(Los Angeles Times) Despite recent improvements by the nation’s largest banks, checking accounts are still too confusing for consumers and overdraft fees are too high, according to new findings by the Pew Charitable Trusts. Disclosures for checking accounts are too long, some fees for overdraft protection have increased and many consumers still are forced into binding arbitration to settle disputes with their bank, said the study by Pew’s Safe Checking in the Electronic Age Project. “Consumers are expected to wade through long, confusing documents and may be subject to steep, unexpected fees to access their own checking accounts, the cornerstone of household financial management,” said Susan Weinstock, the project’s director. “Consumers must have understandable, transparent information that enables them to make educated choices when comparing one checking account’s costs and benefits to another,” she said. Pew called on regulators again to force banks to provide better disclosure and make overdraft fees proportional to the banks’ costs. Nessa Feddis, vice president and senior counsel at the American Bankers Assn. trade group, criticized the report, saying many banks were “going the extra mile” to make sure that customers understood fees and disclosures. The study is an update to the Pew project’s 2011 report, “Hidden Risks: The Case for Safe and Transparent Checking Accounts,” which raised alarms about fees and disclosures at the nation’s 10 largest banks.
Michael Mansell (front center) with members of his research group at Oregon State University
Corvallis, OR (BlackNews.com) — Blacks represent 13.6% of the U.S. population with a purchasing power of nearly 1 trillion, according to the recent State of the African-American Consumer Report gathered by information and analytics company Nielsen. However, less than three cents of every dollar return to Black-owned businesses. And at 16%, the national unemployment rate among African Americans is disproportionately high.
“A majority of our resources are spent outside of our own community, while the goods and services we offer are rarely extended to the international market. Because of that, the economic disparity is self-inflicted,” says Michael Mansell, a physics student at Oregon State University, pictured left in striped among his colleagues.
According to Mansell, manufacturers, distributors, wholesalers, and retailers in the United States are predominantly non-Black, and other groups are profiting from the African American consumer market. When this happens, the wealth gets drained from the Black community and invested in businesses, organizations, institutions, and programs that benefit other communities, where those dollars tend to remain. When the immense spending power of African Americans gets funneled into Black owned entities, those dollars return to the community, recycle, and reappear in the form of jobs, programs, and resources that ultimately benefit the Black consumer.
In response to this, Mansell, himself, has launched MDM International Enterprises, an online superstore that sells thousands of unique products. This is a for profit company, however community reinvestment remains the primary focus of this business model. Mansell hopes MDM International Enterprises will one day join the ranks of Walmart, Best Buy, and other such retailers.
Mansell is currently working on his PhD and has developed a sound solution to the economic disparity of the Black community. Drawn from studies of quantum physics, sociology, economics and other areas, his theory is called Nuclear Economics. Our economy is a physical system with definite properties. When certain sectors of that system are stimulated in controlled increments, the outcome can be predicted and the results, measured. Using algorithms Mansell creates what are called “stable pseudo jobs.”
Mansell has determined that introducing a controlled amount of “perturbations” into the correct part of the economic system would boost the whole economy in a relatively short period of time. Introducing the right amount of “perturbations” would yield a chain reaction of perpetual growth, hence the name “Nuclear Economics.” That exact amount of “perturbations” is also calculated using Mansell’s algorithms. What he is looking to do now, with the help of others, is put his theories into practice. He is launching Let’s Evolve, a nonprofit that will serve to institute these initiatives.
He comments, “We need to change our spending habits. We need to tell our friends and family to support Black owned companies whenever possible, to purposely and eagerly seek out black businesses to patronize. We need to leverage our economic power so that we can get more money back into our own community.”
Mansell would like for Nuclear Economics to help the Black community progress to a point where Black owned companies claim a fair share of the international market and also produce a majority of the products purchased by Black consumers. He insists this is not about exclusion, as the economy as a whole would ultimately benefit. However, he still maintains that the economic empowerment of the African American Community must start from within.
“I’ve collected data over the years, while studying sociology, economics, business, math, and physics. Albeit, in my theories, all these principles are at work, but no one has to be a physicist to understand that buying from Black businesses means more jobs for Black people. That’s just plain common sense,” he says.
About Michael Mansell Michael Mansell, engineer, entrepreneur, and scholar, first introduced his theory of Nuclear Economics in 2010. He developed the framework for his concepts while studying at California Polytech University in Pomona, where he worked as a teacher. His research in nanotechnology led to publication in Physics Letters A. Currently, Mansell is enrolled at Oregon State University’s Graduate School of Physics and he is also working as a Teacher’s Assistant (TA) in that program.
For more information about MDM International Enterprises, visit www.mdmie.com. To learn more about Nuclear Economics, subscribe to the Let’s Evolve newsletter, visit www.letusevolve.org. There is a onetime fee of $20.00 for a lifetime subscription.
To make a donation to support Nuclear Economics research and initiatives, send a check or money order payable to Let’s Evolve, 1218 NW 23rd St. Unit #3, Corvallis OR 97330.
For more details, visit www.letusevolve.org
by Gar Alperovitz, Truthout | News Analysis
The recent Public Banking conference held in Philadelphia offered a message that is at once so simple – but also so bold – it is hard for most Americans to pause long enough to understand how profoundly their thinking had been corralled by the masters of finance – in ways far, far, far more insidious and powerful than even the latest financial crisis suggests. To understand what has happened, however, you first have to take a minute to shake a few cobwebs out of your brain about “money” – and how it is created and by whom and for whose benefit. Money is “created”? Yes, obviously so – or did you imagine there is some fixed pile of “money” some place that exists once and for all and for all times? Think about it: If that were true, it would be impossible for the economy ever to change and grow. If the “money supply” were not increased over time, the original economy of, say, 1776 – which served about 2.5 million Americans – would still define the amount of “money” we would have to work with today. (And yes, going back further, if money were not increased – i.e. “created” – the amount that existed even in a far smaller economy prior to 1776 would be all there was and is, even down to today.) * * * Once you realize money must be and is regularly created and expanded, then the interesting questions begin to occur – like “How is it done?” and “Who benefits from it?” Step One: Most people think of “money” as something real, something that is kind of like gold or silver or anything that has intrinsic value. Allowing for a very, very few minor exceptions, that is simply not what “money” is. “Money” in the real world is a piece of paper (or electronic version of the same) that is a promissory note – a promise to pay you – that legally must be accepted by anyone to whom it is given to settle a debt. Behind this promise is the federal government in two very big ways: First, the government itself stands behind the promise as the party that will pay what it says it will pay on the piece of paper. Second, the government ensures that everyone must accept this promise if the piece of paper is handed over when you buy something or settle a debt. So, money is a promise to pay? Yes and that is all it is – but that is huge, especially when backed and enforced by the government. Once you fully grasp this simple truth, things get very, very interesting: Some “authority” must have the power to issue or authorize the issuing of “promises to pay that must be accepted” – i.e. to “create” money. In the United States that “authority” is called the Federal Reserve (“the Fed”). And yes – because the economy does, in fact, get bigger over time – the Federal Reserve Board must have a way to create more money (more promises to pay) as time goes on. It does this all the time. In the modern era, it does it via computers issuing – literally out of thin air, via nothing more than accounting entries – promises to pay that are called “dollars.” The Federal Reserve uses these to buy up securities owned by banks – and then these newly created “dollars” are deposited in the banks’ reserve account at the Fed. Again, yes, created literally out of thin air. (Otherwise the money supply wouldn’t expand and we would be back in 1776 …) * * * Now things start to get very interesting indeed: Banks have the legal right to lend more than the amount of “dollars” they actually keep in their vaults or at the Fed (their reserves) – roughly ten times more these days. So, for instance and simplifying a bit, let’s say that Bank A has $1,000 in deposits. So long as it keeps $100 on reserve, it can lend out $900 to the public. But this is only the beginning and here’s where the real action is and how the game is played: that $900 is now multiplied throughout the banking system. Note carefully the word “multiplied.” Bank A loans the money to individuals, businesses and perhaps other banks. Then, these people deposit the money in another bank (or they spend it and someone else deposits it in another bank). Though in the real world, it would go to many banks, for simplicity assume for the moment it all goes to Bank B. Now, Bank B has $900 in “new” deposits and (keeping 10 percent in reserves as required) it can now lend out another $810. And if this is deposited in Bank C, in turn that bank can keep 10 percent and lend out $731 ($810-81). Ultimately, when the process is completed the initial $1,000 permits the creation of (again, yes, out of thin air) $10,000. (Ten times as much is not a magical number; it is what the Federal Reserve Board currently allows for transaction accounts of more than $71 million [it is 3 percent for $11.5 million to $71 million, and zero for accounts of less than $11.5 million. It could be more; it could be less.]) * * * Let’s stop for a moment, however, to consider something far more important: I started out this little essay by saying that “the recent public banking conference offered a message that is at once so simple – but also so bold – it is hard for most Americans to stop long enough to understand how their thinking has been corralled by the masters of finance – in ways far, far, far more insidious and powerful than even the latest financial crisis suggests.” The above has, in fact, all simply been background for the big story: Think again about the fact that the Federal Reserve Board (like any central bank in any country) simply “creates money” out of thin air or authorizes it to be created by banks (by, among other techniques, setting or altering the amount banks have to keep on reserve). Moreover, it can also decide what interest rate it will demand for the money it lends out when banks need additional reserves to meet requirements – including, if it likes, zero or near zero. (Currently banks can borrow short term from the Federal Reserve Board at three-quarters of one percent – i.e. 0.75 percent.) Why, you might ask, doesn’t the Federal Reserve Board simply “create” money (as it does all the time) and lend it at 0.75 percent to the government (rather than let the banks do it) to pay for important public goods and to settle its debts? (Our bridges are falling down; not a bad thing in which to invest.) The answer is: It certainly could do that, in theory. In fact, it has been doing something close to this recently using a fancy term, the origins of which I won’t bother you with. The term is “quantitative easing” – but all it means is that the Federal Reserve Board “creates” money and buys up government bonds from the banks – and, then, the banks in turn lend to the government and the government pays its debts (or buys airplanes, or schools, or bridges and roads, or anything it decides it wants to buy or spend money on ….). The banks, of course, make a nice profit on this as “middlemen” between the Fed and the government. If you have been watching closely, you will now begin to see why the Public Banking conference’s message is pretty dramatic: What is the big deal about deficits when the economy is stagnating? Why doesn’t the Federal Reserve Board simply “create money” (as it does all the time anyway) and lend it to the government via the banks and then have the government put people to work by investing the money (building bridges and roads and schools, for instance)? Two things then happen: the economy gets going and more tax receipts come in to help pay off the debt (of newly created money). Yes, of course, if this went too far, inflation could become a concern. So, it is important not to go too far. * * * Even more interesting – much more interesting! – if the law were changed – or we acted as we did in part during World War II and, for instance, Canada acted between 1938 and 1974; – it would be possible for the Fed to lend directly to the government, bypassing the bank “middlemen” who make their profit by selling bonds to the Fed and investing the money in the government. Moreover – watch this very, very closely – since by law the Federal Reserve Board turns over almost all its profits (i.e. all interest) to the government even now, the loans would cost the government literally nothing if things were done in the simple, straightforward way (or if a “public bank” were set up that operates just the way private banks are run today, including making profits for the owners – who in this case would obviously be the public – i.e. the government). (One rough estimate offered by the Public Banking people is that had the United States done what they are talking about over the last 24 years, the amount saved on interest payments on the national debt would have been roughly eight trillion dollars – and the economy might also have been moved out of recession. Whatever the number might be in a careful statistical analysis, it is very, very large indeed.) * * * There is a rough parallel in all this with the way student loans used to be handled and are handled now. For a substantial period, the banks provided some loans to students that were guaranteed by the government, adding a mark-up for their profit. In 2010, Congress decided to eliminate the middleman and the government now simply makes the loans directly at lower cost. But, of course, we don’t allow ourselves to follow the straightforward path outlined above or suggested by the student loan program changes. Indeed, to even suggest the Public Banking strategy is to suggest a horror of horrors, since one of the biggest money makers for the banking industry would be on the chopping block. And the banking industry – especially its Wall Street branch – plays a very powerful and rough political game opposing anything or anyone who tries to “uncorral” the thinking of the public. Nonetheless, that is the direction that was opened up for serious discussion at the Public Banking conference. First steps first, of course. We currently have one “public bank” in the United States, the 93-year-old Bank of North Dakota. Since 2010, seventeen states have considered legislation to create banks based in one or another way on this model. Ellen Brown, the leading theorist behind the movement – along with many participants – urges the value of such banks on their own terms in that they help small businesses, farmers, home-owners, students and others. But, down the line, the big payoff is to get us thinking much more carefully about the way the world really works, and why. Once you start thinking about how money is created and who gets to use that power and for what purpose, some very, very interesting questions indeed begin to follow. To be sure, the story gets more complicated when you bring in global trade, finance, the Chinese, and so forth: A serious move in the way posed by the Public Banking people would have major implications for global finance, and the role of the US – and the US dollar – in the global system. But this, too, is one of the purposes of taking such proposals seriously – and the importance of starting a far-reaching new debate not only about money and the US system, but the fragility of the entire superstructure of global finance these days. * * * (By the way, one estimate is that roughly 25 percent of the world’s banking systems allow central banks to extend credit directly to governments; another 37 percent allow short-term advances. These include some of the fast charging so-called “BRIC[S]” countries such as India and South Africa, as well as Malaysia, the United Arab Emirates, Israel and Japan.) If you want to have some fun with this – before you get angry at the rip-offs – take a look at the video of 12 year-old Victoria Grant explaining the same thing for Canada. There is a reason why it went viral and has been seen by more than a million people.
As we look to celebrate this special day with the men we love, it’s important to know how to spend money wisely on the perfect gift for Dad. Better Business Bureau (BBB) has some suggestions.
“Whether you’re looking to get Dad something traditional like a watch, or something flashier like the latest electronic gadget, check out the business first,” noted Randall Hoth, Wisconsin BBB president/CEO. “These gifts can get expensive. Always make sure to get information on refund, exchange and warranties in writing. Don’t hesitate to ask if there is a return time limit, and get a gift receipt to enclose with your gift in case Dad needs to take it back.”
BBB offers the following ideas and tips for Father’s Day gifts:
Gift Cards and Certificates: Check the terms and conditions of any gift card or certificate prior to purchase to ensure that the expiration date and any other conditions won’t be problematic. If you are giving a gift card to someone who will make online purchases, be sure the gift card is redeemable for Internet shopping and not just for in-store use.
Electronics: Whether you plan to give Dad a camera, GPS system, phone, music player, DVD player or other electronic device, be sure that you don’t remove it from its box before wrapping it up as a gift. Many electronics stores require the original packaging in order to process returns or exchanges.
Recreational Rentals: If you’re interested in renting ATVs, campers, canoes, kayaks, motorcycles or other recreational equipment this Father’s Day, be sure that you get a written contract that includes details such as the base rental cost, daily fees, insurance and time restrictions. Also, take the time to visually inspect the rental and get written proof of any existing damage before renting the equipment.
Guides, Tours and Classes: Fishing, sightseeing, skydiving and golf lessons are a fun way to celebrate and spend time with Dad. However, it’s important to get details about these classes and adventures in writing and in advance of the trip. Be sure to clarify all of the factors listed below:
- Are reservations required and if so, by when?
- What are the total costs and features?
- What services and equipment are included?
- Are taxes or any other charges added?
- Are there any restrictions or special time requirements?
- Are there any cancellation or refund penalties or policies?
Milwaukee area employees of M&I, a part of BMO Financial Group, are setting out to make a difference. The week of June 4, approximately 766 employees will be taking time away from their desk to volunteer in their local community.
Milwaukee Habitat for Humanity will benefit from the helping hands of M&I employees during the painting of porch railings for some of the 17 new homes Habitat is building this June. Employess will also assist in the installation of exterior siding and hanging of drywall. To date Milwaukee Habitat has built or repaired over 500 homes in partnership with hardworking Milwaukee families.
“Milwaukee Habitat is honored to partner with M&I employees again this year for its Volunteer Day. We look forward to an infusion of M&I helping hands to build homes for deserving families. The generosity of M&I employees has been such an important asset to Habitat and we look forward to deepening the partnership with BMO Harris Bank,” says Brian Sonderman, Milwaukee Habitat’s Executive Director.
In addition, nearly 100 employees will perform habitat improvements and remove invasive species at the Hank Aaron State Trail. Nearly 40 employees will spend their day packaging, labeling and sorting food at the Feed America warehouse which feeds the hungry in Milwaukee and South East Wisconsin. M&I employees will also volunteer at many other local community organizations.
These activities are part of BMO Volunteer Day in which 6,500 BMO Financial Group employees across North America will be participating in over 400 projects to improve their communities. BMO Volunteer Day is an initiative that encourages employees to recognize the needs of their local community, establish a volunteer project and mobilize teams to fill that need. This is the first North American-wide BMO Volunteer Day, which initially started with efforts at both M&I in 2001 and Harris and BMO Capital Markets in 2007.
“Our vision to be the bank that defines great customer experience goes beyond financial products and services,” said Brad Chapin, Executive Vice President, Personal Banking, M&I. “We are dedicated to enhancing the quality of life of those who live and work in the communities we serve.”
Is your file cabinet overflowing? Do you hesitate to purge tax information because you’re not sure what to keep and what to discard? Here’s a quick guide to help you cut through the clutter.
Expenses. Substantiation for deductions includes charitable donation acknowledgments, receipts for employee business expenses, and automobile mileage logs. Retain these at least seven years after you file the return claiming them.
Income. The same seven-year rule also generally applies to common tax forms such as 1099s showing interest, dividends, and capital gains from banks or brokerages, and Schedule K-1s from partnerships and S corporations. However, the IRS recommends holding on to your W-2s until you start collecting social security.
Tip: Shred interim income reports once you’ve compared the totals to annual forms.
Retirement Accounts. You may have to calculate the taxable portion of distributions, so keep records detailing your contributions until you’ve recovered your basis.
Tax Returns. The statute of limitations is usually three years but can be six years if underreported income is involved. In cases of fraud or when no return is filed, the IRS has an indefinite time period for assessing additional tax.
As a general rule, keep federal and state returns a minimum of seven years.
For additional information, including how long you should store business papers and payroll reports, please give my office a call, United Tax Service, (414) 871-1040. We’ll be happy to help you establish a records retention schedule or answer any questions you may have.
Pewaukee, Wis. – Investor Education in Your Workplace®—a program developed with the help of Wisconsin credit unions—positively impacts investing behavior, new research shows. Researchers from the University of Wisconsin-Madison found that employees improved their financial behavior after taking part in the program’s ten-part online education series, covering topics such as “Basics of Investing,” “Investing in Mutual Funds” and “Working with Financial Advisers.” After taking the series, 8% of the participants reported opening an individual retirement account, 6% reported establishing a written budget, and 5% each reported drafting a written financial plan and saving for three months of expenses.
In a report for the Filene Research Institute, J. Michael Collins, PhD, assistant professor and director of the Center for Financial Security at the University of Wisconsin, said the research “supports the idea that remote learning tools like online education can improve financial knowledge and lead to better financial behavior. That’s promising in a cultural environment that increasingly prizes on-demand information access.”
The program, made possible thanks to the Investor Protection Institute and Investor Protection Trust, encourages credit unions—and thereafter, other employers in their communities—to offer voluntary, online investment education to employees. It is the first program of its kind using credit unions to engage thousands of citizens in voluntary, workplace-based investor education.
During the pilot phase of the program, from 2009 to 2011, each credit union employee completed 10 hours of self-paced study of basic investment concepts online. Fourteen of those grads completed more advanced online study to become Certified Financial Educators® (CFE®) through the Heartland Institute. They, in turn, encouraged participation by additional companies. In Wisconsin, 5,476 learners from 80 credit unions and 24 Wisconsin businesses completed 60,000 hours of investment training.
The program has been used in three states to encourage proactive investing and – as a result of additional states expected to adopt it – has become one of the nation’s fastest growing workplace-based investment education programs. It is expected to stimulate many millions of dollars in investing nationwide. In 2011 the program received a Wisconsin Financial Literacy Award.
Funding for the program includes a grant of $30,000 from the National Credit Union Foundation and $500,000 in grants from the Investor Protection Trust (IPT), a nonprofit organization devoted to investor education. Since 1993 the IPT has worked with the states to provide the independent, objective investor education needed by all Americans to make informed investment decisions. Visit www.investorprotection.org. Additional partners in the project include the Wisconsin Department of Financial Institutions and the Educated Investor®, which provides the online university system and assistance with project management.
Credit unions are participating in the project as part of their REAL Solutions initiative, which helps people of all incomes build wealth. As not-for-profits that have no stockholders, credit unions’ role is to help people regardless of profit.
Credit unions are cooperative financial institutions that are owned by their members and do not have stockholders. Because they are not-for-profit, they return earnings to members in the form of more competitive rates of return on accounts, lower interest on loans, lower fees and improved services. Around 2.2 million Wisconsin residents belong to credit unions, of which nearly half are open to the local community. Find a credit union to join by visiting www.asmarterchoice.org. Read The League’s REAL Solutions 2011 Scorecard that explains how credit unions returned more than $201 million to their members in 2011 and served their communities regardless of profit. It is available at www.theleague.coop/scorecard.
New Automobile Sharing/Renting Programs a Gamble, Says Asset Protection Specialist
If parents loan the family car to their child, they can be sued if an accident occurs. The same goes for anyone who loans a car to a friend in need. So, what happens when a third party like RelayRides is involved?
RelayRides is a peer-to-peer car rental or car-sharing service that went nationwide in March this year after launching in Boston in 2010. Many participants loan their cars as a good deed to open up parking along busy urban streets, promote environmentally sound habits or simply to help those in need of a ride. Most, however, opt to rent their vehicles for a variable rate – usually about $10 per hour.
“Every car loaned or rented through the program gets $1 million in liability insurance coverage from RelayRides, but even that may not be enough,” says Hillel L. Presser, a lawyer specializing in asset protection planning and author of Financial Self-Defense (www.assetprotectionattorneys.com).
“When there’s an accident involving serious injuries, the victims simply have no choice but to sue for at least $1 million, and often more. If you rented the car and you have assets, you could become a target.”
Earlier this year, a man who rented a car through the program was killed in an accident while driving the wrong way on a highway, Presser says, citing a New York Times report. Four people in the car he hit were seriously injured.
“Medical expenses are expected to exceed RelayRides’ insurance coverage,” Presser says. “The owner of the car is a part-time Google systems administrator – which means she probably makes good money. Who will pay the overage, and who might be sued, is still yet to be determined.”
In today’s world, lawyers have gotten very creative in what they’ll go after, which is why comprehensive protection of assets is absolutely crucial, he says.
Presser offers the following tips:
• Account for ALL of your assets: Not sure of what you have? Don’t wait for a plaintiff’s lawyer to tell you exactly what that is before he or she takes it from you. Take stock of valuable domain names, telephone numbers, intellectual property, potential inheritances, and other non-liquid assets.
• Liability insurance is no guarantee: Buy as much insurance as you can; it’s cheap and it helps you sleep at night. But realize that 70 percent of claims will not be covered. Your coverage may be inadequate for a particular suit, and your insurance company may go bankrupt. Having insurance and an asset protection plan is the belt-and-suspenders approach for hanging onto your pants.
• Convert non-exempt assets into exempt assets: State laws protect some personal assets from lawsuits and creditors. Those assets typically include your primary residence; personal items such as furniture and clothing; pensions and retirement funds; and life insurance. Find out the exemptions for your state and convert non-exempt assets, such as cash, into exempt assets, such as life insurance.
• Transfer your assets to a protective entity: The key to asset protection is to own nothing while controlling everything. Transfer any non-exempt assets out of your name to protective entities such as trusts, limited liability companies, limited partnerships and others.
• Don’t loan out your car – even to your kid: If your children are going to drive, they should drive cars titled in their name alone. And if they pay for the cars themselves, you add another layer of protection. Courts may find that parents who are obviously paying for their children’s cars liable to some degree, even if the car title is in the child’s name.
“While everyone can take well-informed steps to further protect their wealth, there is no substitute for having an experienced legal professional review an estate – all of it,” Presser says.
About Hillel L. Presser
Hillel L. Presser’s firm, The Presser Law Firm, P.A., represents individuals and businesses in establishing comprehensive asset protection plans. He is a graduate of Syracuse University’s School of Management and Nova Southeastern University’s law school, and serves on Nova’s President’s Advisory Council. He also serves on the boards of several non-profit organizations for his professional athlete clients. He is a former adjunct faculty member for law at Lynn University. Free copies of Financial Self-Defense are available through AssetProtectionAttorneys.com.
Today’s twenty-somethings can have bright financial futures by following a few simple steps
MINNEAPOLIS – Despite a turbulent job market and economy, if you are a recent college graduate, there is much to be optimistic about as you leave campus and head out into the real world. No one ever said life on your own would be easy, but post-graduate financial bliss can be a reality. These six tips from Thrivent Financial offer a starting point for recent graduates who are ready to put their education to work for a secure financial future.
Get real about your paycheck
Compared to the minimum wage jobs you survived on through college, the annual earnings at your first post-graduate job may give you dollar-sign eyes. Don’t be fooled though; after taxes, benefits, living expenses and student loan payments, your remaining monthly spending money could amount to less than half of your gross income. Being realistic about your paycheck doesn’t mean you can’t have any fun, though. That new car may have to wait a while, but with smart budgeting you can still enjoy the finer things in life with a clear conscience.
Your credit score matters
Thought you were done worrying about test scores? Think again. Whether you want to get an apartment, mortgage, car or a new job, your credit score says a lot about you and can make or break these important steps. Free credit reports are available at http://www.annualcreditreport.com, and for a small fee you can also obtain your credit score. Examine your report regularly for accuracy, and pay off any existing credit card debt as soon as possible. Credit card interest is wasted money, and outstanding debt can hurt your credit score.
Look out for number one
After expenses and taxes, your paycheck may look too slim for comfort, but protecting your assets, health and income is worth the additional cost. If you have an apartment, renter’s insurance is a relatively inexpensive way to protect your possessions. Health insurance is also a must, whether you get it through your employer or stay on your parents plan. Your paycheck is worth protecting, too. Disability income insurance is not just for those with physically demanding jobs, as most beneficiaries are on disability from illness, not injury. Preparation for the unexpected comes at a small price considering the costs associated with the alternative.
Save for the fun stuff
Again, being responsible with your finances doesn’t mean you can’t have any fun. You have worked hard to start your career, and deserve to reward yourself. The best way to spend smartly is simply to spend less than you have. Diligent saving allows for the occasional splurge without having to feel guilty or anxious about your decision to spend. Consider directly depositing a certain amount from your paycheck into a savings account for a “fun fund.”
Save for the grown-up stuff, too
Your parents’ nagging may start to quiet now that you’ve graduated, but their retirement planning advice is worth listening to. Start investing now, you won’t regret it. As you barely scratch the surface of your career, retirement seems a long way off, but successful investors understand that the longer your assets remain invested, the greater their potential for growth. The cash you forfeit now will pale in comparison to the amount you’ll end up getting back at the end of your career if you start as early as possible.
Don’t pass up free money
Many employers offer pretax savings through their retirement accounts. Because your retirement contributions come out before taxes, your taxable income is decreased, saving you money. For example, a $100 contribution from your earnings to a pretax retirement account would reduce your paycheck by only $75 if you’re in the 25 percent tax bracket. If your employer matches a percentage of your retirement contributions, it is wise to contribute the maximum amount of their match so as not to pass up on “free money.”
Money is just one of many aspects of adulthood that college graduates must meet head-on to start living independently. Personal finance may seem daunting, but don’t be discouraged. The above-mentioned tips boil down to common sense: spend less than you earn, stay protected through proper insurance, maintain good credit and save for the short and long-term, and you will be off to a great financial start in the next chapter of your life.
About Thrivent Financial for Lutherans
Thrivent Financial for Lutherans is a not-for-profit, Fortune 500 financial services membership organization helping approximately 2.5 million members achieve financial security and give back to their communities. Thrivent Financial and its affiliates offer a broad range of financial products and services including life insurance, annuities, mutual funds, disability income insurance, bank products and more. As a not-for-profit organization, Thrivent Financial creates and supports national outreach programs and activities that help congregations, schools, charitable organizations and individuals in need. For more information, visit Thrivent.com. Also, you can find us on Facebook and Twitter.
Insurance products issued or offered by Thrivent Financial for Lutherans, Appleton, WI. Not all products are available in all states. Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, 800-847-4836, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent Financial for Lutherans. Thrivent Financial representatives are registered representatives of Thrivent Investment Management Inc. They are also licensed insurance agents of Thrivent Financial.
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Non-profit credit counseling agency Take Charge America offers parents tips to boost their teens’ financial literacy
PHOENIX – (May 30, 2012) – While personal finance curriculums are expanding in schools nationwide, much of a teen’s money savvy is learned in the home.
According to Mike Sullivan, director of education for Take Charge America, a non-profit credit counseling agency in Phoenix, all teens need some financial home-schooling before entering the “real world.”
“It takes a lot of time and effort to set our children on the path to a secure financial future,” he said. “Not only are parents responsible for setting an example in the home, they must be proactive in incorporating financial lessons into their teens’ daily life. Teens will carry these lessons with them long after they leave the nest.”
Sullivan has five tips to help parents equip their teens with the knowledge to save and spend wisely:
1. Encourage a part-time job: Jobs help teens understand that earning money requires hard work and sacrifice. Foregoing a night out with friends in order to work may shift and strengthen their appreciation for the value of a buck. Moreover, as kids get older, their wants and “needs” become much more expensive. Your teen may think twice before spending his or her own hard-earned cash on lavish or impulsive buys.
Additionally, a job will help your teen understand the impact of taxes on take-home pay. After the government takes its share, your kid’s paycheck may seem pretty meager, especially since most teens earn minimum wage at entry-level jobs.
2. Offer an allowance: If your teen is too young for a “real” job or needs to spend more time studying, consider giving him or her a monthly allowance for completing extra work around the house. This allowance should cover all “wants,” even if it means they have to save up for a few months.
3. Create a budget: Work with your teens to outline all of their expenses. In general, it’s a good rule of thumb to continue providing for needs – like food and school supplies – and requiring him or her to fund “wants,” such as video games or a night out with friends. You may also consider passing along a portion of auto or cell phone expenses. Just make sure they understand who pays for what to avoid potential squabbles.
4. Mandate saving: Help your teen set up a savings account at a nearby bank or credit union. Agree on a mandatory savings program to allocate percentages of their allowance or paycheck towards specific goals. For example, 20 percent for emergency savings, 30 percent for a college fund, and 10 percent towards saving for any big-ticket items. Then your teen can spend the remaining 40 percent as they see fit. This practice will help teach the importance of saving cash and ensure he or she isn’t squandering limited funds.
5. Matching funds: Give your child an extra reason to save cash by creating a matching program. Commit to matching your teen’s savings account dollar-for-dollar upon graduating high school. Or, if your teen’s heart is set on a car, offer to match a down payment.
For more money management tips, visit www.takechargeamerica.org.
About Take Charge America, Inc.
Take Charge America, Inc., a non-profit financial education, credit counseling, housing counseling and debt management agency, is dedicated to helping consumers nationwide improve their financial futures. Founded in 1987, the organization has helped more than 1.6 million consumers nationwide manage their personal finances and debts. To learn more, visit www.takechargeamerica.org or call (888) 822-9193.