Qvisory - Tools for Life Blog

Four Lessons from the 2008 Financial Crisis

2008-10-07T08:26:53Z

What does the 2008 financial crisis mean for average people like you and me? Unfortunately, it’s too soon to say. We can, however, begin to reflect on what these messy economics have taught us, and how we can apply that to our personal finances.

It started with easy credit. Many people are (understandably) baffled by all the factors that contributed to our current economic mess. But the one thing most of us understand is this: Banks approved too many mortgages for people who couldn’t afford them. Lesson: Just because a lender says you can afford it, does not mean that you can. Anytime you make a big purchase or take on credit, soberly assess your own financial situation and determine what you can afford.
Banks are not invincible. First IndyMac fell, then WaMu, and Wachovia. Even a year ago, few people would think that a savings and loan—much less the largest in the country (WaMu)—could go belly up in a matter of months. Lesson: Never put all of your eggs in one basket, or more than $100,000 cash in an FDIC-insured account.
Home prices can go down. A real estate bubble led millions of Americans to gamble on interest-only mortgages featuring low monthly payments for five or ten years before shooting sky high. Buyers assumed profits were a sure thing. When they weren’t, homeowners owed more than the homes were worth and worse, faced payments they couldn’t afford. Lesson: While your primary home may appreciate, real estate—like any investment—carries risk. Put 20% down and buy a house you can assuredly afford.
Don’t trust anybody. People lie, cheat, and steal. Whether or not today’s crises result in any criminal convictions, some of the banking practices that got us here were dubious at best. But money was being made, and so everybody turned their heads. Lesson: Question authority, arrive at your own conclusions, and, if needed, go with your gut. Never assume just because somebody is a professional they are 100% right all of the time. Diversify your information sources in the same way you diversify your investments.

Have you taken anything away from the events of the past few weeks? Is there anything you think we all should take away?

Originally posted at Money Under 30

Presidential Debates: Do the Candidates Care About Our Issues?

2008-10-07T06:49:08Z

Tomorrow, October 7, is the second debate between Senator Barack Obama and Senator John McCain. It’s a town hall debate, and we'll be watching to see if the moderator asks our question that we submitted via MySpace MyDebates, and how the candidates answer.

We’ll also be watching to see how often the issues on our agenda come up over the course of the night. Over the last month, you helped build our agenda. Now, let’s see if the candidates agree with us about what issues are important. Watch the debate with us and let us know when you hear our issues come up.

If all you hear is disturbing silence on an issue, we’ll make sure to try and get the moderator of the next and last debate on October 15 to ask about it.

Find out if the candidates care about you. Watch the debate!

Paying Those Pesky Dues

2008-10-06T15:23:09Z

“Paying your dues” might be defined as doing work that may be considered grueling and demeaning because you are the newest or youngest person on staff. Or, it could involve working longer hours with less time off or taking less desirable assignments so that you can gain seniority. If you’re a recent graduate, your company probably sold you on contributing your skill set in a meaningful way, and you may be insulted that your pricey college education has bought you a position answering phones or other jobs that might be expected as an “assistant.”

Although the tide is changing and mandatory dues-paying is not as rampant as it once was, don’t expect to be running the company within days of your start date. Think of your time at the entry level as a rite of passage. Serve with a smile, and attitude and show you’re eager to learn everything you can about your job, your organization, and your field. Once you’ve spent a year in the trenches, you will appreciate the basic tasks that go into running a business, and you will also have the knowledge and experience to contribute in a consequential way.

How long should you be expected to pay your dues? Some might argue that work is a permanent membership and as such, we pay dues forever. But one year is about the length of time you should spend as an assistant. Set clear promotion goals for your boss to ensure that this is the case, and take on projects above and beyond your daily job responsibilities to show what you’re capable of.

If you’re doing your job well and there is no opportunity for advancement in sight after your anniversary has passed, update your resume and start looking. Some managers will keep promising twenty-somethings in administrative positions out of need (i.e. no one can do your job as well as you can) or jealousy. Move on before you get stuck, and think carefully before accepting your next position. A series of lower-level jobs held over long periods of time can impact your future employability, so check to see if other people at your level have had the opportunity to move up after a reasonable period of time.

You Just Can’t Change People

2008-10-06T08:15:31Z

We all have friends who struggle to manage their money wisely. Telling them that they are irresponsible, need to pay down their debt, create a budget, and/or find ways to spend less on frivolous goods isn’t going to work.

Ask yourself how you would respond if a friend in better financial standing told you what it takes to manage money. You probably wouldn’t take it well. And generally, I don’t want to be told what I’m doing wrong, especially if I didn’t ask.
In many situations, our purpose in starting a conversation is to get the other person to change their point of view or behavior. There is nothing wrong with hoping for change, as the urge to change others is nearly universal, but it generally fails.

Trying to change someone rarely works because we are more likely to argue with and attack their story, and less likely to listen to their perspective. This approach increases the likelihood that they will feel defensive rather than open to learning something new.

Though young adults are more open to discussing topics that generations past would refrain from, personal finance remains a touchy one. While some people are willing to discuss it in depth, others will push back. If you have a friend whose finances you are concerned about, be cautious when you raise the topic. Creating a space for your friend to open up may not kick start a conversation right away, but your friend will know that you’re interested in their personal well being and willing to talk.

If a conversation does ensue, here are few things to consider:

Listen. Avoid telling and focus on listening. Make your friend comfortable, and ease him/her into talking about their situation.

Ask questions. Gather as much info as you can before you start giving advice.

You are not the answer to their financial problems. Loaning friends money or bailing them out of debt can often cause problems in the relationship later on. Rather, offer help in exploring the root problems (which might be be a denial of present finances, limited income, too many credit cards, etc.), and focus on what THEY can do to get out of it.

If you end up lending a friend money, it should be done in a professional fashion. There should be a written agreement and terms should be clear. If no written documents are created, you may find yourself with your own set of financial issues.

Recommend and become a trusted source of information. Provide your friend with reliable information (e.g. Qvisory). Once you become trusted, your friend might want to talk with you before making big financial decisions, and it is possible you can save them from making a big mistake.

Let go. Some people say that you should not care what your friends do with their own money because it’s not your business. Having good friends is more important than having a lot of money, but hanging out with people who have financial problems can be stressful. If your friend in dire circumstances chooses not to take your advice seriously and you are starting to get frustrated, step back, and stop talking about money. Ultimately, only your friend can mange his/her own money, as you manage your own.

Rock the Vote, Palin Bingo, Some Young Voters Unsatisfied

2008-10-03T14:07:52Z

Rock the Vote, which has registered 1.9 million voters this year, sponsored an event (video link) at the Hard Rock Café in Atlanta, Georgia on Thursday where a group of friends played Palin Bingo. And I thought bingo was only popular on cruise ships. The vice-presidential nominee debate between Senator Joe Biden and Governor Sarah Palin left some young voters unsatisfied:

I'm disgusted by the whole process because I don't see a difference between either of them: Obama, McCain, Palin or Biden," Cordeiro said. "[Biden and Palin] are agreeing on so much. You take tax reform, for instance. What did they say that was different, really? They aren't speaking to me. There's all this talk about change, change, change. It's all gimmicks. - CNN

Many at the event wanted to be moved, feel something, and hear something other than another campaign pitch. It's seems that many didn't get what they wanted.

Do you feel that the candidates are talking about the money, health, and work issues that matter most to you?

For the rest of the election season, Qvisory will be working hard to make sure the candidates talk about us.

GAMEPLAN

2008-10-03T09:17:41Z

Every day the news seems to go from bad to worse. Wall Street’s sky is falling. Companies across the globe are trimming business and cutting their workforce. Unemployment continues to plague the economy, while consumer prices rise.

It can be overwhelming, especially if you’re just starting out in the workforce and may be juggling student loans, rising costs for food and housing -- and the fear that your lack of seniority may make you more vulnerable to a company layoff.

But here’s some good news: You are not powerless. There are things you can do right now to not only increase your worth at your current job, but to position yourself in the marketplace and strengthen your career in the long run. The important thing is to have some objectives in place so that any unsettling news will not cause you to panic and have a knee-jerk reaction that could adversely impact your career for a long time.

Some steps to take:

Get your game face on. Review your last job performance and see if you’re on track for all the objectives and goals outlined by your boss. If you’re not sure, or want some things clarified, ask to meet with your boss to not only get a better idea of where she wants you to go, but to update her on your accomplishments. Savvy employees make it a habit to check in with the boss on a regular basis (schedule some time so you don’t bug him or her unnecessarily), and use it also as a chance to make sure communication remains open.
Network like crazy. While Facebook can be a great place to hang out with friends, make sure you’re on LinkedIn, and attend industry or professional gatherings. Stay in contact with your college or alumni association, and even take advantage of your parents’ contacts to let others know of your professional abilities. The majority of jobs are still gained through who you know. Further, developing your networking ability is seen as a plus by your current employer, and can lead to important contacts for yourself and your company.
Be squeaky clean. OK, that’s really a cute photo of you on the beach during spring break last year, and that Halloween costume photo was hilarious. But it’s not the stuff that employers appreciate, so go ahead and get rid of your questionable personal online footprint. And don’t be naïve enough to think they won’t find it – they will. Employers now routinely Google employees and job candidates, and even hire outside firms to do more in-depth checks. Make it a habit to check your online reputation at least once a week, and sent up a Google alert on your name. The first three Google pages about you should be nothing incriminating – just your professional association memberships, a LinkedIn profile, a professional blog, Nobel Peace prize, etc.
Have an action plan. If the worst should happen – you lose your job – have a plan in place. Your resume should always be updated and you should have a list of what you must have in a job. For example, maybe you can’t have a long commute because of family commitments, or you can’t work certain hours. If you know your “absolutes,” then you won’t waste time applying for jobs that don’t fit.
Put together a personal board of directors. Ask several other professionals who you respect to periodically assess where you are and your career development. These should not be personal friends – you want this board of directors to be objective and honest.

While these are difficult times, employers have been clear that they want to hang onto key performers, no matter their age. Your commitment to developing your skills and your contacts will not only pay off now, but in the future.

Understand Bankruptcy Now: Avoid it Later

2008-10-03T08:57:25Z

Over one million U.S. consumers will declare bankruptcy in 2008 according to the American Bankruptcy Institute. Bankruptcy can relieve struggling consumers of their debts, but it also creates financial consequences that can last 10 years. Indebted or not, understanding how bankruptcy works can help you make smarter credit decisions for years to come.

Personal bankruptcy 101
When an individual simply cannot meet financial obligations, he or she may declare bankruptcy. By doing so, the federal court system becomes an intermediary between the filer and his or her creditors. Bankruptcy helps the struggling consumer free up money for essential expenses like rent and food, but also ensures that creditors get at least some of what they are owed.

Typically, consumers file bankruptcy as a result of unsecured debt such as credit cards or medical bills. Secured debts, such as mortgages and auto loans, cannot be discharged during a bankruptcy. If a consumer does not repay a secured loan, the creditor repossesses the secured asset (e.g. the house or car) that is tied to the loan.

Two types of bankruptcy
There are two types of consumer bankruptcy: Chapter 7 and Chapter 13. Under Chapter 7 bankruptcy, the filer's property is sold off to repay his or her debts. After the property is sold, the court discharges any remaining unsecured debts (like credit cards), and the filer does not have to repay them.

Under Chapter 13 bankruptcy, a filer must repay a portion of his or her unsecured debts over three to five years based upon their income. Any remaining sums are discharged. In 2005, Congress enacted a law that makes it more difficult for consumers to file bankruptcy—Chapter 7 bankruptcy in particular. Now, to be eligible to file for either kind of bankruptcy, a consumer must first participate in a credit counseling program. To be eligible to file for Chapter 7 bankruptcy, consumers must then pass the "Chapter 7 means test."

To file Chapter 7 bankruptcy, a filer's gross annual income must be less than the median income in the filer's state of residence. Second, the filer must determine how much "disposable" income he or she will have over the next five years based upon a complicated IRS formula. If the filer's disposable income is less than $6,000 over five years ($100 per month), he or she can file for bankruptcy under Chapter 7.

Benefits of bankruptcy
There are two primary benefits to bankruptcy filers: 1) The total amount a filer owes is either eliminated or reduced and 2) Immediately upon filing for bankruptcy, the court issues an automatic stay prohibiting creditors from contacting the filer and freezing any legal actions against the filer. The automatic stay will—at least temporarily—prevent the filer from being evicted, having utilities shut off, or having property repossessed. The reason the stay is ordered is so that the bankruptcy court can have a chance to hear from all of the creditors to whom the filer owes money and then systematically and equitably distribute any repayments collected among the creditors.

Downfalls of bankruptcy
To those under a mountain of debt, bankruptcy can be enticing. There are several negative consequences to filing bankruptcy, however, that potential filers must consider:

Bankruptcy will limit your credit. Bankruptcy is not necessarily the kiss of death to your credit report, but it's far from a good thing. Chapter 13 bankruptcy stays on your credit report for seven years and Chapter 7 for ten, during which time getting new credit will be difficult.
Bankruptcy is a permanent record. The bankruptcy will eventually disappear from your credit history, but that doesn't mean it's gone. Bankruptcies are public records, meaning that for the rest of your life, anybody who checks can see that you filed bankruptcy. It may, for example, come up during background checks for a new job. While not debilitating, it's certainly embarrassing.
Bankruptcy costs money. Oddly enough, filing for bankruptcy is anything but cheap. There is a $274 filing fee for Chapter 13 bankruptcy and a $299 fee for Chapter 7. Plus, an attorney will charge anywhere from several thousand dollars to tens of thousand of dollars in fees, depending upon the complexity of your case.

Personal bankruptcy is a safety net that the government provides for citizens that encounter dire financial circumstances. While the process can work for those who need it, bankruptcy should never be seen an "escape hatch" for consumers who have simply spent themselves into too much debt. Those that think that way file for bankruptcy one year and find themselves in debt all over again the next.

Plenty of additional information on bankruptcy is available online, but be careful, as there is a lot of unreliable information from law firms and other businesses trying to scare readers into using their services. I recommend the bankruptcy resources on NoLo.com, which also features a directory that can help you find a qualified attorney.

Government Invests to Educate Youth About Handling Credit

2008-10-02T10:39:36Z

The federal government is trying to prevent our financial system from falling apart while the Treasury Department is moving forward with an initiative to educate young adults aged 18-24 about handling credit more responsibly.

http://www.youtube.com/watch?v=uK9oyrHppoo

The campaign, which includes videos, radio spots, and an online game called The Bad Credit Hotel warns young viewers, “Don’t let your credit put you in a bad place.”

According to Jennifer Zuccarelli, a Treasury spokesperson, “I think that recent events have highlighted the importance of understanding the impact that your financial decision can have on your life.” Presently, only three states - Utah, Missouri, and Tennessee - require a class devoted to personal finance. - New York Times

Efforts to advance financial literacy will likely increase in years to come. Organizations like Jump$start Coalition for Personal Financial Literacy are already pressing forward.

What do you think of the Treasury Department's efforts to educate young adults?

Sunlight is D-licious!

2008-10-02T07:55:26Z

The warning that should appear on sunscreen containers is, "Warning -- you're not getting enough sun." Sunlight is just like a food nutrient that your body needs in order to function in a healthful way. Exposure to sunlight, for example, creates Vitamin D in your body. Vitamin D, as recent studies have shown, is preventative for most cancers in women (breast cancer, colon cancer, cervical cancer, lung cancer, brain tumors, multiple myeloma... to name a few). Meanwhile, the toxic chemical ingredients used in most sunscreen products are actually carcinogenic and have never been safety tested or safety approved by the FDA. They get absorbed right through the skin (a porous organ that absorbs most substances it comes into contact with) and enter the bloodstream.

It is the deficiency of Vitamin D that is thought to be the primary cause of most cancers and many chronic diseases, such as multiple sclerosis, diabetes and other metabolic issues, osteoporosis, to name a few. In other words, if you don't get enough sunlight on your skin on a regular basis, you are extremely likely to suffer from Vitamin D deficiencies that will inevitably result in chronic disease and/or cancer. New research is showing a possible correlation between Vitamin D levels and susceptibility to Influenza viruses. Do you ever wonder why there is a "flu season"? In northern latitudes, it is uncanny that the flu season peaks at a time when our vitamin D stores are diminishing (interesting how most people reach for Vitamin C pills during this time and not vitamin D….one more reason to book a tropical vacation in the middle of winter).

This is not to say that you can't get sunburned if you aren't used to being under the sun, or if you follow the standard American diet that consists of processed foods, chemical additives, refined carbohydrates, soft drinks, and junk foods. Eating these foods alters your body chemistry, and makes you highly susceptible to sunburns. Changing your diet, removing processed foods, and adding super foods (whole nutrient dense foods) and nutritional supplements into your diet should go hand in hand with getting an adequate amount of sun light exposure. So how much is enough?

For those us who live above the 35th parallel (North of San Francisco) it is impossible for our skin to produce adequate vitamin D from October through April. This occurs because of the position of the sun to the earth during these months. The angle of the sun is too low on the horizon and the UV rays reflect off the atmosphere. During the summer months our bodies can produce about 10,000 to 20,000 IU's within 15 minutes of sun exposure.

The current RDI (recommended daily intake) for vitamin D is between 200 and 600 IU, depending on age. Current research has shown that the RDI for Vitamin D is far below what we need. Vitamin D deficiency in our population is widespread, especially affecting people who are elderly, overweight, lactating, dark skinned, who have digestive issues (including gluten sensitivity and gallbladder problems), who have had gastric bypass surgery, and who wear sunscreen daily.

Some researchers (and this nutritionist) are calling for an increase in vitamin D intake (D3 form), from 2000 to 4000 IU's in adults and 6000 IU's for lactating women. To obtain vitamin D naturally (and the way your body prefers), expose skin without sunscreen applied for 10-15 minutes 3-4 days per week from the end of May through September. Vitamin D is a fat soluble vitamin. To improve the absorption of Vitamin D and the other fat soluble vitamins (A, E and K) always take them with a meal. If you would like to have your Vitamin D levels tested, mention this to your naturopathic physician at your next visit. Vitamin D levels are tested through a simple blood test, which can also be done at your yearly check up.

What about food sources of vitamin D, you ask? Natural sources are cod liver oil, wild salmon, and egg yolk. Since these foods do not provide our bodies with sufficient Vitamin D during the winter months, supplementation is usually necessary. Dairy products are NOT natural sources of vitamin D. “Milk with added A&D” is simply milk that has had supplemental Vitamin A and D added to it. For this reason I do not recommend eating dairy to get adequate vitamin D. Instead, get adequate exposure to natural sunlight, adequate supplementation of D3 form vitamin D and choose healthy whole foods because they taste good.

Originally posted at Nourishing Blog News

Networking: It's Too Late to Get to Know a Fortune 500 CEO

2008-10-01T16:38:10Z

Originally posted on Ben Casnocha: The Blog.

It's too late to buy Google stock. You're not going to make much money buying it at its current high price.

I think the same attitude should apply when trying to meet new people. If you're a relative no-name trying to build a network it's too late to reach out to Mark Zuckerberg to talk about entrepreneurship. He's too busy, too high profile. If you're an aspiring writer and want to meet other writers, you can't reach out to an author after he's become a New York Times bestseller. Either you won't reach him, or if you do, he'll assume you have an agenda or want something from him.

Better, in my view, if your goal is to develop long-term relationships with interesting people, to focus on those whose "stock prices" are low but long-term potential high.

Compared to the already rich and famous, no-names can be less egotistic and often more insightful. Plus the value flows bi-directionally (you can help each other).

How to find a hidden gem? Hints from my post on de-emphasizing popular filters: seek out introverts. Seek out people under age 30. Seek out people who are bad at marketing.

Recognize and discount the celebrity effect. Spend time with people who also have time to spend with you. My bet is you'll have a more rewarding relationship.

Bottom Line: The only reason to try to meet with Mr. Busy and Rich for 10 minutes is if you have a very specific request or need. If you're just trying to "network" or build a relationship, don't waste your time.

Yes, There's Hope

2008-10-01T11:12:23Z

The U.S. economy is in a dangerous position with the financial and real estate markets continuing to perform poorly. Throughout the week of September 14, 2008, the stock market crashed, loosing substantial value in a matter of days. Lehman Brothers collapsed and Bank of America bought Merrill Lynch, rescuing it from the brink of financial disaster. Many people, governments, and corporations are suffering from losses.

I’m not going to sugar-coat this – times are really tough right now and there’s great uncertainty. But, there’s hope … lots of hope. Remember, markets are cyclical (they go up and down) and times like this have happened before. So as you navigate through this market uncertainty, I’d encourage you to keep some financial fundamentals front and center. When times are tough, do the following:

Avoid getting into debt as much as possible.
If you’re in debt, work extra hard to pay it off.
Save every extra penny in case unemployment comes knocking on your door.
Resist spending on luxury items and make do with what you currently have.
Consider investing, as the market has been ‘beaten up,’ which presents investment opportunities.
When investing, consider a conservative strategy – at least until the markets have settled down. This means buying big-name companies with histories of strong and stable returns. Good companies in this economy will have little debt, strong cash flow, and a history of solid earnings.

I invite you to email me (Lesley@richbythirty.com) or post your questions in the comment section below throughout this period of uncertainty. I’d be happy to help you find answers.

Originally posted at Rich by Thirty.

Get Your Question Asked in the Next Presidential Debate

2008-09-30T12:18:35Z

You can take part in the next presidential debate! The next debate between Barack Obama and John McCain takes place on Tuesday, October 7. It’s going to be a town hall-style debate, so the moderator will be taking questions from the audience. Even though most of us won’t actually be there, we can still submit questions online.

This is our best chance to make sure that Obama and McCain address the issues young people face.

You can use this opportunity to ask the candidates anything you want to know to help you decide who to vote for.

At Qvisory, we are focused on the money, work, and health issues of young people, so we submitted this question:

Young adults want affordable education and health care, not a higher government debt burden. How will you ensure that your plans to help the country through the economic crisis don’t come at the expense of the next generation?

There is strength in numbers. The more of us who ask this question or questions like this, the more likely it is to be asked.

Take action! Make sure the candidates talk about us.

Go to http://www.myspace.com/mydebates and copy this question into the question field.

Then, tune in to the debate next Tuesday and see if they answer it.

How the Mortgage Industry Works (or Worked!)

2008-09-30T08:42:14Z

Since last summer, Americans have painfully watched their economy's fire dwindle to just a hunk of burnt charcoal. There were many factors that could have doused the flame, but it started with mortgages. I’ve found that many people, most of them with mortgages, do not understand how this industry works. This includes co-workers, and since I’m new to Qvisory, you should know that I work at a bank. In order to gain a full understanding of why we’re in this mess, we must first learn how the mortgage industry works.

Imagine you’re on the lawn of a 2,200 square foot house. You’re sipping cold water from tiny 8 oz bottles that your Realtor gave you at the beginning of your venture. You look at your spouse and smile, this is home. ”I’ll take it!” you say with pride. Your spouse shoves their elbow into your side and gives you a dirty look, “I mean … we’ll take it!”

The Realtor takes care of the negotiations for you and a price is settled. How do you pay for it? You get a mortgage. Your Realtor recommended a great mortgage broker: an independent seller who can give you prices on many mortgages from various banks. They offer a wholesale price, and get a kickback from whatever company you decide on. Instead, you decided to go talk to your banker at the local Wells Fargo. Since you already have your accounts with Wells, you’d like to keep everything grouped together. You aren’t the type to take risks, and this is your home, so you get a 30 year fixed rate mortgage and put 20% down.

Every month for the next 30 years you expect to get a bill from Wells Fargo. That sounds perfectly reasonable. Well, after a year or so you receive a notice from your bank that your mortgage has been transferred to another institution. Your bill will now come from JP Morgan Chase. What happened?

JP Morgan bought your mortgage. If I loan you $100 at 10% interest, and tell you it must be paid back in one year, I might decide I want my money now. I could sell the rights of the loan to someone else for something like $102 and move on. That’s what Wells Fargo did. It’s a standard practice now, and that is the purpose of Fannie Mae and Freddie Mac. They’ll buy loans from Wells Fargo, package the mortgage in with other loans and sell it off to another institution like a bank, hedge fund, pension, or a foreign company. The packaged mortgages are sold as “mortgage backed securities.”

Why is this done? Because there is demand for it. Banks want to account for the revenue now by selling the loan, and the buyers are interested in holding the loans long term. This means that they’re willing to take their profits later. The selling of mortgage backed securities also allows banks to get the loans off of their books, which lets them sell more loans.

The bank gets a small profit from the sale plus any origination fees, Fannie and Freddie take a cut when they re-sell, and the organization that buys the mortgage backed securities of course gets the interest on the loan. The banks and other financial institutions are happy with this type of transaction, but what about the homeowner?

Now you have JP Morgan sending you bills and your data sits with them. That means direct mail about home equity loans and credit cards (i.e. spam). Worse, if you have a question, you can’t go down to the local branch because there aren’t any in your area. This is what happened to my parents. They’ve had the same bank for decades, and also got their mortgage there. The bank sold their mortgage to Wells Fargo, which has no branches within a 2 hour drive of their house.

What does the future hold for this struggling industry? Layoffs across the board from the Realtor to the hedge fund manager. Banks will continue to sell their loans to Fannie, Freddie, and others. In turn, they'll repackage them and sell to investors. Just for the next few years we'll be doing it a bit less.

Flirting with Disaster...?

2008-09-29T15:15:23Z

I was watching The Shield (the sixth season, if you’re curious) last night and it got me to thinking about flirting in the workplace. Now, if you’re familiar with The Shield you’re probably trying to figure out how all the guns, gangs, violence, and swearing could possibly ever lead to musing on the nature of flirting in the workplace, but stick with me and I’ll explain.

If you’re not familiar with the show, it essentially chronicles the actions of police officers and detectives in a very gang-ridden part of Los Angeles. The main characters often make shady moral decisions in service to what they perceive as the greater good. Bloodshed, violence, and occasionally success ensue.

One of the lesser characters is a pretty, young, female police officer who’s new to the force and trying to make her way up the ladder. She flirts indiscriminately with virtually every man who works in her precinct and, at least this far into the season, seems to be making some powerful connections as a result.

Watching her flirt with her colleagues started me thinking about the use of feminine wiles in the workplace. Is it a natural advantage in the female arsenal or a foolish practice destined to end in failure?

I once worked with a woman who was convinced that men were very simple creatures and that the only way to get ahead in the workplace was to appeal to their baser natures by flirting. She dressed appropriately enough, but she was notorious for suggestive comments and almost every guy at the office loved talking to her. I wouldn’t say her career was better off than most, but I wasn’t at that office long enough to find out for sure.

On the flip side of this coin, many people believe that flirting at the office is a sure-fire way to erode your credibility and respectability at the office. By relying on your charm instead of your performance, you are showing everyone that flirting is the only thing you’re really good at.

Personally, I am not a fan of flirting at the office. As a happily married woman, though, my view may not be the most unbiased. It just seems to me that it’s too easy to confuse being popular at the office with being successful. Men may want to hang around you all the time, but it doesn’t seem like this would naturally progress to wanting to give you more responsibilities and a better role at work.

Where do you stand? Is flirting at work simply an extension of working your strengths or a one-way ticket to shooting yourself in the foot?

Don’t Press the Panic Button

2008-09-29T14:50:06Z

Washington Mutual was seized by the FDIC on Thursday night in the largest bank failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase for $1.9 billion.

As a customer of WaMu, I’ll get to experience the change of hands firsthand. So far, so good. Despite all of the dramatic news coverage about people pulling their money out of WaMu, I left mine in there, and guess what? It’s still there!

For most customers, there’s really no reason to panic, and there never really was one in the first place. However, with all of the media hype about the financial crisis, it may be hard to resist.

So why shouldn’t you panic if you’re a WaMu customer?

Customers of WaMu, based in Seattle, are unlikely to be affected, although shareholders and some bondholders will be wiped out. WaMu account holders are guaranteed by the Federal Deposit Insurance Corporation up to $100,000, and additional deposits will be backed by JPMorgan Chase. Source: NY Times

That’s right. All deposits, even those over the $100,000 FDIC limits, are still safe after being acquired by JPMorgan Chase.

What should you expect during the transition?

“There will be no interruption in services and bank customers should expect business as usual come Friday morning,” FDIC Chairman Sheila Bair said in a statement. Source: CNN

The transition should be fairly seamless. Branches are still open, bill payments are going through, checks are clearing, and online services work. Your account number even stays the same.

Where are the rest of the details?

There hasn’t been an official press release, so all of the details aren’t available yet. For example, I’m wondering if the interest rate will change on the 4.00% APY Online Savings account.

As you can see, there’s really no reason to panic, so save yourself some time and WaMu employees some stress by not rushing to the bank to pull out your money.

Originally posted at Broke Grad Student

Lawmakers Reject Bailout

2008-09-29T12:20:46Z

Yes, it’s true. Like it or not, U.S. lawmakers rejected a $700 billion bailout plan for the financial industry in a vote of 228-to-205 that sent global markets sliding. The plan's defeat sent U.S. stocks down sharply, with the Dow Jones industrial average briefly falling more than 700 points.

In the News & Blogosphere

House Rejects Bailout Package, 228-205; Stocks Plunge - New York Times
205-228, House bailout fails - Politico
House Narrowly Defeats Bailout Legislation - Washington Post
Could the bailout turn a profit for taxpayers? - L.A. Times

Check back for updates!

10 Links to Walk Through today's financial crisis - and make you smarter than 99% of other people - I Will Teach You To Be Rich
Friends Don’t Let Friends Bail Out of the Market - Generation X Finance
What Investors Should Do Now - Fortune

Best Places to Work (If You're a Mom)

2008-09-26T16:13:39Z

Originally posted at Working Moms Against Guilt.

It's that time of year ... Working Mother Magazine announced its annual 100 Best Companies for working moms. What makes these companies so great, according to the magazine's editors?

From flextime and telecommuting to backup child care and parental leave, these winners are expanding the concept of family-friendly benefits to make sure they cover adoptive parents, fathers and grandparents as well as working mothers—even as the economy stumbles.

Amen to that! Check out this downloadable chart of the top 100, with a breakdown of their mom-friendly policies and benefits. I also recommend taking a look at their "Best vs. the Rest" chart, comparing the top 100 companies to the average.

If you read it and think, "Why doesn't my employer do this stuff?", don't hate—educate. Why not become an advocate for mom employees in your workplace, and use this issue of WM as your ammo? Even if they only adopt a couple of these benefits or policies, you're better off than if you say nothing. And if your employer tells you to talk to the hand, maybe you should start job-hunting--at one of those top 100 companies!

On the Money with Carmen Wong Ulrich

2008-09-26T09:11:57Z

If you’re looking for actionable financial advice on TV, consider watching “On the Money” with Carmen Wong Ulrich on CNBC. Carmen is the author of Generation Debt: Take Control of Your Money--A How-to Guide, a former Qvisory blogger, and presently serves on the Board of Directors of the Qvisory Education Fund.

Carmen’s new show is a one-hour personal finance program, providing personalized information that teaches you the steps necessary to gain financial freedom. This quick-fire, “tell me your story, I’ll give you advice” show is worth checking out. Carmen believes that if you take control of your money, you can take control of your life!

On September 2nd, Ramit Sethi, a financial blogger who has been featured on Qvisory, was highlighted on the show and talked about credit card perks. Watch the clip.

Let us know if you’re watching the show!

We Won! Next Up: The Senate

2008-09-25T11:09:06Z

We won! The House just passed the Credit Cardholders’ Bill of Rights (HR 5244). This is a huge victory for young Americans. We carry more debt at this point in our lives than any generation to come before us and have the second highest rate of bankruptcy. The average indebted young adult spends a quarter of every dollar earned paying off debt.

Now it’s the Senate’s turn to take action. The Senate will vote on a bailout for Wall Street this week. Your Senator should make sure the bailout not only helps Wall Street bankers, but also everyday, young Americans. The bailout legislation should include credit card reform provisions like the House just passed.

The Senate bailout should ban credit card companies from:

Raising your interest rates when you are late paying an unrelated bill.
Forcing you to pay your least expensive debt first.
Setting arbitrary due dates and times.
Raising your interest rates any time for any reason or for no reason at all.

Every day, these sneaky and outrageous practices hurt consumers who don’t even know they exist. Tell the Senate to join the House and put a stop to them. Take Action!

Our generation has been in our own credit crisis for years. This week, we have a real opportunity to move meaningful credit card legislation through both houses of Congress.

Tell your Senator: Support young workers. Make sure credit card reform is included in the bailout.

Why Use Twitter?

2008-09-24T17:06:00Z

As a regular Twitter user, I have become a big fan of the micro-blogging platform that invites you to share thoughts in pithy, 140-character blasts. Chances are, you:

Have never heard of Twitter.
Have heard of it, but think it is just another way to waste your time, or
You love Twitter and use it to keep in touch with friends, colleagues and to meet people.

If you are in the first category and have never heard of Twitter, this is a good time to get acquainted! My favorite place to learn about social networking applications is on commoncraft.com. They have a great video that describes Twitter in very easy to understand terms.

I must admit, before I found a niche of people to "follow" on Twitter (that is - people whose "tweets" I receive on my home page) - I thought the whole thing seemed like a big waste of time. Once I got over the fact that so many people share what they are eating for breakfast, lunch or dinner, I realized that, by following the right people, I would be "in the loop" on up-to-date information my colleagues all over the country (and world) are sharing. It is also a wonderful way to form new connections with other professionals, clients and business owners.

So, if you are looking for a job or are a professional in your field (working for someone or an entrepreneur), these are the reasons I think you should try Twitter:

Get Connected. There is no doubt that Twitter facilitates connections. It is a great place to introduce someone or to get introduced in an informal way. You can learn who is talking to whom in your field and choose to "follow" people who are "in the know." Unlike Facebook, where it is kind of creepy if you start trying to "friend" people who are connected to your contacts, it is much more acceptable (and expected) to follow people on Twitter because another friend or colleague does.

Personally, I have had phone conversations with several colleagues, shared information with many and am working on several partnerships directly as a result of our interactions on Twitter.

Business Growth. No doubt that you can grow your business using Twitter. Chris Brogan wrote 50 ideas for using Twitter for business. He notes, instead of answering the question, “What are you doing?” (as Twitter suggests), answer the question, “What has your attention?” He also reminds us that it's great to retweet something your friends or colleagues have shared. This is a terrific way to connect and potentially lay the groundwork for networking opportunities.

Yes, you can get business on Twitter, but don't think of it only as a way to get business. The idea is to be in the networking space, which will lead to great opportunities as you grow your connections and help each other.

Personal Branding. For those unfamiliar, personal branding is the way "individuals differentiate themselves and stand out from a crowd." Twitter is a great way to build your personal brand. By sharing professional information along with just the right amount of personality, you can strengthen your personal brand and help people get to know you. The result - those who know (and like) you will become part of your network and will be willing to help you when you have questions or need help.

Look for a Job. Deb Dib (the CEO coach - an esteemed career professional and someone I've gotten to "know" on Twitter), wrote an in-depth post on how Twitter can be useful for the job search. She asks, "Where can you create almost instant exposure to (and build credibility with) other executives, recruiters and the press?"

The answer - Twitter!

Finally, The Credit Card Companies Lose in Congress

2008-09-24T10:34:27Z

Yesterday, the House of Representatives passed the Credit Cardholders Bill of Rights (HR 5244) that would curb some of the industry’s most common and most egregious practices. It’s the first piece of legislation passed by either house in Congress that restricts the lending practices of the credit card companies.

The final vote was 312-112, with 84 Republicans joining the Democrats to stand up for consumers who have increasingly piled up credit card debt to deal with rising costs. This bill is especially important for young people who increasingly start their adult lives mired in high-cost credit card debt. College graduates leave school with just under $3,000 in credit card debt, often racked up to pay for tuition, books, and other essentials. By the time they reach their mid to late twenties, that figure can easily double, and then spiral upward as the credit card companies tack on fees and find new ways to raise interest rates.

Here’s how the Credit Cardholders Bill of Rights will keep more of your hard-earned pay in your pocket.

First, the bill ends one of the most egregious and expensive “gotcha” tactics that has extracted billions of extra dollars from consumers—the retroactive rate increase. Basically, credit card companies can raise the rate on your card even if it arrives a day late—and apply that new higher rate, which can be double or triple the original rate—to the entire existing balance. They can also raise the rate and apply it to old balances if you happen to be late on some other bill, like a car payment. The bill would stop card issuers from engaging in both of these practices by prohibiting interest rate increases from being applied retroactively unless the bill is 30 days overdue.

Second, the bill prevents credit card companies from gaming payments in ways that make it harder to pay off credit card debt and increase the cost of borrowing significantly. Business as usual has been that credit card companies apply payments to lower-rate balances first. For example, a card may offer a short-term teaser rate for balance transfers while purchases will be subject to a higher rate. If you carry balances from both types of transactions, your payments would only be applied to the lower rate balance until it is totally repaid. H.R. 5244 requires that cardholders who receive promotional offers will be able to pay down their highest rate debt first. And in situations where cardholders may carry balances at different interest rates, payments must be allocated either to the highest rate debt or proportionately to each debt.

Third, the bill stops a complicated practice known as “double cycle billing,” which is unfathomably complicated to explain, but results in cardholders paying extra interest on balances they’ve actually already paid off.

And finally, the bill reduces the chances you’ll be hit with a $40 late payment fee because your payment posts a few minutes after the due date deadline. The bill also gives cardholders more advance notice of when their bill is due by increasing the number of days, from 14 to 25, that credit card companies must mail your bill before the due date.

The last eight years have not been good for most people. Earnings have fallen, unemployment has mushroomed, health care costs have skyrocketed, and student loan debt has risen. To deal with this sorry state of affairs, many people have turned to credit cards to buy their groceries, fill up their tank, and even pay the rent. The credit card industry has responded by inventing new ways to tack on fees and raise interest rates. The Credit Cardholders Bill of Rights certainly won’t solve all our financial problems, but it will give many some much needed breathing room.

The Day the Lending Lords Died

2008-09-23T08:44:45Z

On Sunday, September 9, Treasury Secretary Henry Paulson pulled out his figurative “bazooka” and fired it down the street to Fannie Mae and Freddie Mac (henceforth referred to as “the Frannies,” “the GSEs,“ “F&M,” “F&F,” “M&M,” “Frack,” “Mac Daddy,” or “Ms. Mary Mac”). The federal government took over the two companies.

How Did The Feds Take Frannie Over?
The same way they take anything over. The President authorizes a “security team” without Congressional approval. No. Congress granted the power to Paulson, and this is what Paulson referred to as his “bazooka," hoping that it's presence would negate the need for it. So much for that. Paulson took the keys to the building and passed them over to the Federal Housing Finance Agency (FHFA), a brand new agency created by the same bill that gave Paulson his big gun.

What Did Paulson and the FHFA do Next?
The first step was called a capital infusion. The Treasury Department will essentially buy preferred stock at the price of $1 billion for each GSE. This means both companies now have a fresh billion smackers to help back up their dire need for cash. Because buying preferred stock from other shareholders won’t give the companies any new cash, the GSEs must issue new preferred stock. This dilutes the value of current preferred stock (held mostly by other banking institutions). The current owners of preferred stock will lose some value. This does mean that the government has thrown taxpayer money to save what is essentially a business. If the business fails, we could lose our billions. However, common stock holders and other preferred stock holders will take the brunt, with bond holders and the government getting most if not all of their money back if the companies are dissolved and assets sold.

And Then?
The FHFA, headed by James Lockhart II, placed the Frannies into conservatorship. This is similar to bankruptcy, but only in legal terms. It doesn’t mean the companies are dead, and you can still buy their stocks. However, now the goal is survival, not profit, so shareholders would have to wait a long time to reap any potential rewards from their investment. Dividends have been eliminated.

Otherwise business continues as normal. The FHFA replaced the CEOs, and the agency will serve as the board of directors. Thankfully, the intense lobbying done by both GSEs has been given the axe as well. The Treasury will serve as a business partner in the matter. A line of credit up to $100 billion will be available for the Frannies to use at FHFA’s discretion. Additionally, the Treasury will buy certain mortgages just like any other investor would. Since most mortgages are safe, the Treasury will get a return on this investment. The line of credit will be paid back with interest as well. The entire point of these moves is to lighten the load of the Mac Daddies because they are too important to fail (according to the government). Over the next few years both companies will reduce in size, allowing other private entities to step into the business.

What is The Weakonomist’s Take?
It's a shame this move by Paulson had to be done, but I guess it had to be. This will be the perfect case study for how the government can step in to make the market react faster than it normally would with stability to boot. Had we let them fail, the companies would be liquidated and new firms would step in to take over the role of buying and re-selling mortgages. However, it might have taken a decade to get done, during which the morgtage industry might come to a halt, which could throw us into another Great Depression. What Paulson did was the “better safe than sorry” approach.

The goal is the same as my scenario above, though. We, and by we I mean all banks, government, and shareholders of the GSEs, let the companies get too big. You can’t rely on one thing too much because if that one thing breaks we all fall down. We relied on the Frannies way too much to keep us propped up, and it wasn’t enough. The reliance will be decreased significantly over the next year. I blame Orange Face, not because its his fault, but because he still scares me.

What Else Happened?
The stock prices for these two companies tanked. In mid 2007, Fannie Mae was hanging out in the upper $60s. It tanked to below $10 by July. After the announcement of the takeover, the stock is now trading around $1. The stock market in general liked the news, especially banks. This means the mortgage business can keep it's focus on fixing their own problems instead of worrying how they’re going to sell the new mortgages they originate.

Any Conspiracy Theories?
I haven’t heard any, but I did think of one. Please keep in mind I created this and don’t believe it myself, but it is fun. It's no secret that China owns a lot of US debt. A good portion of it is in US Government debt and the bonds of Frannie. If China ever wanted to destroy the US economy, they could flood the bond markets with their holdings, making the values of the bonds tank. This in turn would destroy our dollar. China would lose lots of money too, but would be hurt less. My conspiracy theory is that the federal government knows this, and so China told them to go in and take over Fannie and Freddie so China’s wealth stays pure. Its fun to play around with but highly unlikely the Chinese pulled this stunt. We’re smart enough to know when to step in.

Originally posted at Weakonomics.

A Potential Ring-Shaped Liability

2008-09-22T16:24:17Z

Getting engaged and later married to the person you love is life-changing in more ways than simply getting a tax break, changing your name, or being able to live together without your mother blushing.

One of the little-known effects of getting married is caused by that little band of gold/silver/platinum/whatever around your finger. In addition to giving you something pretty to look at whole you’re driving, it can make or break your next job interview.

A recent blog post on the LexisNexis legal blog caught my attention. It discussed the very real pros and cons of wearing a wedding ring during a job interview. Apparently, if you’re a man the ring scores you cool points (I guess the responsibility of supporting a family makes men more stable, reliable, and hard-working) whereas a ring around the finger of a woman is more likely to make employers wary of hiring her (women cannot seem to escape the perception that, as soon as they get married, they become baby-makers and cease to care about their careers).

While that post was specifically related to legal careers, I think it’s important to consider the message your wedding ring is sending out to people in other fields as well. I have personally seen women get passed over for jobs because the hiring managers assumed that they would have babies and quit, and hired unmarried women or men instead.

It’s a unique form of sexual discrimination that’s nigh impossible to substantiate or prove. So, what to do about it?

As far as I can tell, there’s really no down-side for men. If they don’t have a wedding ring, it’s not going to cost them the job, but if they do have a wedding ring, it’s a bonus.

For the women out there, there are two options: you can remove your ring before an interview, or you can subtly assuage any fears the hiring manager may have by being strategic in how you present yourself.

A hiring manager who isn’t going to hire a married woman is afraid that person will up and quit the moment a pregnancy test turns positive. It’s essentially fear of a lack of commitment.

You can minimize or negate that fear by presenting yourself as someone who is passionate about her career and who has long-term goals and aspirations she’s working toward. A woman who gets fulfillment out of what she does for a living is more likely to work out an equitable solution after having children than someone who’s just looking for a paycheck.

Either way, it’s pretty lame if married women are pre-judged as short-timers before they even open their mouths. The great thing is that, once you know about it, you can turn that outdated misconception on its head and use it as an opportunity to make yourself look really good.

Help Set Our Agenda: Vote Today!

2008-09-22T14:20:16Z

In this election season, here’s another chance to express your opinion: help set Qvisory’s advocacy agenda by voting on which issues we should address.

Why do we need an advocacy agenda for our generation? Well, here are some facts. Between 1992 and 2001, average credit card debt for young adults went up 55 percent. As a result, today the average indebted young adult carries a little over $8,000 in credit card debt and spends a quarter of every dollar he or she earns on debt payments. What happened? Well, in 1978 and 1996, Supreme Court rulings in two court cases removed all limits on how high banks could set interest rates and fees on credit cards. This deregulation had drastic results for today’s young adults, who got their first credit cards just as these rulings came into effect.

Another story: over the past ten years, the average tuition and fees at four-year public colleges and universities have increased by 40 percent, while the median family income has increased by only 12 percent. Meanwhile, the maximum Pell Grant has gone from covering 84 percent of the cost of tuition at a four-year public college in 1976 to covering only 39 percent today. What is the result? Well, today two-thirds of students graduate with debt and the average student borrows $20,000 to go to college.

These two examples show that state and national policies have a direct impact on our daily lives. Our access to health care, good jobs, first homes, and childcare also depend on policies that are set by federal, state, and local government, and by companies we work for and do business with.

Young people have seized on this year’s election as a chance to change things and are turning out in record numbers. Now, we need to be ready when the election is over to push decision-makers to support policy change that benefits us. Play a role in this movement by voting on which issues should make up our agenda.

Vote today, and then help us fight for our agenda tomorrow.

Be a Qvisory Contributor!

2008-09-22T11:59:35Z

The record number of us turning out for this year’s election has mystified the mainstream media. Instead of embracing us and serving up the news we care about, they insist on pondering over our involvement. It’s not that hard to figure out why we got involved. We are voting because the challenges that face the country are directly impacting us.

Since the media is not covering those challenges the way we need them to, we’re taking matters into our own hands. We’ll report the news and our opinions about money, work, and health issues, our demographic, and national events. That way, we can take even more informed actions on the issues.

Here’s how you can become a Qvisory contributor: find a news story (or take one from our list on the right) about anything from college loans to green collar jobs. Then, write a blog post (under 500 words) or make a two or three minute video telling us about the issue and what you think about it. Submit it below, and as long as you keep it relatively clean and relevant, we’ll post it.

Start making news now. Submit your post or video. If you have a post, email it to us at content@qvisory.org and we will work with you to post it in your account. If you have a video, upload it to YouTube and put the link in the comment section below.

The FDIC: What It Is and Why You (Might) Need It

2008-09-22T09:28:23Z

The Federal Deposit Insurance Company (FDIC) is a division of the United States government that insures bank deposits up to $100,000 each. The FDIC was founded after the Great Depression when many troubled U.S. banks failed under economic pressures and the additional weight of panicking customers simultaneously demanding their funds. Usually, consumers like you and me never think twice about whether the money we put into our bank accounts will be there tomorrow. But today we do.

Why might your bank fail? Banks earn profits by taking the money we deposit and investing it. Banks invest in securities like stocks, but also in loans like mortgages and credit cards. As you have read, banks made way too many risky mortgage loans in the last decade. Consumers cannot repay those loans, and banks are not recouping their investments. As the overall stock market struggles, banks are losing money on other investments, too.

As this trend continues, some banks will no longer have money to lend, meaning they cannot earn additional profits and, ultimately, may not have enough cash to settle depositors’ accounts.

How to protect yourself: never keep more than $100,000 in cash at any one bank. If you are married, you can safely keep up to $200,000 in a joint account. If the worst happens and your bank fails, check with the FDIC for instructions on how to recover your funds. Don’t panic. Although today’s economic climate is straining all financial institutions—including the FDIC—the government will ensure that the FDIC can meet obligations for the foreseeable future.

On the downside, the FDIC is taxpayer-supported. Should it begin paying out depositors at an unusually large number of banks, we may all see tax hikes down the road.

Originally posted at Money Under 30

Failures: What Does It Mean for You?

2008-09-22T09:01:24Z

Lehman Brothers’ and Merrill Lynch’s employees and investors are having a bad, bad day. But if you’re not one of them, how do the failures of these Wall Street giants affect your wallet today? Hopefully, you won’t even notice it.

Your investments: The average twenty-something has less than $15,000 in retirement investments, if any at all. While your 401(k) balance may be ugly for a while, you can be assured that even if the grim economic situation continues, you have a long, long time to earn returns. In fact, a sliding market is all the more reason to invest more funds now to take advantage of deflated stock prices.

Your bank accounts: As long as you don’t have more than $100,000 in checking, savings, or other FDIC-insured accounts at any one bank, your money is safe. In the event that your bank goes under, the U.S. Treasury will recover your money for you.

Your debt: A declining economy triggers the Federal Reserve to lower interest rates. Although rate cuts can bring about inflation (meaning long-term price increases for everybody), they provide temporary relief in the form of lower interest rates on variable-rate credit cards, mortgages, and personal loans. If you have a fixed rate, you can still take advantage of new lower rates by transferring your balance or refinancing your mortgage or auto loan.

Your spending: The principle of smart spending is the same in economies good and bad: spend less than you earn and save or invest the rest. Unless you have specific concerns about your personal job stability, there’s no reason to spend any less than you normally do, as long as you stick to a budget!

Your career: Anybody working in the financial world may want to be extra diligent at work these days, as it may be difficult to find a new financial job anytime soon. The rest of us should be in good shape, as long as we continue to show value to our employers. Studies continue to show that a retiring workforce and the low cost of employing entry-level workers is creating plentiful job opportunities for recent college graduates, especially in healthcare, engineering, and education.

Originally posted at Money Under 30.

Tipping the Scales Unfairly?

2008-09-19T16:43:59Z

Almost everyone I know has had a moment where they looked at the number on their scale and said, “Oh, dang it!” After all, maintaining a healthy weight is easier said than done when the vast majority of jobs are sedentary in nature and it’s often easier, and cheaper, to eat fast food.

One of the problems with the obesity epidemic that’s sweeping the nation is that it has an impact on more than just American pant sizes. Health insurance companies are starting to take notice of the greater cost of providing coverage to obese individuals.

Obesity brings along with it a host of health problems like high blood pressure, heart disease, and some kinds of cancer. Health insurance companies are starting to push for increased premiums to account for the added costs of an obese lifestyle.

Some states have chosen to respond to this pressure from health insurance companies by rewarding employees who take positive steps toward a healthier lifestyle. Alabama, however, has taken a different approach by giving its employees a deadline for getting healthier. If the deadline isn’t met, obese who work for the state of Alabama will have to pay $25/month for insurance that is currently free to Alabama state employees.

While I see the reasoning behind this decision, I take issue with how it’s being enforced. The health of Alabama state employees is being evaluated using the Body Mass Index (BMI) which is, in my opinion, not the most accurate measurement of health.

The BMI measures body fat using your height and weight, but the problem with it is that it doesn’t account for muscle or build. For example, my friend and I are both tall (almost 5’11”) but we couldn’t be built any differently. She’s slender, has a tiny frame, and according to the BMI she is a normal weight.

I, on the other hand, am considerably more muscular, have a medium frame, and, thanks to my Hispanic heritage, am very curvy. According to the BMI, I am nearly obese. If I adhere to the BMI, I will have to lose 40lbs and will probably look skeletal.

There are much better indicators of health available out there but they are probably either too expensive or too time-consuming to use in this circumstance. While I understand this, I feel for those Alabama workers who, like me, do not quite fit into the BMI mold.

I support the idea of giving employees incentives for making healthy changes in their lives, but I don’t agree with using a one-size-fits-all system to assess whether or not someone will have to pay more for health insurance that is free for everyone else.

Big Business Magazines Got It Wrong

2008-09-19T08:10:21Z

Gawker has a good bit of media criticism posted on how the big business magazines, in relatively recent issues, touted stock in AIG, Merrill Lynch, and Lehman Brothers. (Nationalized, fire sale, and bankruptcy, in case you haven't been following the news.)

This goes to reinforce the idea that it's not so smart to read magazines for stock tips. I am really glad that the business magazine that I work for doesn't tout stocks because the whole idea is irresponsible. The typical small investor like you and me, trying to grow her nest egg, shouldn't even be buying individual stocks, or really, even mutual funds. The smart long term investment is low cost index funds--period.

On the other hand, I've heard from friends and acquaintances that they are panicked by what's going on and want to get out of the market altogether. This is understandable, but it's also the wrong idea. I'm not even going to check my performance for the next few weeks, although I am reallocating investments to make sure I'm diversified. The secret to successful wealth building is to live beneath your means, save, diversify, buy, and hold. You definitely want a solid rainy day fund in CDs and FDIC-insured savings accounts (AKA cash), but if your retirement is more than 20 years off, it should be a small proportion of your total assets. You have to stay in the game or you'll miss the comeback.

Credit Card Showdown

2008-09-18T16:06:41Z

September is shaping up to be a showdown month for reforming credit card terms and conditions. The Credit Cardholders’ Bill of Rights could be voted on by the full House of Representatives. And in the not-too-distant future, the Federal Reserve could finalize a proposed rule that would create a fairer marketplace for American consumers who want to use credit cards responsibly.

Credit card debt tends to carry substantially higher costs than other forms of credit due to a multitude of fees, high interest rates, and terms and conditions that can be difficult to understand. The result: Many borrowers unwittingly slide deeper and deeper into debt as they pay these high fees and interest rates.

Both the credit card bill and the Fed proposal contain many provisions that could help consumers. Both, for instance, would prohibit card issuers from applying rate hikes retroactively to prior balances borrowed at a lower rate unless the borrower pays more than 30 days late, has a promotional rate that ends, or receives a variable rate increase. Both would also more clearly define when a payment is considered “late” to give consumers reasonable time to make payments, and they would require that if a card has multiple balances at different rates, that a consumer’s payments be allocated among these rates in a way that is more beneficial to the consumer than is currently the practice.

As Congress and the Federal Reserve consider these proposals, they would do well to take a look at recent data, which illustrate why urged action is needed.

Banks are rapidly increasing the amount of credit card charge-offs, a warning that consumers are defaulting on their credit cards at an increasing rate. Charge-offs are the value of loans a lender removes from its books and charges against its loss reserves once these loans are deemed delinquent. In the second quarter of 2008—the most recent quarter for which data are available—all lenders charged off 5.5 percent of their credit card loans, an increase of 77.4 percent from the first quarter of 2006, when lenders charged off 3.1 percent of credit card loans in their portfolios. (Due to a change in the bankruptcy code, data from 2005 and earlier are not comparable to these figures.)

The increase in charge-offs suggests that consumer defaults are increasing. This means that some families are so squeezed as to not be able to pay off their credit card bills every month. In the current economic environment, a credit card can serve as an all-too-convenient pressure valve for families’ budgets, which are feeling the squeeze from rising prices and flat wages. Costs for basics necessities have been accelerating: gas is only now declining from a record high of over $4 per gallon. And since March 2001, food prices have risen by 24.2 percent, while fuel and utilities have risen by 48.1 percent.

Data show that Americans are relying on their credit cards more and more; they’ve racked up more credit card debt than ever before. Americans had $931.4 billion outstanding on their credit cards in June 2008 (in 2007 dollars), the most recent month for which data are available, according to the Federal Reserve. This is just below the record high of $933.4 billion, set in March of this year.

The situation stands to worsen, as more borrowers could end up defaulting on their credit card debt because of the lack of transparency of the costs of credit card borrowing. With the economic picture looking bleaker every day, it’s important that families who need to use credit cards for temporary income emergencies can do so on fair terms.

Originally posted at Center for American Progress