Cyber Monday in July?

July 30th, 2015

Big Sale sign in red over white backgroundI’m not a very active online shopper. Recently I was on the hunt for window treatments for some “not so standard” windows. I was surprised to find the close-out items were eligible for an additional 25% discount if they were purchased between 5:00 pm and 2:00 am on a Sunday in July.

Retail sales have slumped and shoppers aren’t going to the malls. Online shopping, however, is growing. Retailers are moving rapidly into aggressive online marketing efforts. The new marketing strategies include websites paired with physical stores, plus increased efforts to provide services for savvy consumers.  The smart phone — with price-checking capacity, access to product ratings and reviews, and the ability to scan coupons — has changed the way we make purchase decisions.  An estimated 50% of store sales are influenced by digital information. Shoppers are using online sites to gather product details and to check availability. If your local store doesn’t have it in stock, you can alter the store’s inventory by having it shipped there for pick-up. Find a lower price, show it to the clerk at check-out and the price is often matched.

We’ve moved from catalog sales to department stores, to malls, and now to an interconnected marketing known as omni-commerce. To learn more here is a commercial video that illustrates how it works:  http://www.sap.com/asset/detail.2013-09-sep.what-is-omni-commerce-mp4.html

Joyce

 

 

Joyce

Consumer Knowledge, Smart shopping

Will Social Security Survive?

July 28th, 2015

1-intro-lgWhen I’m teaching classes about finance I frequently hear young adults question whether Social Security is going to factor into their retirement income. They often believe that it will run out of funds before they can receive any benefits. Is there truth to this assumption?

Each year the Social Security Trustees issue a financial report card. Beginning in 2020, in order to meet the current benefits schedule, Social Security will need to use taxes collected from payrolls, the interest earned by the Trust Fund and the principal in the Trust Fund. The projected date for using all the assets in the Trust Fund to pay benefits will be 2034. That doesn’t mean the program will be bankrupt. It means that benefits will have to be reduced to be in balance with the taxes collected from salaries. If the system keeps operating as is, you would still receive Social Security when you retire; it would just be a smaller amount.

The Trustees stated that an increase of 2.68% in taxes, 1.34% for you and 1.34% for your employer,  would delay the date when the Trust would be depleted to 2089. Putting this increase in place would mean that today’s 25-year-old worker could expect the full benefits that are promised today at the time they retire.

The question for young adults is “Are you willing to set money aside today for Social Security Benefits tomorrow?”

You can read the full Trustee report here: http://www.socialsecurity.gov/OACT/TR/2015/

Joyce

Retirement, Saving

Protecting Dad’s ID

July 23rd, 2015

credit-cardWhen my dad came to live with me, he came with no important documents. Every once in a while I would find dad looking through his wallet for a credit card or an ATM card that was no longer there. This was a red flag for me.

When I ran dad’s credit report, I found he had 4 open accounts. One was for a car loan and the other three were for credit cards. Two had a zero balance; one had a small balance. It did not take me long to figure out that this balance was for satellite tv. I sent a letter to the satellite company, informing them of dad’s change of address and asked them to cancel his contract.

The credit report detailed the name of the card company, their address and phone number. It also showed the date the account was opened, the payment status, the credit limit, the highest balance charged to the card and the payment history for the past 24 months.

I wrote a letter to each of the card companies, giving dad’s new address, the reason for running the credit report, what was listed on the report that pertained to their company and my reason for contacting them… “Please cancel his card due to his advanced dementia.” I provided my name, relationship to dad and my contact information should they need more information.

For the one card that had a balance due, I wrote an additional comment in regard to the balance. Besides asking them to cancel the card, I asked them to notify me as to any remaining balance after the next billing cycle. I am hoping by cancelling the satellite service, the remaining balance would also disappear.

This free credit report came from Experian.  In another 4 months, I will run a free report with Equifax and another free report with TransUnion, 4 months after that. This will be an opportunity for me to see if the card companies did cancel the cards as I asked, and make sure nobody has stolen his identity. I will continue this practice of running credit reports every 4 months, as long as dad is living and for the year after he passes to ensure nobody has stolen his identity. ~Brenda

Consumer Knowledge, Credit

POAs for Finances

July 21st, 2015

gpaComputerIt became obvious to me that my dad could no longer manage his financial affairs when he could no longer add up his score when we played dominos; this was an unsettling realization as I played a child’s game with this man who was a computer engineer even before such degrees even existed through universities. My brother and I decided that I am the logical person to help him manage his money since I am the one he now lives with.

The durable power of attorney for financial matters names an individual (or two) as an agent, representative or attorney-in-fact.  It is important that the document contain language similar to…”this power of attorney shall survive my incapacity…;” this is the language that makes the document “durable.”  Without this language the power of attorney ends when the person becomes incapacitated, leaving the attorney-in-fact without authority to make decisions on behalf of the care receiver just at the time when assistance is most needed.  When no POA is in place, then the family will need to ask the courts to appoint a conservator; it is much easier and cheaper to have a durable POA in place before it’s needed.

POAs can be either broad or limited.  A broad POA includes anything from writing checks to selling property. A limited power of attorney will limit the attorney-in-fact to specifically outlined tasks, as listed in the document. This document can take effect immediately or it can be a “springing” durable power of attorney that will take effect under specific circumstances. A successor should be named should the attorney-in-fact be unable to act. In my case, both my brother and I have been named attorneys-in-fact.

As I willingly agreed to be dad’s attorney-in-fact, I thought this would not be a big deal: I pay bills and balance a check book all the time. Dad’s lawyer locked eyes with mine, as he repeated the importance of documenting everything well. His persistence on that point made me research what the job of an attorney-in-fact involved. What I found was that the POA creates great potential for dishonesty and poor decision making. To provide total transparency, I track dad’s income and expenses in an electronic spreadsheet that both my brother and I have access to at any time. Dad’s finances are very simple and involve a pension, social security and a home, so this method of tracking his finances works well for us.

The attorney-in-fact for financial matters does not have to be the same person as the one for health care matters, but in our case it is.  ~Brenda

Consumer Knowledge

Headed to Campus in August?

July 14th, 2015

IMG_0006Last week, while on the ISU campus for a meeting, I found many parents and future students using their trusty map to find their way around the campus.  These students were at orientation, registering for classes and learning everything they need to know to be ready for the next phase of their lives.

Watching these students prepare for the fall, I couldn’t help but wonder: “Are they preparing for managing their finances, too?”  If you (or someone you know) are heading off to college next month, here are some ideas to help you succeed financially, as well as academically.

  • As you schedule your classes, try to leave blocks of time free, so you can have a part-time job. If your classes are scattered throughout the day, there might be little time to work.
  • Be responsible with your money. Think twice before signing up for credit card. You may be better with a debit card; it works like cash and (oh yes!) you have to have money in your account.
  • One place to visit might be the bookstore/computer store to get all the technology you need – computers and other hardware, as well as software. For students and staff, there are educational discounts. Remember that the staff of the bookstore is there to help you succeed.
  • Usually, books are not included in tuition/fees, so be sure to find out which textbooks you will need and plan for that expense. Books are expensive. If you can find out from the class syllabus what are your needs.

Good luck to all you students as you begin this next adventure!

~Susan

Consumer Knowledge, Credit, Saving, Smart shopping

Build Your Credit Score Without Building Debt

July 9th, 2015
Credit Score Gauge

Credit Score Gauge

Does it seem contradictory to say I’m in favor of using credit to build a credit score but I’m not in favor of building debt?  It’s possible that was your reaction after reading the Credit Score Myth post.

It’s true: As a financial educator, I’m definitely in favor of using credit, including credit cards.  At the same time, I’m definitely not in favor of building credit card debt.  NOTE: I followed this belief as a mom, too: when my oldest turned 18, she was very reluctant to get and use a credit card. I pushed her to do both, because I knew how important it was for her to build a credit record.  She’s now in her mid-20’s, and her good credit score is helping her in many ways!

It’s actually not difficult to use credit cards without building debt.  Simply use the card throughout the month and pay the full balance before the due date on the bill.  If you do this, you…

  • won’t be charged any interest,*
  • won’t fall into a debt spiral, and yet you
  • will provide continuing evidence that you can be trusted to pay your bills (thus building or maintaining a good credit score).

Are there potential pitfalls?  Yes.  You need to be smart about this.  You need to charge only as much as you will be able to pay in full at the end of the month.  How can you make sure?  You may find your own strategy, but here are a couple of ideas:

  1. Keep charges so small that paying the bill will never be a problem.  (If you only use the card a couple times a month for small purchases, then the balance at the end of the month should always be manageable).
  2. Set aside money for each charge you make on your credit card.  If you charge $30 for gas, then set aside $30 in your savings account which you can use to pay the bill when it comes.
  3. Every few days log in on-line to your credit card account and pay the balance.  Even if you haven’t received the bill.  That will ensure that you are paying as you go, rather than building up a balance.

Need reassurance?  Consider this: if you are able to manage a checking account carefully to avoid overdrafts, then you should also be able to use credit cards in moderation so you can build a strong credit history without building debt.

~ Barb

*Most credit cards have a grace period, meaning they do not charge interest if the balance is paid in full each month. Make sure your card falls in this category!

Credit , ,

Myth: Credit Score Doesn’t Matter If You Don’t Borrow

July 7th, 2015
credit score

credit score

Last week – twice in the same day(!) – I was reminded of a myth.  The myth is propagated by people who have a worthy goal, but are just missing some information.

  • The worthy goal?  Encouraging people to avoid debt.  My thoughts on that goal? I agree!  Debt, especially excessive debt or certain types of debt, can lead people into extremely difficult situations.
  • The well-meaning recommendation:  Avoid using any credit, especially credit cards.
  • The myth: If you aren’t ever going to borrow money, then your credit score doesn’t matter.  I talked with someone who quoted a well-known financial guru as saying that it doesn’t matter if your credit score is zero.  In fact, they went on, it’s just as well to have a zero credit score, because then you can’t and won’t borrow.

The problem with this seemingly-logical sequence of thoughts is that your credit score does matter, even if you never plan to borrow money.  A zero score – or any low score – can have devastating impact, because credit scores are also used for other purposes:

  • Renting – Many landlords check your credit score before deciding to rent to you – they want to make sure you can be relied on to pay.
  • Insurance – Statistical analysis has shown a connection between credit score and frequency of insurance claims, so you may be turned down or charged extra for certain insurance policies if you have a low credit score.
  • Employment – a poor credit score can prevent you from getting a job in certain industries.

It’s also possible that even if you never planned to borrow money, you might someday decide to buy a house or start a business; these are both cases where taking a loan can be a very good idea, because it allows you to purchase something that will build value over time.

Even if you expect to never borrow money again, your credit score will affect you.  This means we all need to use credit (wisely) to build the best scores we can achieve.

~Barb

P.S. Stay tuned to next time for a follow-up!

Consumer Knowledge, Credit

Student Loan Co-signer Release

July 2nd, 2015

Picture1Did you know you could be released as a co-signer for private student loans? Depending upon language in the original loan document and the history of repayment; the loan might have reached a benchmark where parents and grandparents can request a release from the obligation to repay. The action would decouple you from another person’s finances and reduce the record of installment loans on your personal credit history.

The Consumer Finance Protection Bureau has been gathering feedback from consumers about student loan management. One discovery is the practice of private loan holders placing a loan in default if a co-signer dies or files bankruptcy; even if payments are being made and the loan is in good standing.  A second discovery is that 90% of the requests for release are denied. Consumers are being urged to investigate their options by sending a request for information to the loan holders.

To learn more visit the CFPB site and enter the following in the search box: Private Student Loan Inquiry Sample Letter.
Several articles will give you additional background and guidance.

Joyce

Consumer Knowledge, Credit

Identify Theft News

June 30th, 2015

taxreturnidentitytheftThe federal government has redesigned its webpage for identify theft. It’s a user friendly site with step by step actions to take if your identity has been stolen; it also includes direct links to the sites you’ll need to visit. You can narrow the options to specific kinds of personal issues, and there are tips for additional measures to take beyond immediate response.

The IRS has also announced that it will put new procedures in place which allow individuals who have had their social security number used on a fraudulent tax return to request a redacted copy of the fraudulent return.  Access to this information may be helpful to resolve an identify theft case. Procedures and forms are not yet available on the irs.gov website, so stay tuned.

Joyce

Consumer Knowledge

Powers Of Attorney

June 25th, 2015

youngcoupleShortly after my dad came to live with me, new Durable Power of Attorney documents were drafted for his health care and financial matters. As the lawyer interviewed my dad about his wishes in regards to health care, I tried to picture myself carrying out those desires. None of what my dad shared surprised me, and I am sure I could act according to his wishes. I think my level of comfort had a lot to do with our shared spiritual values and beliefs. The need and urgency to draft new POA documents was brought to my attention by his physician. Dad’s ability to make sound decisions was quickly evaporating due to advancing dementia.  If we did not get this accomplished soon, we would not, in good conscience, be able to have dad sign legal documents.

A Durable Power of Attorney for health care is one of two primary kinds of advanced directives for health care. Living Wills spell out your preferences, whereas a Power of Attorney names a person that will act as your agent if you are unable to speak for yourself.

Because my dad had, at an earlier time, named another person as POA, an additional document had to be signed that “cancelled” that person’s legal authority. The Revocation of Power of Attorney document revoked any and all Powers of Attorney documents that were created and signed prior to date that my brother and I were named as dad’s Attorney-In-Fact.

Powers of attorney documents are significant matters that need to be carefully considered. It is important to understand the care receiver’s needs. A power of attorney document created in one state may or may not hold up in another state so research those details, especially if there is a chance you may live in a different state as you near the end of life. ~Brenda

Consumer Knowledge