugal person would look for deals on a pair with the best value and make sure his budget can accommodate the purchase. Similarly, most frugal people I know would not drive across town to save a buck because they value their time (and gas) too much. The stigma of frugality comes when some equate frugality to saving dollars at almost any cost. However, being a miser, stingy, hoarder, and cheap is not the same as being frugal.

Let’s be clear, there is no conflict between generosity and frugality. Some of the most generous people I know are also frugal, and that’s one of the many reasons they have money to give. I know people who will search for deals on quality food and will buy food for both their families and their local food pantry. Contrast that to the person who is so tight with their money that they resort to taking from others. Using the aforementioned office example, the coworkers who didn’t contribute to purchasing a present are taking credit without giving their fair share. Some people will even steal to save a buck. It’s quite unfortunate.

"Frugal" People: Examine Yourself

Somewhere we may have lost our ways under the guise of frugality. We should be concerned if we will barely go out to eat or have fun with others because we’re too cheap. The warning bells should go off if we stock up on napkins and utensils that we stole from the condiment bar at McDonalds. We are not right if we’re “regifting” crappy stuff that we don't want ourselves. Of course, it is incredibly important to be responsible by budgeting for purchases and investing for the future, and eliminating debt if you have it. Indeed, if you have consumer debt, your financial primary concern should be getting rid of it. Nonetheless, it is also important to be a giver, to not steal, and honor your word when you say you’re going to do something. Somewhere in the quest to save a buck, the miserly have lost sight of moral integrity, honor, family, and friendship. Avoiding unnecessary expenditures is admirable; however, when this behavior becomes an obsession, you’re not frugal, you're miserly and may need help.

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Have We Stopped Saving Already?

ls Recession-Induced Frugality Sustainable?

Dangers of Living Paycheck To Paycheck

2009-10-02T03:00:00.001-04:00

By: Roshawn Watson

Is there not enough check at the end of your month? Apparently, you're not alone.

Careerbuilder.com hired Harris Interactive to conduct an online survey amongst US workers 18 and older to determine our financial solvency. The results reveal a disturbing trend: 61 percent of workers reported that they usually live paycheck to paycheck just to make ends meet. This marks what appears to be a significant rise over last year's 49% and 2007's 43%. Notably, the trends held true for those with incomes higher than $100,000 as well. Thirty percent of workers with salaries of $100,000 or more report that they live paycheck to paycheck, up from 21% in 2008.

Savings and Investments Suffer Too
The effects of the recession can be felt in the households' bottom lines, and many have resorted to dipping into savings as a means of coping with dwindling incomes, often precipitated by job losses and salary declines. Although the survey did not ask what percentage of respondents dipped into existing savings and investments, the survey did reveal that twenty one percent of workers say that they have reduced their 401 (k) investing or personal savings just to make it. Twenty three percent of respondents with salaries at least $100,000 annually also reported to have decreased 401 (k) contributions, which likely indicates that those with higher salaries (i.e. salary over $100K) were not financially insulated from the troubled economy or that they feared investing in such a volatile market. Additionally, many reported difficulty saving anything at all. Thirty-six percent of respondents said that they were not contributing to any retirement accounts at all, which is up from 31% in 2008. One-third (33%) of respondents don't save anything from month to month, up from 25% in 2008. Thirty percent of respondents save between $51-$100 monthly while 16% save $50 or less monthly, meaning that nearly half of those who do manage to save are not putting away much.

Some Thoughts on "Dipping" into savings

Although the survey suggests going into savings and investments may be relatively common practice, it is typically ill-advisable. If this occurs habitually, one can end up with little to no money in the end.

The practice of dipping into savings is essentially robbing Peter to save Paul, and when it's your savings, you are Peter!

Although the function of the emergency fund is to place a buffer between you and Murphy, it is not there to avoid dealing with financial problems. What's quite unfortunate is that dipping into savings often masks a real financial problem thereby allowing one to stay in denial while his finances are depleted. For example, if you have a career crisis (i.e. underemployment), supplementing your income with savings may keep the woofs at bay temporarily, but you will still need to address your income problem. Otherwise, what are you going to do when the savings are gone. To be fair, when facing serious financial hardship tapping an emergency fund and even cashing in some liquid investments may be the only saving grace.

Suspending or Decreasing Savings and Investments

Another issue that the survey dealt with decreasing savings or investments. A general rule of thumb is to invest 15% of your gross income after becoming debt-free. Although such consistent investing, over the long-term, is one of the best ways to build wealth, there are definitely situations where you simply cannot continue at the same rate. Examples are if you have a job loss, a large emergency expense, or if you have a reasonable expectation of an emergency in the future (i.e. the birth of a child or job loss). One question that the survey doesn't appear to address was what percentage of respondents actually decreased savings and investments due to actual financial hardship precipitated by the recession? With sensationalistic emphasis on negative economic news by the media, it is certainly likely that some decreased investments out of fear of losing money rather than out of necessity.

Although it is reasonable to be scared, the knee-jerk reaction to suspend (or
diminish) investments while the Dow is plummeting is the very reason why some
investors missed the whopping 45.7% upswing we have experienced since March.

In fact, in the third quarter alone, both the Dow and the S&P 500 index returned 15 percent. It was the Dow's best quarter in nearly 11 years. The point is if you must suspend investments or savings to prevent financial havoc, that's fine, but to do so out primarily out of fear-based speculation can cause investors to end up on the losing side.

Overall, the survey results suggests that the majority (61%) of us are living on the edge financially. This supports previous data stating that most Americans are just one paycheck or two away from ruin. Interestingly, a sizable percentage of those with incomes of at least $100,000 annually were also in the same predicament. As expected, respondents tapped their savings and suspended investments to account for economic hardships. These results surely highlight the need for budgeting. Of course, that's little comfort to those who are presently out of work or who make very little; however, for the rest of us, we must make sure that during times of plenty that we are acting responsibly with our money.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

Uncommon Money News (Vol. 72)

2009-09-27T09:00:00.002-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

This week, I participated in the Carnival of Financial Planning - Edition #108 hosted by: The Skilled Investor. We have the following posts included in this carnival: Should You Buy A House Outright? and The Rich Get Poorer. Additionally, Should You Buy A House Outright? was also included in the Carnival of Twenty Something Finances hosted at How I Save Money. Last week, I participated in the Carnival of Financial Planning # 107 hosted by Intelligent Speculator and the Carnival of Financial Planning # 106 hosted by My Wealth Builder. The following posts were included in last week's edition The Rich Get Poorer and Should You Buy A House Outright?

Business

Isn't that special: 30,000 employees of Goldman Sachs to earn on average $700K. Thanks taxpayers!

Top Five Highest-Paid, Worst-Performing CEOs

Ten Big Companies That Are Veering Toward Bankruptcy

Colleges Find Creative Ways to Cut Back

Retailers Ready For Fight On Credit Card Fee

The World's 10 Most Valuable Brands (Updated) view!

Cash4Gold Threatened Jail For Not Removing Negative Comments

2 banks change rules on overdraft fees (in a good way)

US Economy and Real Estate Money News

Bernie Madoffs Penthouse Hits the Market Steal at $9,900,000

Bernanke says recession is "very likely" over

Seniors racking up credit card debt

60% of Americans living paycheck to paycheck

Entertainment Money News
Netflix awards $1M prize to improve movie picks

Salary Declines For Generation Y

2009-09-23T09:00:00.001-04:00

By: Roshawn Watson

The employment outlook for recent college grads has not been great this year. Unemployment, underemployment, and now salary declines have made this job season quite challenging. Generation Y have unfortunately found themselves as expendable shock troops in a campaign of corporate “downsizing.”

Generation Y Particularly Vulnerable in Recession

With the stock and real estate crashes, plummeting consumer confidence, and mass layoffs, Gen Y has been significantly impacted by this recession. Perhaps this comes as no surprise since recent college grads are typically hit harder during recessions, as they are amongst the first to be laid off and may have difficulty competing against laid-off workers with years of experience. The Bureau of Labor Statistics recently reported that more than one million college graduates over the age of 25 lost their jobs in FY09, pushing the unemployment rate for their cohort to 4.8% in June, precisely double the rate of June, 2008. Note that the unemployment rate for those new graduates currently seeking jobs is already at 10.8%. Additionally, the National Association of Colleges and Employers said Tuesday that those who graduated with bachelor's degrees in 2009 received a $48,633 average starting salary offer, down 1.2% from last year, according to a survey of 140 college and university career-services offices. This represents a stark change from 2008, when the average starting salary was 7.6% higher than those offered to the class of 2007 (WSJ).

Of course, estimates of unemployment are subject to some errors. For example, the unemployment data have a number of problems that lead to an understatement of unemployment. For example, the data count as employed all people who are working part time but who would like to work full time. Since these people represent unused labor effort that is available, the unemployment rate understates the extent of unemployed resources in the economy. Another problem that causes the unemployment rate to understate the extent of unemployed resources is the "discouraged-worker" effect. If someone wants to work but becomes so convinced that there are no jobs available that he makes no effort to find work, he will be counted as "not in the labor force." Since there will be more discouraged workers the more severe the recession, this factor will tend to dampen the fluctuations in the unemployment rate. No statistic is perfect, but it is important to keep these factors in mind when evaluating unemployment data.

Another consideration is that the salary data is based on surveying by university of recent graduates, which may be subject to all sorts of biases. A look at the actual survey question(s) and some demographics of the respondents would be helpful in interpreting this data. For example, it would be helpful to know whether there any differences in salary based on race, gender, geographical region, major in school, previous job experience and a variety of other factors that may potentially confound the interpretation of the data. It may be that they have corrected for these factors; however, it is not stated. It would also be helpful to see other summary statistics such as the median salary, as the average salary can be skewed by some of the higher earning students.

The psychological and financial impact of being a new graduate in the present job market can be staggering. Often, we forget that Generation Y may be particularly unprepared in this challenging job market. Although there are definitely signs of economic recovery, preliminary 2010 statistics show that employers still intend to cut hiring of new graduates by 7%. Although you definitely have to use your available resources (intellectual, social and economical) to find the right employment in today's economy, the old mantra of work hard and everything will work out fine does not always immediately materialize in the present.

Save For Retirement or Avoid Student Loans

2009-09-15T01:06:00.004-04:00

By: Roshawn Watson

Student loans are just terrible. As the costs of colleges continue to rise disproportionately to incomes, many graduates keep loans around now almost as long as mortgages. According to Kiplinger's Personal Finance, the price of tuition and fees at some four-year public institutions have increased by 35% since 2001; CNN reports that the costs of college has soared 439% since 1982. Many students work to help ease the burden of paying for school. If a student is working and has acquired some cash, should he or she use that money to avoid future student loans or invest the money for retirement?

Image Credit: SBA73

Surprising Wisdom From an 18-year old

Recently, WSJ published an article asking this very question. The son of the chief of the Wall Street Journal's San Francisco bureau wants to use the money he earns for writing a column to avoid student loans. At eighteen, he already has a Roth IRA. His parents want him to take a federally-guaranteed student loan of $5,500 for the first year and invest his money in his Roth IRA. With his parents' plan, Isaac would end up with close to $30,000 in debt upon graduation. He lamented in the column...

I can see it all like a bad dream: I finish up college and, after the flurry of graduation celebrations are over, I'm left out in the real world with my education, aspirations and a massive pile of debt.

For years, it would hang over me, taking a large chunk of my paychecks hostage and forcing me, while job hunting, to always consider first how well a job pays before thinking of how much I would learn from, or enjoy, the work. Working for a nonprofit, traveling the world or going to graduate school would all be mostly out of the picture.

But this is avoidable for me. I've received a large windfall from writing this column, in addition to the money left over from my high-school job. In total, it's enough to significantly reduce the debt I'll need to take on, or to avoid it altogether. That is, only if I don't do something else with the money, like putting it aside for retirement. By deciding to go to college, I piled a heaping mound of financial obligation on my plate. Dealing with this should be my first priority. I don't quite understand my dad's obsession with saving for retirement...

Although the dad admits that he is obsessive about saving for retirement, he still sticks to his stance on his son taking out a student loan to invest for retirement because "our youth can't count on Social Security or old-style pensions, so they need to start thinking about retirement earlier than we did." To be fair, depending on Social Insecurity is not a great idea for any of us, and 401Ks and IRAs have replaced "old-style" pensions for most. However, that still doesn't mean that it's in his son's best financial interest to invest his money rather than avoiding student loans.

I know that the dad is trying to teach a lesson here, but I'm not sure if I
agree with the lesson: invest for the long-term even when it's to your
short-term financial detriment.

Perhaps a better lesson is invest for the long-term after you have built a good financial foundation (not based on debt).

An Expense The Son Cannot Afford
This scenario is pretty interesting since many traditional students do not have the luxury of being able to invest anything for retirement while in school because the money just isn't there. I would suggest that neither does this young man. By investing the money and taking out a loan instead of paying the school bills directly, he is functionally borrowing to invest. The problem is, as he pointed out, debt equals risks.

Unfortunately, we generally leave out risk in our financial calcuations.

Although we all hope that everything will go perfectly in school, suppose he doesn't graduate or doesn't get a good job after school for some unfortunate reason or because he wants to attend graduate school. He would then have student loan debt and possibly little or limited means to pay it back. Unlike many other debts, you cannot bankrupt student loans, so they really can stay with you forever. This is one of the many reasons why you should build a firm foundation prior to investing, which means avoiding and eliminating debt first. Note that this strategy only works if you plan to get out of debt quickly. Additionally, part of the whole college experience centers on nurturing independence. By encouraging him to graduate with a overwhelming amount of debt, the parents may be prolonging his financial dependence on them.

Agree With The Son With An Caveat
Surprisingly, I almost unequivocally side with the young man with the exception that he needs to reevaluate his timetable for investing. While he definitely should NOT plan on waiting "one of two decades," as he mentioned, to start investing, waiting until he is done with school and done with student loans is definitely reasonable, especially if it means that he avoids or minimizes student loan debt. This assumes that he quickly pays off his student loan debt though. For example, if he invested the typical student loan payment from age 22 to age 65, he would still be a multimillionaire. Fortunately, the father and son seem to have come to some resolution: the parents will increase their contribution to the school and the son will be able to invest. That works too, but for the rest of us I agree with his grandmother: get your education, then invest aggressively.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

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Selecting A Debt Consolidation Company

2009-09-09T23:29:00.004-04:00

I have been away but wanted to share this guest post by Robin Williams. It is about how to select a debt consolidation company. Remember, debt consolidation is not the answer to debt. Getting a handle on the psychological problems (out of control spending) and life circumstances (i.e. job loss) is the real answer. There are many situations where one may consider consolidating his debts. For this reason, it is important that you have the necessary tools to make a wise decision in choosing a company. Read this informative post, and feel free to leave comments, visit their site, and write questions for the author.

Author: Robin Williams

There are thousands of debt consolidation companies that are competing for your business, but selecting a dependable non profit debt consolidation company can truly become an intimidating task. While exploring non profit debt consolidation companies, you must take some important factors into consideration.

A lot of debt consolidation companies claim they are non profit, but in reality they earn in millions. These companies apply the “non profit” tag simply to attract consumers. Consumers believe that these debt consolidation companies are working for their best interests. Other debt consolidation companies apply the “non profit” tag to infringe telemarketing regulations from which charitable institutions are granted relief. Request for evidence of non-profit 501(c)(3) status prior to doing business with any such company.

Some debt consolidation companies mention religious connections in their names or on their official websites. Some agencies indisputably have connections with a religion, however, some agencies are simply making use of the name in order to make you rely on them. You must not allow a religious connection or membership to affect your choice – select the agency that is appropriate for you.

Fees
Not every non profit debt consolidation company comes to you free of cost and the genuine non profit agencies must have minimum monthly fees and establishment fees. Some of them make publicity for voluntary fees but subsequently compel you for paying the total fee even though it’s quite costly for you. If an agency has exorbitant fees, is ambiguous regarding their fees, or compels you to pay a voluntary charge, which is not within your means, you should go for another agency. Be careful about the fact that with numerous agencies, the payment for the first month would probably be directed to the debt consolidation agency and not to your creditors.

You fell into debt in no time, but it would require a lot of time to come out of debt. Don’t rely on an agency that assures that you would become debt free within one or two months. Similarly, you must ensure that the non profit debt consolidation agency is giving time for you. The National Foundation for Credit Counseling (NFCC), which is a non-profit community organization, gives at least one hour on the telephone or personally on a discussion to determine whether you require consolidation. If an agency offers you a strategy within a short time period, then it has not given sufficient time analyzing your expenditures. Utilize a debt consolidation agency that gives a lot of time to investigate your finances.

Better Business Bureau
The Better Business Bureau (BBB) utilizes a Reliability Report to maintain documents on businesses in order to ensure that consumers can select the most reliable agencies. The BBB keeps details about products and services together with a history of grievances and accolades. Companies get an acceptable or unacceptable record on the basis of how they manage customer-related matters. Prior to making a decision on a company, check it with the BBB and only pick an agency with an acceptable rating.

The Better Business Bureau is one of the smartest means to check the trustworthiness of a debt consolidation company over the Internet. Nevertheless, be cautious when you’re typing. Just missing one letter such as “a” in “bureau” can take you to fraudulent sites. Take the help of their official website – BBB.org.

It might be difficult to select a non profit debt consolidation company when there is a plethora of choices. However, with some perseverance and plenty of research, you can select an agency that is suitable for you. You can have a lasting smile since you’re one of those debt-free people.

Uncommon Money News (Vol. 71)

2009-09-04T20:27:00.006-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

This week, I participated in the Carnival of Financial Planning #105 hosted by: The Skilled Investor. We have the following posts included in this carnival: Have We Stopped Saving Already? and The Rich Get Poorer. Additionally, Have We Stopped Saving Already? was also included in the Economy and Your Finances Carnival hosted at One Mint. Last week, I participated in the Carnival of Financial Planning # 104 hosted by Four Pillars. The following posts were included in last week's edition The Rich Get Poorer and Outrageous Law Transfers Parents’ Debt To YOU.

New post Should You Buy A House Outright? was included in the Festival of Frugality hosted at Canadian Finance Blog, the Money Hacks Carnival hosted at Automatic Finances, and the Carnival of Everything About Personal Finance hosted at Nil 2 Million. Thank you, thank you, thank you. Please look through the carnivals if you would like to read plenty of other interesting posts in the blogosphere!

Also, I wanted to send a special thanks to Marshall Brain of How Stuff Works (I subscribe to this site) for linking to Should You Buy A House Outright? under their interesting reads section. This is so appreciated, and they do a wonderful job on this site.

With your help this week, we made the front page of multiple social media with the post Should You Buy A House Outright? !!! Thanks for your OVERWHELMING SUPPORT and also thanks for all the comments!!!!

Posts Of The Week

The Article Cash4Gold Doesn't Want You To Read

The Four-Day Workweek Is Winning Fans

Audi President: GM's Volt a car for idiots

American pharmaceutical giant Pfizer Inc. agrees to pay $2.3 billion for illegal promotion of products, the largest health care fraud settlement in U.S. history

Vanity Fair's The Establishment List 2009

Business

The Article Cash4Gold Doesn't Want You To Read (POW)

The Four-Day Workweek Is Winning Fans (POW)

Audi President: GM's Volt a car for idiots (POW)

How Craigslist still rules with 90's web design (Wired)

American pharmaceutical giant Pfizer Inc. agrees to pay $2.3 billion for illegal promotion of products, the largest health care fraud settlement in U.S. history (POW)

Economy

What Underwear Says About the Economy

Entertainment Money News

Final Destination claimed the No. 1 Spot, but which high profile movie came in second

Could Susan Boyle Already be Bigger Than Whitney Houston, New Moon & the Beatles?

Vanity Fair's The Establishment List 2009

Offbeat & Other
Why the Rich Clip More Coupons Than the Poor

Image credit: Bert Kommerji

Congrats to Kevin from No Debt Plan for reaching a net worth of six figures

Being A Landlord By Default

2009-09-03T04:36:00.011-04:00

By: Roshawn Watson

With decimated real estate markets across the country, many homeowners are facing some very difficult financial decisions. Although choosing to become a landlord can be financially rewarding, many homeowners are finding that this option is not all that it is cracked up to be.

Why the Increase in Reluctant Landlords

Homeowners who have relocated due to new jobs but can't sell their homes or those who want their home values to return before they sell are becoming landlords to offset their mortgages and other expenses. Allstate, the U.S. second largest home insurer, reported that there is a 27% increase in homeowners who converted their homeowners insurance to landlord policies compared to the same quarter last year. In many cases, these homeowners are just looking for some relief from their mortgages and related expenses.

However, many homeowners are unprepared for the additional burdens of finding and retaining quality tenants, the stress of maintaining the property professionally, and the increased responsibility for bookkeeping. Renting out a property is functionally similar to running a small business, yet reluctant landlords are often lacking and unwilling to learn the necessary tools required to do it effectively. After all, being a landlord is just a "temporary fix" for many. One way to make sure that the property is managed correctly is to hire professional property managers, which typically costs 3 to 12% of rental income. Unfortunately, this often erodes any potential profits, but for these default landlords making profits is not their primary motive anyway.

Leasing the Property to Tenants May Not Solve Problem

Becoming a landlord by default is definitely not a panaceas. Even with rental income, these new landlords may still find themselves in negative cash flow positions after you factor in the mortgage, insurance, taxes, and other related expenses. In some U.S. markets, the demand for rental units isn't that strong. Note that the vacancy rate for rental units is the highest in two decades and rents are falling, which is good news for good tenants and bad news for landlords. Additionally, renting out the house may only be delaying the inevitable loss of a property. This is particularly true in cases where the owners owe substantially more on their homes than they are worth. These buyers would benefit from a short sale with no recourse (meaning the lenders agree not to pursue the balance between the value of the mortgage and the actual selling price). Although you definitely take a credit hit for these, you can legally and ethically wash your hands of the property and get out of the financial trap. That's why it is important to be honest with yourself in these situations. The prices for many properties, especially those in areas hit hard by the real estate crunch, may not climb back to mid-2000s levels anytime soon. Thus, holding on to a property by renting where you are operating at a loss each month is not a particularly good strategy in such circumstances.

Being a reluctant landlord is a option that many of us may face at one point of our lives. I have read numerous times that many landlords are indeed reluctant. After all, who wants the call to fix the toilet in the middle of the night or to deal with late payments and ungrateful tenants. Sure there are rewarding aspects, such as providing housing to families and income for yourself, but that doesn't change the fact that there is unpleasantness associated with being a landlord. Perhaps the important lesson is that if you are going to do it, then immersing yourself into the business of being a landlord may turn an unfortunate situation, such as being financially-tied in a house you're trying to unload, into a blessing in disguise.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

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Uncommon Money News (Vol. 70)

2009-08-30T06:22:00.001-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

Last week, I participated in the Carnival of Financial Planning #103 hosted by: real estate 43. We have the following posts included in this carnival: Have We Stopped Saving Already,The Rich Get Poorer, and Outrageous Law Transfers Parents' Debt To YOU. Additionally, Have We Stopped Saving Already was also included in the Carnival of Twenty Something Finances hosted at How I Save Money. Please look through the carnivals if you would like to read plenty of other interesting posts in the blogosphere!

With your help this week, we made the front page of multiple social media with the post Should You Buy A House Outright? !!! Thanks for your help and also thanks for all the comments!!!!

Business

UBS to Give 4,450 Names to U.S.

Banks 'Too Big to Fail' Have Grown Even Bigger

Innovation In Motivation or How We In Business Can Change To Survive The Downturn (Thanks for this post Jerry)

Ephren Taylor, the youngest African-American CEO of a publicly traded company (Thanks for this post Financial Dream).

Two brothers, no fears and $1 billion empire (Thanks for this post Financial Dream)

Economy

Federal Reserve loses suit demanding transparency

The Top 10 Things We're Glad the Recession Killed

Warren Buffet: America Has Hit The Panic Button (Thanks Robin)

U.S. deficit estimate to be trimmed to $1.58 trillion

U.S. government actually making a healthy profit from TARP related investments.

Entertainment Money News

"Inglourious Basterds" aims for more box office glory

Should You Buy A House Outright?

2009-08-26T08:30:00.007-04:00

By: Roshawn Watson

Anyone who subscribes to the Rich Dad, Poor Dad philosophy believes that a house is not an asset. Still, so many people tout the belief that "home ownership is one of the best ways for the middle-class to build long-term wealth." Clearly, for some this is true. However, suppose you find yourself in the somewhat unique predicament of having the resources to purchase your house outright without a mortgage. Is it then financially-wise to make the purchase?

A House Is Not An Asset

Before tackling that question, let's give it the appropriate context by revisiting why some believe that a house is not an asset. The reason some argue that a house is not an asset, at least for the "homeowner," is because home ownership increases financial liability. Consider the balance sheet for a typical homeowner. The value of the house goes in the asset column while the mortgage value goes into the liability column. Thus, for most people, the house is a financial liability, at least until the property-owners sell it. Once sold, the homeowners can access the equity (asset). The real benefactors of home ownership are the mortgage lenders: our liabilities (mortgages) serve as their assets. If one owns the house outright, this eliminates the monthly financial obligations, but home ownership still costs money. Taxes, home maintenance expenditures, and home owners associations dues (if applicable) can still make home-ownership a financial burden. Thus, there are some proponents who believe that even a home with a paid-off mortgage is not a true asset.

Should I Cash Out Stock Options To Buy The House?

I recently came across a scenario where someone had accumulated stock options at work over several years and was considering cashing half of them in to use the proceeds to buy a house outright. She wanted to stay at home with the kids, and without a mortgage, her family could survive on solely her husband's income. Still, the concern was whether this was in their best financial interests.

At the core of the above scenario lies the question "should I cash-out an asset (stock options) to purchase a non-asset (a house)?" I truly believe the best answer is it depends on your unique financial situation. For example, before purchasing the home and decreasing one's income (quitting a job), it is important to have a strong financial foundation. This would include being debt-free and having an emergency fund at the minimum. Even on a single income, they should be able to invest at least 15% of their income and contribute to their kids colleges funds, both of which could be feasible if they were debt-free. The answer also depends on their age. I'm assuming that they are young because they have young children (although you definitely cannot be certain). If they are older, it gets a little trickier. It is always sad when someone has to sell her home because she doesn't have the appropriate amount in investments for retirement. If you become house poor because too much of your cash is tied up in your primary residence and you want to retire soon, you could end up selling the house to eat.

Also, it depends on your investment strategy. I am NOT a fan of stock options in individual companies. It is far too risky for me to not have diversification. Enron, Lehman Brothers, and countless other company failures have proven the principle repeatedly. Thus, I would sell the stock options anyway. Lastly, it may depend on how long you plan on living at the residence. Although real estate is showing signs of recovery, who knows how long it may take your area to recover. The good news is that low real estate prices can still be found, which means you may find some good deals on property. However, it may still take a while for the value of your house to go up significantly, so it would be best to at least plan on staying there for 5-7 years.

Other Considerations

Some argue that they like mortgages for the tax benefits, but I wonder about their math. To keep a mortgage for the tax benefit is like saying that you are willing to pay the bank $10,000 per year to avoid paying the IRS $2500. It just doesn't add up in your favor, financially. Additionally, there is a freedom that comes with removing debt from your life. Excluding my house, I have been debt-free for over a year, and it's been wonderful not having payments. Not owing payments removes the constraints on your cash flow, which allows you to build wealth through aggressive investing, have more fun, and give. For most people, if you paid off your home and invested an amount equivalent to a mortgage payment consistently, you could be a multi-millionaire. Financial issues aside, the lady mentioned above wants to come home to be with her kids, which is definitely worthwhile if she can swing it. A house is where you live, and you have to live somewhere. Why not own it if you can financially afford to? The key is knowing your financial situation.

Uncommon Money News (Vol. 69)

2009-08-20T05:58:00.009-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

Last week, I participated in the Carnival of Financial Planning #102 hosted by: The Skilled Investor Blog. If you remember, we hosted this same carnival edition #101. We have the following posts included in this carnival: The Rich Get Poorer, Outrageous Law Transfers Parents' Debt To YOU, Colleges Pimping Their Students. Please look through the carnival if you would like to read plenty of other interesting posts in the blogosphere!

With your help this week, we made the front page of multiple social media with the post Have We Stopped Saving Already!!! Thanks for your help and also thanks for all the comments!!!!

Posts Of The Week
My Bad! Woman's House Mistakenly Auctioned by Bank

Collection Agency Sends Four Letters to Collect a $.04 Debt

Business News
Pay Raises Are The Worst In 33 Years

Reuters Happy to Take Traffic the AP Doesn't Want

Paypal adds new fees with no notice

Best paid CEO made over 702 mil last year

5-ways-companies-mistreat-job-seekers

Collection Agency Sends Four Letters to Collect a $.04 Debt

The Billionaire Universities

My Bad! Woman's House Mistakenly Auctioned by Bank

Burger King Drive-Thru Workers Try To Cheat Timer System

Economy
Surprisingly strong jobs data signal turning point

Who Won the Recession?

The Recession Is Over: Now what we need is a new kind of recovery.

Entertainment Money News
Ben Stein fired by New York Times

Box Office winner for last weekend was

Trump fights court decision on his defamation suit

Offbeat Money News
Mich Church wins the lottery

Widow sells husband's tomb above Marilyn Monroe

Have We Stopped Saving Already?

2009-08-18T02:31:00.009-04:00

By: Roshawn Watson

Well it is finally happening. With the apparent positive turn in the economic tide, the shock and fear that drove consumers' purse strings and wallets shut is also wearing off. For over a year, people have been talking about a new wave of frugality sweeping through America. However, if this frugality was just a side effect of fear over the decimated economy, will it last now that people are beginning to use that other r-word: recovery?

Three months ago, we asked a pertinent question: ls Recession-Induced Frugality Sustainable? For example, we rediscovered the art of savings. Goldman Sachs predicted 2009 savings rates to be between 6-10%. We even went from record high debt-to-income ratios in 2007 to the American debt load shrinking in 2008, which is the first time American debt has shrunk since 1952. While it would be great for financial temperance to become the new norm, we knew that this unfortunately might be too optimistic. Recent data from the Bureau of Economic Analysis suggests that Americans may be saving less again, as our personal savings rate (as a percentage of disposable income) fell to 4.6% in June, compared with 6.2% in May. Now, it is true that even June's 4.6% is still a lot better than the negative savings rates we had a few years ago, one must wonder if the drop in savings is a signal our former ways of reckless spending will return.

It is possible to read too much into this though, after all this is just two months' data. However, even if you believe these two months are indicative of the present trend in spending, there are some recent events that might be confounding this data. For example, May was when some individuals received their federal stimulus checks, which would help spruce up savings for May and make June look particularly worse by comparison. Additionally, 4.6% represents savings as a percentage of disposable income, and June marked the fourth consecutive month that personal incomes decreased. This is partly due to job loss and underemployment. These are indeed important considerations to remember when interpreting the data.

Financial Abstinence Is Not An Option

Additionally, unless you are Daniel Suelo and willing to live in a cave, you have to spend some money. Just like a food addict, total abstinence is never a viable option. It was inevitable that we started spending again. This still doesn't mean that we couldn't retain the lessons of frugality, and the lack of retention is what is particularly troubling. Programs such as Cash for Clunkers that induce people to trade in their working cars to purchase new cars that they most likely cannot afford appear to be a step in the wrong direction. Such debt-driven spending may be great for the auto industry and even temporarily for the overall economy, but as Suze Orman said nearly a year and a half ago, what you have to be concerned about is your personal economy.

What About The Good News: Economic Recovery

The good news is there are definitely some strong economic signs. Home sales have risen for three straight months—a first since 2004. The stock market has rallied a whopping 44 percent since March. Macroeconomic Advisers, a consulting firm, says the economy is expanding at a 2.5 percent annual rate in the current quarter. Economic activity "will increase slightly over the remainder of 2009," Federal Reserve chairman Ben Bernanke told Congress. Even with these positive trends, one must be concerned that we don't readopt the same kind of debt-fueled consumption that contributed to the economic mess in the first place. The last recoveries were based on bubbles and financed by consumption. This formula doesn't work long-term, and broke consumers end up with the short end of the stick. We should all be mindful of our spending regardless of what incentives are being offered to ignore our financial well-being. Our most powerful wealth-building tools are our incomes. Protecting our incomes by not being leveraged in debt and overspending is one of the best ways to stimulate our personal economies.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE

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Is There Any Room For Economic Optimism?

2009-08-12T06:50:00.002-04:00

By: Roshawn Watson

It is well-known that media often focuses on doom and gloom. For example, hundreds of airplanes land safely everyday and will never garner any media attention (unless the landing is miraculous); however, the one that crashes will be plastered on news across the country. Perhaps it is just human nature to gravitate towards the sensational. By far, fixing our current economic woes is a top priority for many Americans, so the fact that US economic hardships is getting tons of media attention is not wholly unexpected. However, a recent sobering and fear-inducing article by Forbes columnist Tom Riper might have pushed the limits with respect to responsible reporting.

Image Credit: jfsl3

In Where You Won’t Shop in 2009, Tom not only highlights that some retail stores that have already announced that they are closing doors in 2009 (i.e. Circuit City and Sharper Image), but he makes a series of fatal predictions for several other beloved American brands (i.e. Starbucks and Gap). These predictions are based on interviews with some industry experts and surveys. For example, normally just 4 percent of women would not plan to buy any clothes in a given year, but nearly one-third of women plan no clothing purchases in 2009.

The article reads “while industry executives and shoppers will remember 2008 as the year the party ended, figure 2009 to be the year of the hangover.”

Is There Any Room For Any Optimism?
Although it is true for some of these companies, he is just stating the obvious, I seriously doubt all of these companies will close doors completely in 2009, yet that's what the title of this article would suggest. Of course putting on rose colored glasses and being blissfully ignorant is not the answer. Blind optimism helped get us into this mess, but optimism tempered with a dose of reality is what's needed in these times.

It would be more precise, although less attention-grabbing, to merely state the truth: these companies have some real challenges ahead in this coming year.

Entrepreneurship Less Desirable
It is likely that the economic uncertainty is causing a decline in interest in entrepreneurship as a career amongst high-school students and others. With business closures (and potential closures) receiving so much media attention, being in business for oneself seems remarkably more risky now than during the last few decades. Still, these risks alone should not dissuade those who are passionate about entrepreneurship. For example, the following is a list of 14 big businesses that started during a recession. Notice that none of these are on Mr. R.I.P.er's list. It is possible to have phenomenal success in business if you act smartly, even in today's economic climate. This message of hope is often neglected by today's media.

Funny Quote From Article
Perhaps the most comical quote in the post was "people are so scared they are starting to save." It's as if he is almost saying "surely, it has not come to this, people are actually saving... gasp." The truth is he is right! Whereas the United States has historically had a negative savings rate, the Federal Reserves reported a positive savings rate and a decline in debt during the 3rd quarter of 2008, and some experts believe our saving rate may increase to 6 to 10% in 2009. Personally, I think consumers being fiscally responsible is a good thing. Individuals who appropriately manage their monies typically end up investing and spending, both of which are great for the economy long-term.

In summation, media outlets produce sensational stories to get readers (or viewers), for which advertisers will pay big bucks, but such reporting can be demotivating and even irresponsible in some cases. It's up to us to decide the true motives behind such one-sided reporting and whether this is the kind of news that we want to support.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

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Originally posted 1-27-2009

Carnival of Financial Planning - Edition #101 - August 7, 2009

2009-08-07T06:00:00.003-04:00

Best Personal Financial Planning and Personal Investment Articles this Week from Personal Finance Blogs

Welcome to the August 7, 2009 Edition #101 of the Carnival of Financial Planning.

The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.

This edition is arranged by subject heading, so that you can browse efficiently.

Enjoy!

The Skilled Investor, Editor

Budgeting

Dorian Wales presents The Personal Financier: Personal Finance Management: Budget vs. Net Worth posted at The Personal Financier, saying, "While it may be recommended to manage both a budget and net-worth sometimes focus leads to better results."

Susan Saverton presents Living Expense Tracking posted at Family Financial Planner, saying, "If you do not understand how much you spend and how much you are saving and investing, you simply do not have a financial plan. This situation dramatically increases your family’s long-term financial risk."

Economics

Banker Saver presents Is The Inflation Protected Certificate of Deposit Still Around? posted at Banker Saver

Tony Cookson presents Chicago: Why we have good apples, but few old cars posted at This Young Economist, saying, "Chicago streets have a lot of nice cars: BMWs, Audis, Hummers, Range Rovers, etc. Even the less expensive cars are relatively new. This is in stark contrast to the stock of cars in Montana. Not only are such fancy cars rare in Montana, but the fleet of vehicles is much older -- at least based on my casual observation. Our 1997 Oldsmobile Cutlass is a dinosaur in Chicago, but it does not stick out too much in Montana. This article explains why."

Phil B. presents 7 Reasons Why Cash for Clunkers is a Bad Idea « Phil for Humanity posted at Phil for Humanity, saying, "The "Cash for Clunkers" Program only seems like a good idea to stimulate the economy.."

Finance Tips 101 presents Saving Cash With Coupons? Three Tips To Keep More of Your Money posted at Finance Tips 101.

Zach Scheidt presents GDP Report Offers Positive Headline, Negative Details posted at ZachStocks, saying, "The GDP report was trumpeted as an improvement and an indication of a recovering economy. However, behind the headlines there is significant detail pointing to risk for the economy and for investments."

TIE presents Efficiency and Rationality in Financial Markets posted at The Incidental Economist, saying, "A careful review of the EMH and the extent to which it applies to non-institutional investors."

Dorian Wales presents On Causality and Correlation in Economics posted at The Personal Financier, saying, "Causality is perhaps the most fundamental element of empirical evidence available to economists. However, it is also the source of many misconceptions due to its elusive nature."

Roshawn Watson presents The Rich Get Poorer posted at Watson Inc, saying, "The implications of this recent recession have been far-reaching enough to put a big dent in American and world wealth. Both the magnitude of wealth and the number of millionaires decreased profoundly in 2008."

Estate Planning

Jeff Rose presents Taking Care of an Elderly Parent posted at Jeff Rose, saying, "Find of what you need to do when you have to become the parent of your parents."

Financial Planning

Tom Drake presents Fee-Only Financial Planners posted at The Canadian Finance Blog, saying, "Looking for someone to help with your investments with your best interests in mind? You should hire a fee-only financial planner."

jim presents Go Direct To Credit Bureaus for Credit Score posted at Blueprint for Financial Prosperity.

Patrick @ Military Money presents How Much Life Insurance Do Military Members Need? posted at Military Finance Network, saying, "Military members may have different life insurance needs than civilians. Here is information regarding how much life insurance military members should buy, and some resources for finding the best life insurance deals."

Big Cajun Man presents Mid-Year Personal Finance Check Up posted at Canadian Personal Finance Blog, saying, "Mid year is a good time to go over your plan for the year to see how well you are doing, so do it now!"

KCLau presents I achieved financial freedom at 38 posted at KCLau's Money Tips, saying, "This post is contributed by WaiYin, a reader whom I admire very much because she achieved financial freedom at age 38! Here, she shares how she did it."

Four Pillars presents Make Home Affordable Refinance Program Changes Eligibility Requirements For Easier Refinancing posted at Quest For Four Pillars, saying, "Making Home Affordable refinance program eases requirements."

Curt presents Don’t Take The Bait: Why You Shouldn’t Trade In Your Car For $4,500 On a New One posted at PennyJobs.com.

Sam presents New !! Prenup !! Should I Sign a Prenuptial Agreement? Do I Need a Prenuptial Agreement? posted at Surfer Sam and Friends, saying, "Sometime before the wedding, your loved one may bring up the issue of a prenuptial agreement. Don't panic. You've heard about prenuptial agreements. Donald and Ivana Trump had one. Liz Taylor and construction worker Larry Fortensky had one. Tom Cruise and Katie Holmes have one. Keith Urban and Nicole Kidman have one. A prenuptial agreement, also called a prenup, is a way to protect your interests if it becomes time to untie the knot."

Fitz Villafuerte presents How To Find The Best Personal Financial Adviser posted at Ready To Be Rich, saying, "How do you find the best personal financial adviser? It's easy and you'll be surprised where you could find him or her."

KCLau presents Why Robert T. Kiyosaki is a best-selling author? posted at KCLau's Money Tips, saying, "Robert T. Kiyosaki is the best personal finance author I follow. I started reading his books back in 1999. Although some reviews you found written by readers on Amazon say that he keeps repeating most of the points, I still find them interesting every time. It works as a revision whenever he repeats."

Susan Saverton presents Personal Investing Strategies posted at Family Financial Planning, saying, "When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan. You need to control and limit the time that you spend on your financial planning, and you need to focus your planning efforts on the most effective activities."

Financing a Home

FMF presents Now's the Time to Buy a House posted at Free Money Finance, saying, "Has the housing market hit bottom? If so, now's the best time to buy a new home."

Ben Dinsmore presents Why Do I Have to Pay for Private Mortgage Insurance (PMI)? posted at Trees Full of Money, saying, "If you do not stay on top of your Private Mortgage Insurance (PMI), you may end up paying hundreds (if not thousands) more than you need to!"

Ray presents Net Worth Update and First Time Home Buyer Plans posted at Money Blue Book, saying, "Looking to finally purchase a new construction home. Need to improve credit score and save for down payment"

Patrick @ Cash Money Life presents What Do You Do When You Face Possible Foreclosure? posted at Cash Money Life, saying, "What are your options when you face foreclosure?"

Alex Fotopoulos presents When is it Smart to Refinance a Mortgage? posted at My Trader's Journal, saying, "Some key points to consider when refinancing your home."

Financing Education

Dividend Tree presents Which High Do You Prefer? posted at Dividend Tree, saying, "High profitability or high income, or high EPS growth rate as a standalone does not provide a true picture. We can get a true picture by looking for consistency. Two simple statistical measures of average and standard deviation can help us measure consistency."

Praveen presents Students Beware! Colleges, Tuition, Loans, and Debt - Will Education Follow the Housing Bust? posted at My Simple Trading System, saying, "Tips for students to avoid excessive loans and debt"

Joe E presents President Obama Increases Pell Grant and Perkins Loan Limits posted at Consolidating Student Loans Online, saying, "New loan limits on Pell Grants and Perkins Loans - both government backed financial aid products - may make it easier for some students to afford school. The new limits will go into effect in fall, 2009..."

Health Care

Brian presents High Cost Of Health Care: What Is The Root of the Problem? posted at How To Live a Longer Life, saying, "It doesn’t matter if we have private health care insurance, single-payer public coverage, or if we pay out of our cash and savings. No matter the health care system, the last year of life will be more expensive. At some point the costs might not be worth it."

Income

Joe Plemon presents Is a College Degree Necessary For Success? posted at Personal Finance By The Book, saying, "Besides, being billionaires, what do Richard Branson, Bill Gates and Michael Dell have in common? None graduated from college. What attributes helped them succeed and can help you succeed?"

Praveen presents Easy Ways to Generate Cash posted at My Simple Trading System, saying, "Easy ways to generate extra cash"

FMF presents My Jobs, I Get My Dream Job posted at Free Money Finance, saying, "This post details the twists and turns associated with me getting my dream job and lists several key career-building principles I learned in the process."

Investing

Dividend Growth Investor presents MLPs Dominate Distribution Increases posted at Dividend Growth Investor.

Dan at Everydayfinance presents Swine Flu Stock Mania - Just Wait 'til Fall posted at Everyday Finance, saying, "This article highlights the recent triple digit gains in several so-called 'Swine Flu Stocks' and questions whether the hype has gotten ahead of the fundamentals."

Marc Ryan presents IndependentInvestor.info - Non-traditional ETFs in Canada: wolves in sheep’s skin? posted at IndependentInvestor.info, saying, "In this second commentary on exchange traded funds, we look at the various types of ETF’s traded on the TSX (Toronto Stock Exchange) in Canada. We explain how to find yourself among the more and more numerous new ETF funds, where to find information on fund management fee levels, and the speculative aspects and weaknesses of many of the new funds."

Dividend Tree presents Apple - Great Products But Is It a Great Investment? | Dividend Tree posted at Dividend Tree, saying, "I am one of those millions of aficionados who love Apple products. Unfortunately, I cannot say the same when it comes to investing. Questions like these make me wary of investing in Apple."

Silicon Valley Blogger presents Online Discount Brokers: SmartMoney Broker Survey posted at The Digerati Life, saying, "The SmartMoney broker survey ranks the online discount brokers on various criteria."

The Smarter Wallet presents Online Stock Brokers With Cheap Brokerage Fees posted at The Smarter Wallet

Ray @ Financial Highway presents Discount Brokers: 5 Tips to Choose the Best Discount Broker posted at Financial Highway, saying, "Tips on how to find the best discount broker"

Jae Jun presents 2009 Top 40 Best Stocks to Retire On: Part 4 | Old School Value posted at Old School Value, saying, "Went through all 40 of Fortune's Best Stocks to Retire on list of 2009. View the results now."

Sun presents Broker Web-Based Trading Platform Comparison posted at The Sun’s Financial Diary.

The Skilled Investor presents Personal Investment Management posted at Personal Investment Manager, saying, "Investors more easily understand investment costs that are directly measurable, such as fees deducted on investment statements. However, many investors ignore or are unaware of the opportunity costs of their sub-optimal investment behaviors. Opportunity costs are usually much more difficult to measure directly, but these investment costs can be even higher than more visible investment fees."

Barry presents Does It Make Sense To Use Home Equity To Invest? posted at Associate Money.

Zach Scheidt presents Verso Paper Breaking Out From the Brink of Death posted at ZachStocks, saying, "Verso Paper Corp (VRS) has been under intense pressure relating to excessive debt and a lack of paper orders. A slight improvement could touch off a sharp reversal in fortunes, however, as many competitors are now gone. Debts have been re-negotiated and are no longer so serious."

Mike Johnson presents Trading System Part 2 posted at System Trading | Stocks Trading Systems, saying, "Now we covered a large form of protection in the exit strategy. In other investments, there is usually not as much overlap. However you probably want to learn a lot about forming a business entity. Talk to your accountant, bookkeeper, and attorney, and any other needed professionals to determine what is right for you."

Dorian Wales presents The Personal Financier: Diversification is Dead. Long live Diversification posted at The Personal Financier, saying, "Don’t give up on diversification through asset allocation just yet"

Dividends4Life presents Snap, Crackle and Pop: The Sound of a Rising Dividend! posted at Dividends Value, saying, "Dividend increases aren’t the only thing the Kellogg Company (K) is known for. For anyone over the age of two, Snap, Crackle and Pop are very familiar characters. Since 1933 the three elf characters have been the spokesmen for Kellogg’s Rice Krispies."

Allison Johanson presents Why Everything You’ve Heard About Leveraged ETFs Is Wrong posted at ETFdb.

TIP Guy presents Stock Buying Process posted at TIPBlog.in, saying, "For my long term portfolio, I buy stocks that I want invest for long term and grow with the company. I buy stocks in blocks of one third over a period of time. I initiate a position which helps me follow the company. It also helps me make sure; I am not making a mistake. It may take me one year, two years, or more for second or third installments."

The Dividend Guy presents Dividend Stocks in My Portfolio that Have Raised Dividends posted at The Dividend Guy Blog, saying, "As a dividend investor, I watch closely how my dividend stocks perform. In an environment where may stocks are cutting their dividends, here are some of mine which have been increasing them."

The Smarter Wallet presents Stock Mutual Funds: Building Your First Investment Portfolio posted at The Smarter Wallet

Tom Escent presents Quantitative Finance posted at Nerds on Wall Street, saying, "Think of this book as sort of a Hitchhiker’s Guide to Wired Markets. There are no robots parking cars for six million years, but there are robots trading millions of shares in six milliseconds, so maybe that’s close enough."

Dividend Tree presents BRIC Acronym? Does it Have Any Relevance? posted at Dividend Tree, saying, "This BRIC label does not have any fundamental basis other than emerging markets. There are thousands of companies in all four economies, and clubbing all together to preparing a representative fund of few tens, or few hundreds does not make sense to me. Also, the idea that one can capture and hedge by investing in BRIC based funds is something that I cannot understand."

Frank Vertin presents Best Index Funds posted at Best Index Funds, saying, "Buying an S&P 500 index fund through an investment counselor can substantially increase your initial purchasing costs and and drive up your annual management expense fees. Unfortunately, the vast majority of individual investors buy mutual funds and ETFs through brokers and investment advisers. Rarely do financial advisors recommend that you buy index funds with low fees. This is because low cost, no load mutual funds do not pay them as well as loaded, high fee mutual funds.".

Zach Scheidt presents Solar Stocks Cheer SunPower Results posted at ZachStocks, saying, "Solar Stocks traded higher after SunPower Corporation announced positive earnings. The industry is working through an inventory glut but it appears that certain segments are finding strength. SPWRA could reach $50 over the next few months if analyst expectations prove correct."

ABC presents Some Index Funds and ETFs Are Not Diversified posted at ABCs of Investing, saying, "Some ETFs and index funds are too specific and risky for a passive investor."

Larry Russell presents Best Noload Mutual Funds posted at NoLoad Mutual Funds, saying, "Taken as a whole, the vast body of investment research studies show that there really are better approaches to buying and owning mutual funds and ETFs. You do not need to frantically chase fund performance. Performance chasing simply does not work."

ABC presents Different Types of Stock Market Indexes posted at ABCs of Investing, saying, "How different types of stock market indexes work."

Tushar Mathur presents Can't Control the Markets? Try controlling the Costs posted at Everything Finance, saying, "As 2008 proved, the financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results that many mutual funds posted in 2008 and at the outset of 2009 may have left you feeling concerned over your financial future. You're not alone."

Managing Debt

MoneyNing presents AnnualCreditReport.com For Free Credit Reports posted at Money Ning, saying, "AnnualCreditReport.com should be the only way to get a free credit report."

Big Larry presents Stupid Ways to Get Cash posted at Out of Debt Christian, saying, "When you are desperate for cash, there is always *someone* willing to lend you money, but of course at a tremendously high price. We reveal the high price of for popular ways to get quick cash and provide more sensible alternatives to each."

Mr Credit Card presents Airline Credit Cards Survey posted at Ask Mr Credit Card, saying, "This is a survey of available airline credit cards"

Roshawn Watson presents Outrageous Law Transfers Parents' Debt To YOU posted at Watson Inc, saying, "With few exceptions, such as a divorce decree, you are not legally liable for debts you have not personally signed for or agreed to pay. There is an inherent sense of fairness to this principle: your finances cannot be obligated to pay for something without your consent (except perhaps to the taxman or to your dependents). However, an archaic law in Pennsylvania is being enforced to make adult children to pay for their parents' debts."

Pinyo presents What is a Good Credit Score? posted at Moolanomy, saying, "Your credit score is an important aspect of your finances if you're planning to borrow money -- e.g., mortgage for home purchase or a student loan. In this article, learn what the industry considered a good score and follow instruction on how to get your credit score and credit report, as well as how to improve your score."

Flea presents Getting Out Of Debt posted at Be A Survivor, saying, "Learn how to pay off your debt faster using proven techniques."

Miscellaneous

FMF presents Details on Cash for Clunkers posted at Free Money Finance, saying, "Details on the governments new car-buying incentive."

Tyler Tervooren presents Can You Benefit From Energy Efficiency Rebates? posted at Frugally Green, saying, "Being frugal means being able to look past the initial cost of something to see its long term value. Luckily, our government seems to understand this and is willing to help you with the purchase price of high efficiency appliances and renewable energy systems."

Roshawn Watson presents Colleges Pimping Their Students posted at Watson Inc, saying, "Colleges Pimping Their Students: Universities are selling students' personal information, typically to the highest bidding credit-card companies."

FMF presents Parents and Students Finally Getting a Clue on College Choices posted at Free Money Finance, saying, "Everyone is starting to wake up and realize that college costs need to match the expected payout from a degree."

Four Pillars presents 2009 Cash For Clunkers Program - Trade In Your Old Junker For Money posted at Quest For Four Pillars, saying, "A comprehensive look at the new Cash for Clunkers trade-in program."

Noload Bonds presents Bond Index Funds posted at Bond Index Funds, saying, "Simply put, if you pay higher bond mutual fund fees, then these bond management expenses tend just to be a deadweight loss to you. The best bond fund buying strategy is to pick only very low-cost no load bond funds."

Retirement Planning

Patrick @ Cash Money Life presents Tips for Managing Your 401k Plan posted at Cash Money Life, saying, "Tips for managing your 401k plan and other retirement contributions."

Super Saver presents Planning to Retire Later also has Risks posted at My Wealth Builder, saying, "The option to continue working is no longer easily controlled by the employee."

MoneyNing presents 401k, Traditional IRA and Roth IRA Savings Not The Same posted at Money Ning, saying, "When you plan for retirement, do you really look into the tax situation and how it will affect your account balances?"

Jeff Rose presents 5 Year Rule for Roth IRA Qualified Distributions posted at Jeff Rose, saying, "How to get your money out of a Roth IRA tax and penalty free all depends on the five year rule."

Patrick @ Military Money presents Is REDUX Retirement Worth it? posted at Military Finance Network, saying, "REDUX is a military retirement option that offers military members a $30,000 Career Service bonus in return for a lower monthly pension. But is it worth it?"

Super Saver presents A Gift of Retirement Funds posted at My Wealth Builder, saying, "A relatively small lump sum investment of $10,000 can lead to a significant sized nest egg at retirement."

Top 10 Index Funds presents S&P 500 Index Funds posted at Top 10 Index Funds, saying, "Buy these top 10 very low cost no load S&P 500 index mutual funds directly. You do not have to pay the heavy added expenses of buying through a stock broker, financial adviser, investment adviser, or investment counselor."

Risk Management and Insurance

Paul Kamp presents Know the Signs! Pyramids and Ponzis… posted at Don't Quit Your Day Job - Personal Finance, Economics and Investing, saying, "I wrote this article about 3 types of financial scams... Ponzi Schemes, Pyramid Schemes, and Matrix Schemes. Education is the best defense against these risks, so I'm submitting it to your Risk Management and Insurance section."

Taxes

Jeff Rose presents Cash for Clunkers Tax Rules posted at Jeff Rose.

That concludes this edition. Submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: carnival of financial planning, blog carnival.

Do You Have Fatal Fiscal Attraction?

2009-08-04T05:29:00.000-04:00

By: Roshawn Watson

Do financial opposites attract? There could be a real reason why you're attracted to someone who spends a lot differently than you.

Once again, it appears the old adage holds true: opposites attract.

Image Credit: joaobambu

An interesting study was published last week by professors from the Wharton School of Finance and Northwestern University suggesting that people often select spouses who have different attitudes regarding spending. For example, people who consider themselves tightwads will partner with those who consider themselves spendthrifts. Perhaps, this attraction is about becoming what you are not: their dislike of their present attitude regarding money and desire to change. If you are tight with money but admire or envy those who are more carefree, marrying someone who spends more freely can bring some joy into your life, even if some of it is vicarious.

The Irony

Perhaps the biggest paradox is that most single people say that they would be happiest married to someone with similar spending habits. There is probably a good reason for this. Money is the number one reason why people get divorced in the US, so agreement on money is a very big deal. Nonetheless, there is sometimes a disconnect between the characteristics someone says would make an ideal mate and who they are genuinely attracted to.

Wait a second.... Are There Other Considerations????

Are there any covariates that would confound the interpretation of these results? For example, age could be a an important consideration. We don't know whether the aforementioned relationship holds true for all age groups. Also, does being happy affect this attraction? Suppose you are a happy tightwad or a proud spender. If so, are you more happy with someone who is the same or different? That's is potentially an important threat to the validity of this study. I would personally be extremely frustrated if I was married to someone who not only didn't share my goals but consistently worked against them. I would submit to you that this scenario would upset countless others as well. In some cases, avoidance of conflicts with the tightwad leads the spender to even hide their purchases thereby allowing deceit to enter into the relationship. Although this can begin somewhat insidiously, it can potentially serious. Financial infidelity can precipitate divorce. Clearly, it is hard for two to walk together unless they agree (Amos 3:3)

Lastly, if you like this post, please subscribe (upper right-hand corner); You will RECEIVE My eBOOK; also, support this post and Propel it, Stumble it, and tag it on Delicious.

Uncommon Money News (Vol. 68)

2009-08-02T02:00:00.003-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I would like to thank the Carnival of Financial Planning my post the Rich Get Poorer and Outrageous Law Transfer Parents Debt to YOU. They were hosted at the Cash Money Life and The Skilled Investor. Also, I would like to thank the Money Hacks carnival hosted at my ROI. They posted Outrageous Law Transfers Parents’ Debt To YOU as well.

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your help so much! Thanks.

Posts Of The Week

House OKs $2 billion more for 'cash for clunkers'

Recession Causes Mexican Immigrants Here to Run for the Border, Study Shows

American Apparel CEO says Fire the ugly people

Jackson advisor says he turned over $5.5 million

Ruth Madoff Gets Sued for $44.8 Million

Business
American Apparel CEO says Fire the ugly people

Verizon to cut 8000 jobs

South Florida town's mayor defends firing manager after learning his wife is a porn actress

Ruth Madoff Gets Sued for $44.8 Million

Warren Buffett reaps $1 billion profit on Chinese carmaker

Economy

Obesity costs billions

Recession Causes Mexican Immigrants Here to Run for the Border, Study Shows

Oakland, California, passes landmark marijuana tax

House OKs $2 billion more for 'cash for clunkers'

Entertainment Money News
Actor Steven Baldwin Files for Bankruptcy

Jackson advisor says he turned over $5.5 million also see Jackson had some mone afterall

Octomom making $250,000 for reality show

Judge Wants No Messing With Octokids' Money

Offbeat Money News

Could you survive without money?

Mortgage Crisis Redux?

2009-07-29T03:30:00.003-04:00

Roshawn Watson

Those who thought that subprime mortgage mess was over may be in for quite the shock. Although mortgage lending criteria have become more stringent along with the credit crunch, this unfortunately is not enough to prevent the greedy and ethically-challenged from tainting the real estate market. Shady investors are now engaging in the some of the same speculation and deceit that was responsible for this real estate crunch in the first place.

Image credit: bahia0019

Mortgage Fraud is Skyrocketing

Fraud has become so rampant lately. According to the FBI, mortgage fraud has doubled since 2007. Sadly, the culprits are not always crooks from afar but can range from friends lying on their mortgage application to criminals bamboozling millions from their companies and clients. Because of the increased scrutiny of loan applications by lenders, speculators are lying about their incomes and employment on mortgage applications to snap up distressed properties as investments. These buyers are banking on the value of the properties returning, so they can make a profit. As we know, this dangerous strategy can fail if you don't know what you are doing and don't have adequate resources to carry the property if recovery takes longer than you think. Additionally, home prices do not always go up, especially in the short term.

Opportunist with Legitimate Loans Can Still Be Scam Artists

Of course, not everyone cashing in on the mortgage crash is fraudulently qualifying for loans they cannot afford. This is a fabulous time to snap up some real estate deals. If you can ethically qualify for a conventional mortgage and are financially in the position to buy, then you can really save a ton on interest and on the purchase prices in many cases. We definitely need some home buyers and legitimate real estate investors. However, there are some who have adequate financial solvency who still bear blame. Consider a new firm called PennyMac headed by Stanford L. Kurland. Apparently, PennyMac is doing quite well by purchasing severely discounted, distressed properties for fractions of what they are worth and then unloading them for hefty profits. There's nothing wrong with making money, but it is not a coincidence that Kurland is the former president of failed mortgage giant Countrywide Financial. Indeed, several employees of PennyMac are former executives from Countrywide Financial. Countrywide's parent company recently paid upward of $8 billion in settlements for Countrywide's pushing of home buyers into loans they could not afford. In other cases, some firms commit overt fraud by deceiving home owners into forking over hundreds to thousands of dollars to save their homes from foreclosure. Note, sometimes this means that the homeowners will turn over their equity. Nonetheless, often the homeowners still end up in foreclosure and more financially devastated than before the firm "helped" them.

Speculation can hurt recovery

Fortunately, recent data shows that the housing market is starting to recover. According to the National Association of Realtors, June marked the third consecutive month that sales of previously occupied home rose. It is also encouraging that the inventory of foreclosures is finally shrinking. However, one threat to this recovery is speculation. President Obama has pledged to put an end to an economy "built on reckless speculation [and] inflated home prices." Speculation can be damaging in that it can diminish the legitimacy of the real estate prices (i.e. can create housing bubbles). This is important because at some palpable level, this economic downturn has ultimately resulted from a crisis of confidence anyway. When consumer confidence is down, we're less likely to purchase because of concern that the prices are elevated artificially and that the economy is bad. Accordingly, speculation-driven price increases in real estate can convolute economic recovery.

As we turn this chapter in our economy, it is prudent to not repeat the same mistakes that contributed to or exacerbated this mess in the first place.

Lastly, if you like this post, please subscribe (upper right-hand corner); You will RECEIVE My eBOOK; also, support this post and Propel it, Stumble it, and tag it on Delicious.

Why We Need Real Estate Investors

Credit Card Companies Tightening Credit Worthiness Criteria

Uncommon Money News (Vol. 67)

2009-07-24T09:00:00.001-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I would like to thank the Carnival of Financial Planning my post the Rich Get Poorer. It was hosted at the Living Almost Large.

Posts Of The Week

Debt reduction pushes Ford to $2.3B 2Q profit

Dow tops 9,000 as home sales rise for 3rd month

Data show housing market starting to recover

Nas Ordered To Pay $44K A Month Support For Newborn With Kelis

Business

Debt reduction pushes Ford to $2.3B 2Q profit (POW)

More women in senior management = profits

The rise in financial crime in America 1997-2008 graph by type of fraud

Facebook now using your profile image in online dating banner ads.

Krugman: Goldman Sachs’s ...is very good at what it does. Unfortunately, what it does is bad for America.

LAX parking lot is home away from home for airline workers

Zappos and Amazon

Economy
Dow tops 9,000 as home sales rise for 3rd month (POW)

Data show housing market starting to recover (POW)

Government Tab for Crisis Could Hit $23.7 Trillion!

Michigan Unemployment Tops 15% (and That's the Lower, Official Number)

Entertainment Money News
Jackson estate lawyers seek allowance for children

Nas Ordered To Pay $44K A Month Support For Newborn With Kelis (POW)

Uncommon Money News (Vol. 66)

2009-07-17T11:45:00.001-04:00

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I would like to thank the Carnival of Financial Planning and Carnival of Twenty Something Finances for including my posts the Rich Get Poorer and Colleges Pimping Their Students. Hooray, Colleges Pimping Their Students got an Editor's Pick. It was hosted at the Dividend Tree and Rolloverusa, respectively.

Posts Of The Week

Visa card charges man $23,148,855,308,184,500 for cigarettes

How The Average U.S. Consumer Spends Their Paycheck

Illustrative Money News

How The Average U.S. Consumer Spends Their Paycheck (POW)

Business Money News

GM exits bankruptcy; CEO vows better performance

AIG Seeks Clearance For More Millions in Bonuses

How Credit Cards Are Getting Meaner

Visa card charges man $23,148,855,308,184,500 for cigarettes (POW)

20 Brands & Products that Died in 2009