Nationwide, and probably on your street as well, credit card issuers are making life tough for consumers by raising rates and adding fees on otherwise good customers.

The recently passed Credit CARD Act of 2009 is meant to protect non-risky customers from arbitrary rate hikes, among other things.

Now, Senator Chris Dodd of Connecticut is asking Federal Regulators to review recent actions taken by credit companies and possibly force them to undo these punishing moves. Since the law doesn’t go into effect until 2010, he wants Bernanke and company to start regulating retroactively to the beginning of 2009. Specifically, he wants:

credit card companies to review every six months any account where the interest rate has been raised since January 1, 2009. It also directs the companies to reduce the rate if the customer has become less of a credit risk or the circumstances that warranted the increase are no longer present.

It’s basically taking the spirit of the law recently passed and helping out non-risky customers now instead of later. Of course, in light of what we recently learned about how credit issuers decide what makes a person risky, I’m sure there are still plenty of loopholes available.

Sen Dodd seeks review of credit card rate hikes, Karey Wutkowski, Reuters, July 9, 2009

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Possible Federal Action on Credit Rate Hikes

Do you live your life as if everything you do could be made public? I once heard a suggestion that you should judge every decision you make based on whether you would like to see this decision on the front page of the New York Times. That is a good theory, but I can’t say I fully live by this philosophy.

Regardless of the life decisions I make, my purchase decisions are being recorded and analyzed. Almost all of my spending, particularly my major spending, is accomplished through a credit card. I only buy what I can afford and I pay the bill in full every month, but the fact I don’t enter debt or pay interest fees is besides the point.

Based on the places I shop, credit card companies may decide that, based on studies and calculations of the American consuming public en masse, I have become a riskier consumer. If I shop at Some Discount Store, and the algorithms show that people who shop at Some Discount Store are more likely to miss payments or default on a loan, the credit card companies can increase my rates or lower my credit limit. They can change the terms of my credit agreement without missing a payment, exceeding my credit limit, or using a higher percentage of my available credit. Yes, the credit card companies can decide to categorize me in a lower “credit class” based on where I shop. The Credit CARD Act of 2009 doesn’t change this possibility.

If the credit card companies decide to place me in a lower class of consumer, they could increase my interest rates or lower my credit limit. With less credit available, my credit score could be negatively affected. A lower credit score could then have significant financial consequences; I may not qualify for as low as an interest rate on a mortgage than I would have otherwise.

So if you are concerned more about what the credit card companies think of you than you are about what your friends and family think of you, avoid raising a red flag with your banks by choosing cash for these ten purchases. These were suggested by Marketplace.

1. Traffic tickets. If you are more likely to speed and get caught, and to pay for your ticket or court fees with credit, you are a bigger credit risk. Because people who pay for tickets on their credit card tend to default on their payments more often, the credit cards may place you in a lower category of borrowers.

2. Retreading your tires. If you choose to retread rather than replace tires, credit card companies assume you do not have the money to properly maintain your possessions. And if the issuers believe you have less money than you may have indicated when you applied for the card, they might choose to reduce your benefits.

3. Bargain stores. Marketplace points out that American Express has been accused of lowering customers’ credit limits just for shopping at Wal-Mart. That sounds like class discrimination disguised as risk management, but the issuers argue that a change in shopping behavior in a direction of bargain stores indicates concern about money, and if that concern is legitimate, a job loss might be on the horizon. Following the thread, unemployed consumers are more likely to cause a problem for credit card companies.

4. Porn. While the Marketplace article says adult entertainment is simply considered escapism, and those who wish to “escape” may do so due to financial conditions, it seems more likely that credit card simply find consumers of porn to be riskier than others. I wonder if there is any distinction between local strip clubs and high-class escort establishments.

5. Marriage counseling and therapy. If your relationship is on the rocks, divorce might be imminent. Divorce brings on financial problems of its own, such as increased debt and even bankruptcy. The credit card companies will want to cover the possibility of future losses if they believe you are likely to go through a divorce.

6. Lottery tickets. Considered a tax on the poor, lottery tickets are purchased overwhelmingly by people without much money; perhaps winning the jackpot is seen as the only way for people who may not have been given the opportunities of the middle class, or those who had the opportunity to succeed but did not take advantage of them for whatever reason, to build a successful life. Credit card companies see lottery ticket purchases as acts of desperation, and those who are desperate are greater credit risks.

I must confess that when a co-worker goes from cubicle to cubicle, collecting a dollar from each of us to play in the large-jackpot lottery, I still contribute most of the time — not in an act of blind hope but in an act of being social. My coworker doesn’t accept credit cards, though, so I stay out of the banks’ radars.

7. Cash advances. Many years ago, I did take a cash advance. This was before I knew much of anything about personal finance. I had no emergency fund and I left my low-earning non-profit job without a concrete plan. I just needed a few hundred dollars to get me by for a little bit, and I paid it back quickly. But the credit card issuer could have used this event to lower my limit, increase my interest rate, and lower my credit score.

8. Personal pampering. Marketplace suggests women refrain from charging visits to the spa on the credit card if they haven’t established a history of doing so previously.

9. Income taxes. the IRS allows you to pay your income tax bill via credit card. In fact, many people have recommended doing so if you have the cash to pay the bill in full when it comes due and if you can earn cash back or other valuable rewards by paying a large amount of money through credit. But a credit card company may interpret this method of payment as a sign that you can’t handle your financial responsibilities and may penalize you to prevent a larger loss if you default.

10. Alcohol. Drowning your financial sorrows at the bar? That is what the credit card issuers are likely to think if you start using your credit card in bars and liquor stores. Start making a habit of visiting bars and charging the drinks and you may raise a red flag.

While it’s unlikely that some Chase employee is poring over your credit card statement marking demerits for your porn, booze, gambling and spa vacations, the credit card companies have algorithms that detect these patterns automatically. Effectively, a computer program is making the “decision” that could result in you paying thousands of dollars more for your mortgage than if you just paid cash for these certain products and activities.

10 purchases not to put on credit cards, Marketplace, July 8, 2009

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10 Purchases That Can Harm Your Credit

While a budget in one form or another is a must-have financial tool, it’d quickly become big and ugly if you tried to anticipate and include every expense you might run in to. You’d quickly lose interest and wouldn’t stick with your budget, right?

A budget is a basic recorder of recurring expenses, and trying to cover a purchase you didn’t foresee is like fit a round peg into a square hole. Unplanned expenses happen to everyone though, so what we can do about them?

Anticipate the expense

This sounds counter-intuitive to the rest of this post, but you don’t need a magic 8-ball to do it. If you’re aware of the next time your car is going to need an oil change, you can set aside that money in your budget to cover it. That way you don’t step up to the counter to pay for it while wondering where that money is going to come from.

Setting aside $30 or $50 each month for unplanned expenses will help you cover those little repairs or fees you might run into. and you’ll have even more on hand if you don’t use it during the month.

Lock down your emergency fund

This is extremely important. You are the only person who can determine what you consider an emergency, but don’t run for cover the first time you run into a problem. Your emergency fund shouldn’t be the first place you go when you find yourself short a couple of bucks, it should be the last.

Cut back In other areas of your budget

Did you plan for three tanks of gas this month but ended up using only two? Don’t spend that money on just anything, move it over to cover an unexpected expense. If you’re living within your budget, you’ll probably find that you’ll be able to do this quite often. When you have months where everything runs smoothly, you’ll be able to save that cash!

Make extra money

If you’ve got the time and the desire you could earn a couple extra bucks to meet your needs for that month. Are you going to babysit for your neighbor, or have a garage sale? That extra income can help you when you don’t have another way to pay for something.

Find another way

Can you borrow the item you need? If you can get someone to loan you the item you’re considering purchasing, you can keep from incurring another expense. Taking a bit of time to consider your options and see if there’s another way to solve your problem may help you save money.

Unexpected expenses are a major factor of what I call “the month-to-month monster,” living paycheck to paycheck. If you can work to reduce the impact of these purchases on your budget, you’ll be able to strengthen your financial foundation and get to the point where you can begin to establish real wealth.

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Unplanned Expenses and Your Budget

Now that the halfway mark of 2009 has passed by, it wouldn’t hurt to review the financial mini-goals I set for myself at the beginning of the year and determine how far I have strayed from my path. For me, these goals are only milestones. They help my gauge my progress but numbers in my bank account have little correlation to my quality of life and do not have much bearing on my non-monetary, real goals.

Last year, my success at reaching arbitrary financial milestones was hindered by the stock market, so when I set my goals for 2009, I focused on metrics that are not affected by short-term investment performance.

Income

My goal for “Other Earned Income” in 2009 is $108,000, or an average $9,000 per month. My stretch goal is to surpass this year’s success with $132,000.

“Other Earned Income” refers to the gross revenue (before subtracting expenses) derived from running a number of websites, most notably Consumerism Commentary. I don’t write much about how I earn money through these websites because I feel it is too introspective to publish. It would be like writing a book about writing that book or singing a song about singing that song. There is a market for self-referential writing, but I’m not particularly interested in writing about the minutiae of blogging. Consumerism Commentary is a blog about money, not a blog about blogging.

Anyway, according to my June financial reports, I am on target to meet my target as long as I maintain about $4,000 Other Earned Income per month for the rest of the year. Barring any unforeseen problems, this is achievable, but mostly due to significant income earned earlier this year. To meet my stretch goal, I would have to earn an average of more than $8,000 each month for the rest of the year. That is less likely as I expect the remainder of the year will look more like May than March.

Grade: B.

Investing

• Contribute the full $16,500 to my 401(k).
• Contribute the maximum to a Roth IRA if possible; if not, contribute to a Traditional IRA and convert the account to a Roth IRA in 2010.
• Contribute the maximum to an SEP IRA.
• Invest $250 per month into an account to help pay for future children’s education.

According to my most recent pay stub, I have transferred $8,836 to my 401(k), split evenly between “Before-tax” and “Roth” contributions. It seems I may overshoot my goal, so I will make sure to adjust my contributions to prevent my 401(k) from hitting the maximum early, reducing the amount of employer match I receive.

I have not yet contributed to my 2009 IRAs yet, although this might be a good time to do so. Usually I want until the tax deadline, but with the stock market hitting lows again, I should consider starting my IRAs now.

Although I set a goal to invest $250 per month for the education expenses for a theoretical future child or children, I have not done this. My internal debate is whether to start the fund now and get a head start or to wait until I plan on having children, reducing the risk of being penalized for withdrawing the funds at some future date without education expenses to cover.

Grade: C.

Saving

I’m working on finding a tax accountant to ensure that my tax bill isn’t any higher than it is supposed to be. After I pay my taxes, I’d like to take half of whatever I have left and earmark that amount for a down payment on a house.

Through 2009 so far, my savings progress has been strong. I do not think I specifically earmarked half of my remaining savings on April 15 for a future home purchase, but I have been paying attention to my “Orange House Fund.” No, I do not particularly plan on purchasing a house colored orange; “orange” refers to the fact that this bank account is housed at ING Direct, a bank that has claimed orange as its color. The fund currently sits at about $13,000, and I add money occasionally.

If I need to buy a house in a hurry, I could draw from a number of other accounts to come up with 20 percent of a reasonably priced house in this area. I tend to distribute leftover income to a variety of goal-based savings accounts, and a house is only one of these.

Grade: B.

I did not set a net worth target for 2009 as this number is pulled in different directions by the stock market, something over which I have very little (that is, zero) effect. My investing strategy is to stay invested in the stock market for all assets other than cash I might need in a few years, so as time goes by, my net worth is driven increasingly by the performance of stocks.

How are you progressing against your goals?

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Evaluating My Progress Towards 2009 Goals

Ron Lieber, a columnist for the New York Times, spent one day focusing on the financial tasks that he had been neglected. He calls this day a “fiscal health day,” like the mental health days everyone needs to take once in a while to remain a functional human being. I think this is a great idea. While I have taken similar financial health days in the past, I feel there is always more I could have done.

Lieber cataloged and documented the tasks he chose to accomplish. This is a good start for your financial health day.

• Open a high yield savings account. The author chose SmartyPig for its high interest rates while recognizing the account’s monthly deposit requirement.
• Apply for a cash back credit card. Like Smithee, Lieber prefers the Schwab Bank Invest First Visa Signature Card.
• Insure your assets. The author used this opportunity to shop for more affordable insurance for the family jewelry. If I were to take a financial health day, I would do the same for my automobile and home insurance.
• Optimize your services. You will need a good portion of the day if you plan on calling your phone or cable company to negotiate.
• Hire an assistant. While Ron Leiber had a very specific need. He hired a nanny tax service to take care of the financial paperwork involved with paying a baby sitter. Even Schwab helped out by setting up automatic direct deposits. It may not be a nanny tax service that you need, however. You may want to research outsourcing some of the tasks that take up the time that could be better spent on other activities, as long as it is financially worthwhile. I might be exploring this in the future if I decide to hire a virtual assistant.
• Create or update your will. I don’t have a will, but the only one relying on my income for survival is my cat, Rupert. Yet I may be underestimating my need for a will.
• Organize your financial paperwork. Ron Lieber used the opportunity to arrange his family’s health insurance paperwork for a successful campaign against the companies in the future. I am not a terribly organized person, and it usually takes a block of dedicated time for me to reorganize.
• Leave information for those who follow after you. Although this is a morbid thought, if something happens to you, it’s important for your family to know how to access your financial accounts. Merrill Lynch offers a convenient form that you can complete and keep with your records.
• Automatic charitable giving. Here is a good way to have a positive effect on the world. Lieber signed up with NetworkForGood.org which allows him to put his charitable giving on autopilot for a small fee. I have a few non-profits that deduct monthly payments but I could improve this by setting up automatic grants from my charitable gift fund.
• Use your gift certificates and gift cards. Even if they don’t expire or lose value over time, the companies that offer these gift cards are making the use of your money, hoping you never come into the store to claim your merchandise. Collect your gift cards and use them on your financial health day.

If you have the luxury of turning your financial health day into a two-day money spree or a week-long retreat, you may be able to tackle more.

• Choose a path to get rid of your debt. Whether you like the debt snowball, the debt avalanche, or some combination, formulate your plan and put it into action.
• Review your credit report and score. You are entitled to three free credit reports each year, one from each reporting bureau, through AnnualCreditReport.com, not the industry’s scammy lookalike, FreeCreditReport.com. Review each credit report for errors that could affect your score and your abililty to qualify for loans. You can get your TransUnion credit score for free through CreditKarma. I check once a month, and I’ve seen my score drop from 779 to 774 since October 2008.
• Get ready for your next employment. If you work for someone else, part of your employment status is out of your control. No matter how hard you work and how well you perform for the benefit of some organization, you are always in jeopardy of losing your job. Be ready for the next opportunity by keeping your resume and portfolio current.

Please share if you have any other tips for beneficial activities on a “financial health day.” Thanks to Ron Lieber for the inspiration.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Take a Financial Health Day to Organize Your Finances

Summertime is traditionally when most people take their annual vacations, and since the social media explosion, more aspects of a given person’s vacation will end up as photos on Flickr, or “wish you were here” messages on Facebook.

I’m a big fan of openness (with the obvious exception of my use of a pseudonym on this site), and so I’m a little sad, though not surprised, to see at least one victim of a burglary who suspects his tweeting about being on vacation is the cause of his trouble.

The Trouble

“We had mentioned that we were going out of town for an extended period and even Twittered about the trip as we drove for three days,” he told an Arizona television station. While he was gone, video editing equipment was stolen from his home.

The Subtleties

My first reaction was to assume that the man in the story has some people following him on Twitter who aren’t exactly friendly. But then I remembered that anybody can do a search on Twitter for a phrase like “vacation” and find results like these:

Then, if you can cross-reference a likely victim with their address found online, and you have criminal tendencies, then you know which house to burglarize.

Additionally, many Twitter apps (and possibly for other services) have the option of finding your current location and looking nearby for specific criteria.

The Solution(s)

Take an inventory of which of your information can be found online easily. Some starting points:

• Is your username the same as your real name?
• Are you and your address listed in the phone book?
• Does your wireless router know where it’s located? Does it broadcast that location?
• Is your profile public? Do you want to keep it that way?
• Are you on LinkedIn? How much of that profile is public?
• and so on…

You may decide that a simple solution would be to keep the vacation secret until you get home, but remember, even if you decide to avoid the magic word “vacation” in your own online updates, your friends may inadvertently be helping potential burglars:

Going on a trip? Keep tweets discreet, Kathleen Pender, San Francisco Chronicle, July 6, 2009

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Vacation vs. Social Networks

I enjoyed Tom Dziubek’s discussion with Jon Gaskell, the CEO of SmartyPig, in the latest episode of the Consumerism Commentary Podcast. If you have a chance, listen to the part discussion in which they discuss SmartyPig’s interest rates. Tom asked how SmartyPig can continually offer high interest rates. Jon Gaskell intimated that SmartyPig’s restrictions and requirements result in a banking relationship in which customers’ accounts are much less liquid than a typical savings account.

According to the CEO, the average saver using SmartyPig is saving for a goal over four years away (fifty-one months). Customers are generally not withdrawing their money early, so they are “sticky deposits.” SmartyPig therefore offers a savings product that has more in common with certificates of deposit (CDs) than with savings or money market accounts.

Keep this in mind when shopping for banking products. As of today, SmartyPig is offering a 2.75% APY, but if you are going to let your money sit without withdrawals for four years, consider some better priced options like Ally Bank’s 48-month CD, currently offering 3.0% APY.

To be fair, SmartyPig does have an advantage over certificates of deposit. You can (and must, according to SmartyPig’s rules) make additional deposits towards your goal each month. If you consider your goal as a fixed point in the future, each month, you are earning the current interest rate on a decreasing term length. With a certificate of deposit, each monthly contribution would mature one month later than the previous month’s deposit.

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SmartyPig Should Be Compared With CDs, Not Savings Accounts

We have reached the half-way mark for 2009, and time certainly does fly when you keep busy. As long-time readers know, the original purpose of Consumerism Commentary was to keep myself accountable for my own financial decisions and to blog about interesting things I find on the web. I freely admit that Consumerism Commentary has expanded quite a bit since the first post in 2003. One thing that has remained constant is the monthly report of my finances.

So far this year, my “modified net worth” has increased about 30% since the end of 2008. Despite fluctuating levels of income and irregular expenses, this seems to be in line with my earning and saving pattern for the past several years. This modified net worth is not a true net worth because I do not include some items like my household inventory and tax liability. I would also need to include the value of my business to get a full accounting of what I am worth financially, but I just like to keep things simple. I do include the private-party sale value of my car from Edmunds.com even though I do not intend to sell, and I only update the value once or twice a year. And if I decide to buy a house, I would include its value as well.

The quarterly tax payment due in June took a bite out of my monthly income. I plan for this my transferring a portion of my other earned income into an account earmarked for tax payments each month, but income will likely not keep pace with my estimations.

Continue reading to see my balance sheet and income statement without commentary. You can click on the reports to zoom in to full size. If you have reasonable questions, feel free to post them and I will answer. I will include my quarterly investment report in a following post.

Personal balance sheet and net worth statement

Income and expense report

If you have any questions, feel free to post them here.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Personal Balance Sheet, Net Worth, Income, and Expenses, June 2009

Today’s guests in the eleventh episode of the Consumerism Commentary Podcast are Jon Gaskell from SmartyPig and Consumerism Commentary’s newest contributor, Jeff.

SmartyPig is a unique banking application that works closely with West Bank to offer surprisingly high interest rates but presents limitations to its customers. In this interview, Tom Dziubek and SmartyPig founder Jon Gaskell explore SmartyPig’s purpose and the tools offered for goal-oriented savings.

I join Tom to speak with Consumerism Commentary’s newest contributor, Jeff. Jeff writes a weekly column for Consumerism Commentary, appearing usually on Thursdays. You can find Jeff’s articles here and on Jeff’s own blog, StretchyDollar.

To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.

[00:00] Introduction from Flexo
[00:36] Interview with Jon Gaskell
[01:20] — How SmartyPig helps savers stay goal-oriented
[01:50] — Accounts for children
[02:35] — How SmartyPig makes money
[03:28] — SmartyPig’s interest rates
[06:28] — Red McCombs’ investment into SmartyPig
[06:57] — SmartyPig account opening process
[09:15] — Contributing funds towards a SmartyPig goal
[11:42] — What happens when a saver reaches a goal
[13:58] — What happens if a saver doesn’t reach that goal
[15:04] — Using SmartyPig to help raise funds for charities
[17:55] Interview with new Consumerism Commentary contributor, Jeff
[18:55] — Jeff’s initial interest in personal finance
[19:30] — Why Jeff started writing about personal finance
[20:11] — Jeff’s favorite personal finance advice
[20:40] — Favorite personal finance authors and books
[21:16] — Jeff’s anticipated contributions to Consumerism Commentary
[22:29] End

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Podcast 11: Jon Gaskell from SmartyPig and New Consumerism Commentary Contributor, Jeff

Happy Independence Day to anyone celebrating today! I’m celebrating by spending time with friends later and sharing my investment portfolio with readers now.

Last month, I began sharing my investment portfolio more in-depth than I have in the past. This is part of a renewed effort to make myself more familiar with the investments I have chosen and to develop a better overall investing strategy for multiple targets and time horizons. This will also help with determining the proper asset allocation for my investments.

The last time I rebalanced was when my 401(k) was basically my only investment. At that time, I configured my account to automatically rebalance my portfolio every quarter. Now, with investments scattered in IRAs at two different companies and non-retirement investments in the mix as well, it has been more difficult to determine what I should be doing with my investments.

First, according to Quicken, here is my overall asset allocation for my investment account only.

Investment allocation

If this allocation were to include all assets, it would be heavily weighted towards cash. The chart above only takes into account cash held in investment accounts and cash that is part of a mutual fund’s mix. The “Other Asset Class” consists of the Real Estate Fund in my 401(k). Unfortunately, the asset mix categories are not configurable by Quicken. Each investment must be assigned one or more of the existing categories.

Here is the detailed breakdown, account by account.

Flexo’s investment detail

I provided an explanation for these investments last month, so I won’t repeat that here. The YTD performance calculation comes from Quicken’s internal rate of return included in the Investment Performance report. It is the “average annual return” for each investment.

The investments where I have been dollar-cost averaging as the stock market increased have performed worse than the investments I have not added funds to. As I continue buying, I’m buying at higher prices as the fund values increase, so my performance will continue to get worse. That is a drawback to periodic investing, such as the biweekly investment into my 401(k) or my monthly investment of VTSMX. Dollar-cost averaging works better when the stock market is declining, assuming values return to a high at some point in the future.

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Flexo’s Investment Portfolio, 2Q 2009

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Best of Consumerism Commentary, June 2009

Here are some of the most popular articles, based on total visitors, published on Consumerism Commentary in June. If you missed them this past month, take a look.

1. Comparing the Visa Black Card With American Express Platinum and Centurion Cards
2. Extending the $8,000 First-Time Home Buyer Credit to $15,000
3. Savings Mistakes That Cost More in the Long Run
4. Microsoft Money Will Be Discontinued
5. What General Motors’ Bankruptcy Means For You
6. Consumer Reports Exposes Cool Surge’s Misleading Claims
7. Changes to Student Loans Coming July 1
8. The Cash for Clunkers Program
9. Savings and Checking Account Interest Rate Updates
10. Citigroup Employees to Receive 50% Pay Raise

Social media

Please feel free to follow me on Twitter, a social media services based on short personal updates. My updates tend to be somewhat random non sequiturs but occasionally I might write about something pertaining to personal finance. I don’t simply duplicate my RSS feed.

If you do, however, prefer to receive notifications of new Consumerism Commentary articles on twitter, follow ConsumerismComm as well.

If you’re a member of Facebook, visit the page for Consumerism Commentary and become a “fan.” Also, feel free to view my own profile and add me as a “friend.”

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Best of Consumerism Commentary, June 2009

Businesses are hoping to get more bargaining power when it comes to how much they are charged to accept credit and debit card purchases.

The Credit Card Fair Fee Act (read the whole bill), was reintroduced this year and is now being discussed in Congressional committees. I first heard about it when I was buying an emergency breakfast at one of the various 7-Elevens that are sprinkled on my way to work.

They had a binder of papers on the counter and were asking for people to sign their petition. It seems that groups like the National Restaurant Association feel the credit card companies are treating them unfairly with a lack of transparency in the way they do business and arbitrarily raising fees.

Convenience store owner Bruce Mitchell said his operation paid out more than $3 million in credit card fees last year.

“I am paying 25 percent more for credit card fees than I pay in wages,” he said.

Business owners say that these fees, and their frequent increases, are being passed along to consumers in the form of higher prices.

What do you think? Should the “free market” sort it out, or do credit card companies have too much power?

Small business pushes credit card reform, Susan R. Miller, South Florida Business Journal, June 8 2009

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Credit Card Fair Fee Act of 2009

On July 20, TIAA-Cref will be holding its annual participant meeting. There is an effort underway to encourage the company to be more socially responsible and accountable to its customers, and representatives will be attending the meeting to bring any common problems directly to the board’s attention.

Are you having customer service problems with TIAA-Cref? Please see the instructions below. Here are my past notable experiences with the company.

In March 2006, I scheduled a transfer from ING Direct to create my first SEP IRA on April 7, leaving enough time for the account to be created before the tax deadline. I noticed the problem the day after the account should have been created. The company did not create the account nor did they deduct funds from my ING account. There was still a week before the tax deadline, so I was not yet up in arms.

By April 18, 2006, the TIAA-Cref account had been created but they still did not deduct my funds. This was after the tax deadline, so I was very concerned that the funds would not be attributed to my 2005 SEP IRA. I had difficulties getting the correct department on the phone.

My 2005 SEP IRA was not funded until April 28, 2006, and my level of concern was much higher. I spoke to an account representative who assured me that even though they were late, my money would be applied to 2005’s tax year and I would get April 7’s price for the investment. My account information online confirmed this.

Fast forward to January 2007. I received my received my tax forms from TIAA-Cref which indicated my SEP applied to the 2006 tax year. I did eventually have this issue resolved, but it surfaced only one week after I reported that thousands of people were having problems with TIAA-Cref. Customers could not access their money, didn’t receive their payments, and couldn’t get in touch with any customer service representative who could fix the problems.

The company acknowledged the problems and attributed the mishaps to implementation of a new computer system. This excuse carried on as the problems did for at least a year, with updated in March and June 2007. Even today, visitors are still voicing their concerns with TIAA-Cref in these comments this year.

Most people’s problems were a lot more frustrating than mine, involving restricted access to money and missing payments from the company. Although I think it may be too late, Neil Wollman, an author who has been following TIAA-Cref’s activities as a socially responsible company over the past twenty-five years, is looking to speak up for consumers at the company’s annual meeting later this month.

If you are currently having issues with TIAA-Cref that you have not been able to resolve by going through the normal channels, please let me know by commenting here using an email address where you can be reached or email me directly at flexo at this domain name. I will pass your information along to Mr. Wollman who will speak to the board of directors on your behalf.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Still Having Problems With TIAA-Cref? Tell Us Now

I plan to open up an account with EverBank within the next week to take this bank for a test drive. I like what I see of EverBank’s interest rates, but I have to admit the structure is not as simple as I like to see.

As of today (July 2) the savings product, “Yield Pledge Money Market Account,” sports a 1.85% APY, but thanks to a 3.01% APR bonus rate for three months, the effective rate over the first year of having money in this account can be as high as 2.15% APY. If you’re confused, review the difference between APR and APY.

The checking product, “FreeNet Checking Account,” offers tiered rates from 1.02% to 1.85% APY. Again, money from new customers earns a 3.01% APR bonus rate for the first three months. With this bonus, if the regular rate does not change, you would theoretically earn an APY between 1.52% and 2.15%.

EverBank also offers certificates of deposits (CDs) with maturities varying from 3 months to 5 years. Like most CDs, you will be penalized if you withdraw your funds before maturity. A minimum deposit of $1,500 is required for any EverBank CD. The rates range from 1.25% to 3.10% APY as of today.

Also notable are the foreign currency CDs available at EverBank. With foreign currency a change in exchange rates can either work for you or against you by increasing or decreasing your effective interest in terms of US dollars. If you believe the Mexican peso is due for growth, you may wish to invest in a CD denominated in pesos to take advantage of the 4.04% APY and the increase of the worth of a peso against the dollar.

I’ll post a full review of the account opening process shortly.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

EverBank’s Confusing Array of Interest Rates

Whether due to the economy or the impending regulation enacted within the Credit CARD Act of 2009, credit card companies are taking the opportunity to raise interest rates and minimum payments. This is perhaps an unintended consequence of increasing regulation. These changes affect consumers with manageable debt, but others who are trying to get out of debt or living paycheck-to-paycheck are harder hit by these changes.

Issuers’ actions come as a growing number of consumers lose their jobs and default in record numbers on their credit card debt. The industry is also preparing for restrictions to take effect in February 2010… The banking industry says Congress has no one to blame but itself for higher rates and fees because banks had predicted that restrictions on pricing would lead to higher costs for everyone…

Yet some critics say that issuers are taking advantage of a loophole in the law to bolster their financial conditions… In a statement Monday, [Senator Charles] Schumer slammed issuers for trying to “wring more dollars out of their customers.” Some of the changes in card terms, Schumer says, are “against the spirit of the law and … just plain wrong.”

Is credit card reform — the Credit CARD Act of 2009 (Credit Cardholders’ Bill of Rights) — a mistake or are issuers just using the fear of losing future profits as an excuse for bilking customers now?

Consumers hit again as some banks raise credit rates, fees, Kathy Chu, USA Today, June 30, 2009

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Credit Card Issuers Making Life Tough For Consumers

My wife and I went way over our budget in a couple of categories during June. Part of it was to be expected because I’m commuting to a new internship, and part of it was planned, but unfortunately, most of the over-spending can be chalked up to a simple fact: we made some spending mistakes.

Any time you make a mistake it hurts, but financial mistakes have the possibility to cause quite a bit of damage. Mistakes are especially costly when you’ve been making progress with your efforts to get out of debt and put your finances in order. They stifle your desire to keep trying and give you one more problem to fix. When you’re dealing with multiple banks and bills and paychecks, however, mishaps are bound to happen, whether small or large. While mistakes may be unavoidable, disaster is not.

Here are some simple steps you can take to mop up after a mess.

Minimize the damage

Because accounts and bills are all linked together by transfers, there is a good chance the mistake might become a bigger one if you don’t take action. If your overdraw your checking account, make sure that you have enough money in there to make up for the overdraft and any associated fees your bank might charge you. Nothing is more frustrating that withdrawing too much money from your checking account, depositing money to cover it, and then overdrawing again because of a fee.

If your financial misstep is something more long-term, like spending more than you planned, you have a bit more time. Slide the money in your budget around, and if you do have to add more money, make sure you only add as much as you need, and unless it is a real emergency; don’t pull from your emergency fund.

Take steps to ensure it doesn’t happen again

Double check any automatic transfers or bill payments you have and record them all on a calendar so you know how much is going to who and when. It’s easy to forget about the electric bill that’s due while you’re on vacation or the check you gave the kid who mowed your lawn that finally got cashed. Getting into a rhythm takes a couple of months, but once you get the swing of it you can be sure to always have your money where it needs to be.

With mistakes in budgeting or spending, go back over your purchases and find out exactly where all that money went. Make sure you can account for all of your purchases, and try to find a couple that you can leave out next month. If your situation is dire, you might want to see if you can return something or cancel a service.

You can keep more money in your checking account or come up with a bill reminder calendar to help you get an overall picture of what you need to be doing.

Learn from the experience

Do some research to find out exactly what happened. Did you forget about a bill payment or checking account fee? If you see a charge you don’t recognize, don’t just pay it and brush it off. Learn why you were charged and if there was anything you could do about it. If you understand what happened, you are more than likely able to prevent it from happening again. The worst thing you could do is ignore it.

Catch your second wind

Don’t let the setback discourage you! Everyone runs into trouble of one kind or another as they get their finances in order. It’s important to pay attention and do all you can to know what’s going on with your money, but when you miss something or something bad happens, don’t get stressed out, just fix it and do what you can to improve future.

Learning to handle mistakes in a way that suits you takes a little bit of practice, but you will cut down on the majority of mistakes and recover quickly from the others.

Photo credit: neilspicys

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Dealing With Financial Mistakes

Bankrate.com recently completed a study of 20 different credit cards from 10 different issuers and concluded that if one of your priorities is a card which will forgive your human errors, Discover is probably the card to apply for (or not cancel).

Looking at the fine print for one platinum card and one rewards car for each bank, they found the following significant differences:

• Most banks will raise your rates if you pay late once, or end up over the credit limit once. Discover will wait for you to make that mistake twice
• Discover, along with Capital One, have a range of overlimit fees instead of just one flat fee
• Discover’s grace period is 25 days, instead of 20-25

It’s not all hugs and puppies with a Discover card. For example, if you violate the terms of the credit agreement, your rate goes up to 29.99%, the highest in the industry.

Of course, no credit card is a wise choice to carry a balance on. Check the BankRate survey if you’re in the market for a new card; they’ve done most of the hard work for you.

If you want forgiving, Discover card is the one to pick, Becky Yerak, Chicago Tribune, June 30, 2009

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Discover as the Most Forgiving Credit Card

Although I do not have children, I am considering starting to save for college. With the cost of tuition rising well above levels of inflation, the sooner I get started, even before any children exist, the higher the chance my child or children will be able to go to school without an insurmountable pile of debt. Unfortunately, most college savings plans are complicated. They are tax efficient, but only if some conditions are met. If you need to withdraw money from the funds for purposes other than education, you can face penalties. There are a number of variables to consider, least of all is the idea that I may not have children at all.

Kiplinger’s Personal Finance has named its top five 529 college-savings plans to help parents or possible future parents like me decide which options to pursue. None of these options sound perfect, however. I do not like the sound of any of these top five, either due to flexibility or fees. In addition to fees by the dollar, all plans charge a management expense, fees as a percentage of assets, in addition to the underlying funds’ management expense.

Illinois Bright Start College Savings Program. Pros: Low fees. Cons: Low fees only apply to actively-managed funds (poor performers). If you choose Vanguard funds you must pay $10 per fund.

Alaska’s T. Rowe Price College Savings Plan. Pros: Good investment options. Cons: $25 yearly fee for some accounts.

Michigan Education Savings Program. Pros: Plan includes a guaranteed return option. Cons: The plan is run by TIAA-Cref.

College Savings Plan of Nebraska. Pros: Investors can choose from a wide variety of mutual funds. Cons: Every account has a $20 annual maintenance fee.

Virginia CollegeAmerica. Pros: Kiplinger’s counts the fact that this plan is sold by financial advisers as a pro. Cons: The plan includes only funds from American Funds, which are expensive and underperform.

Kiplinger’s also includes a state-by-state guide to 529 plans. Use this guide to determine whether your state offers its own plan with tax benefits. The benefits may compensate for the other drawbacks of the plan. I live in New Jersey, which does not offer any 529 plans with tax benefits, but I could invest with another state’s plan. While I live in New Jersey, I would not be able to benefit in the other state’s tax advantages.

Best 529 College-Savings Plans, Thomas M. Anderson, Kiplinger’s Personal Finance, June 26, 2009

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Kiplinger’s Best 529 College Savings Plans

I am a typical American consumer. I buy books, music, and movies for my own entertainment, and the objects spend more time on my shelves than they do in their respective playback devices. I make an exception for music as everything I buy is almost immediately transcoded digitally and transfered to a portable media device. The entertainment industry is thankful for people like me. I don’t even maximize my Netflix subscription, which I seem to have kept despite considering quitting the program over two years ago.

The library should be a money-saving option for people who like reading, watching movies, and otherwise consuming media. I found a calculator that will put into numbers how much money you could save by utilizing a library’s services rather than opting to buy everything you consume. The calculator is designed for library patrons who already use the free services and would like to see how much they are currently saving, but a slight modification in the terminology would focus the calculator on how much you could save by getting to know your friendly neighborhood librarian.

A quick run of the calculation shows that I could save $100 per month in books, movies, and CDs alone. How much could you save by visiting the library rather than the store?

Personal Library Savings Calculator, Winter Haven (Florida) Public Library

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How Much You Can Save By Using a Free Library

The summer following graduation is an interesting time for recently-former students. The newly-commenced young men and women, those not opting to pursue an additional number of years in an institution of higher learning, spend their time amongst activities such as attending backyard barbecues in celebration of their achievements, traveling to distant lands with newfound free time, and possibly beginning the first real job on their career path.

Not every job is the same, but for the most part there are a number of things in common.

• You need to make a positive impression on people you are meeting for the first time.
• How you perform on your first job sets the stage for your work ethic.
• If you stay in the same career throughout your life, your initial salary will be your most important negotiation.

Here are more specific tips for making the most of your first job.

1. Look the part. As much as it is superficial and stupid, people will judge you by your appearance. You need to dress and carry yourself in a manner that is expected and accepted by the people who work in your field. What is acceptable varies. If you work in banking in New York City, it’s almost guaranteed you will be expected to show up in a suit every day. If you work in the graphic arts, more liberal clothing might be acceptable. Find out what your manager or supervisor wears and emulate.

If you have not been accumulating attire during college, you may find the need to buy a variety of clothing at the last minute. This is one reason it may make sense to accept a controllable level of debt. Attire is a start-up cost associated with accepting a first job, and if you are required to dress well, your salary should cover these costs before long.

2. Negotiate. Graduates may be experiencing a “sellers’ market” while starting new careers this summer. With stories of the difficulty of finding a great job in the right field, it may be tempting to jump at the first offer. It is true that times like this call for adjusted expectations, but the dance of negotiation is an important and expected part of every job offer.

Not every job has this flexibility. For example, if you start as a teacher in New York City, your salary and benefits are determined by the union contract and you have no room for negotiation. If your first job is with a cash-strapped non-profit organization, you may face resistance. But the first salary offer you receive is almost always lower than the company’s true ability to pay.

The best suggestion is to be prepared to support your desire for a higher salary by researching your peers’ compensation and by explaining well the skills you can bring to the table above other candidates. As you may not have much experience in your field when you start your first job, you may not have a list of accomplishments, so be creative while being honest.

Here are tips for dealing with a low salary offer. Remember to look at the total compensation, not just the salary. You may have more wiggle room if you ask for more vacation days or for quicker establishment of your retirement benefits.

3. Enroll in your company’s retirement plan. When I started at the company where I currently work, I qualified for the company’s 401(k) on the day I began. Although a portion of my company’s matching contributions wouldn’t vest (become officially mine) until I had been working there for three years, my first paycheck included a deduction for my 401(k) and a matching contribution from the company. While enrollment is often automatic, some companies don’t start helping you put aside money for retirement until you tell them how much you want taken out of your paycheck.

Young adults with their first job often do not think about retirement, an event likely to be more than forty years in the future. Not enrolling in a 401(k) with matching contributions is the same as throwing away money. I understand that people who are just establishing themselves at work and in life have expenses, and retirement savings cuts into income. But putting aside two or four percent of your income — or up to the maximum matched by your employer — should not be a stretch.

4. Open an IRA. Your 401(k) contributions are taken right from your paycheck, so you might not even notice your money is being transferred to your future self. It may be more painful to your wallet to open an IRA, but if there is no pain, there is no gain. So open an IRA at a low-cost brokerage like Vanguard. When I started my IRA, I didn’t have the $3,000 minimum, so I jumped right in with TIAA Cref. I suggest saving money periodically in a special bank account until you have the $3,000 necessary to open an account at Vanguard because I have encountered some problems with TIAA-Cref.

If you already have a 401(k), open a Roth IRA. These two types of accounts have different tax treatment, and it’s good to diversify. If your company does not offer a 401(k) or its non-profit cousin the 403(b), split your money between a Traditional and Roth IRAs, if you can, to get the same tax diversification.

Your career and the skills and tools you use to thrive in that career are your biggest assets, even though you won’t see them measured on any balance sheet. Protect, refine, and showcase your self and your skills when you can. If your career is important to you, go above and beyond the call of duty.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

4 Important Tips for Graduates Beginning a First Real Full-Time Job

In the tenth episode of the Consumerism Commentary Podcast, Tom Dziubek interviews Jim Wang and Erica Douglass. Jim Wang is the creator of Bargaineering and Grill Maestro, and in today’s interview, Tom and Jim discuss a variety of tips for creating a successful and frugal barbecue for July 4.

Erica Douglass is a business success blogger who sold her first business for $1 million. She coaches small businesses at Erica.biz. Tom, Erica, and I discuss her entrepreneurial experiences with building her own business and suggestions for anyone who would like to prosper while self-employed.

To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.

[00:00] Introduction from Flexo
[00:51] Interview with Jim Wang
[01:25] — Bargain tips for grill shoppers
[02:22] — Charcoal grilling
[04:12] — Preventive maintenance for grills
[06:38] — Meat buying tips
[09:25] — Other cheap ways to keep guests happy
[11:03] Interview with Erica Douglass
[11:44] — Erica’s teenage job
[13:07] — How Erica made a million dollars
[17:04] — Obstacles Erica faced in starting her company
[19:46] — Successful personality traits in entrepreneurs
[20:37] — Tips for aspiring entrepreneurs looking to beat poor startup success rates
[21:35] — More tips for entrepreneurs
[23:03] — Business goals for entrepreneurs
[24:23] — How Erica’s handling semi-retirement
[27:41] End

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Podcast 10: Jim Wang From Grill Maestro and Business Success Blogger Erica Douglass

Håkan Djuphammar, VP of Systems Architecture for Ericsson, made a prediction recently that all new mobile phones sold after Summer 2010 would have two-way RFID chips in them that would allow them to act as a tag or a reader.

If what you just read sounds like technobabble, watch this short news excerpt to get up to speed. Even if you’re not interested in technology, you should learn about the possibilities and the dangers of RFID:

Back to the mobile phone: yes, it would be perfectly easy for all mobile phones on the planet to have an RFID tag/scanner in them. The possibilities for making use of RFID, like the numbering scheme itself, are practically endless. People in Asia use their mobile phones to buy drinks from vending machines all the time, and according to Djuphammar:

the chip might also be used by credit card companies to track the location of cardholders to cut down on fraud.

This was followed up on the Wired Magazine article about this story with a great user comment:

So, the myriad of privacy concerns aside, does this mean I won’t be able to use my credit card if I leave my phone at home?

RFID doesn’t inherently scare me. I already use one in the keyfob for my car when unlocking the door and starting the engine. It raises ethical concerns, and I think we should plan our next moves carefully. We don’t have a great history of moving carefully forward (people still drive without seatbelts all the time), which is one of the reasons I’m hoping you’ll educate yourself and your friends about this starting today.

If you have the means and the time, I highly recommend the book Everyware: the dawning age of ubiquitous computing, which not only details many possibilities for taking advantage of RFID, it also contains a great starting point for a positively ethical “post-PC” future (including some really neat new icons).

RFID-Enabled Phones Could Let Credit Card Companies Track Users, Kim Zetter, Wired Magazine, June 25, 2009

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Do You Want RFID in Your Mobile Phone?

Overall, the worst of the economic recession may be over in terms of unemployment. If it isn’t, or even if it is, many companies are still struggling as they find ways to cut costs. The next expense that might be cut could be your job. If you receive the pink slip after missing the signs pointing towards the loss of your job then you have some catching up to do.

There is nothing like an expected bout of unemployment to remind you of the benefits of a fully-funded emergency fund. With cash in the bank, you can sit back at the beginning of your time away from working and approach your situation without stress. Stress will cloud your perception and cause you to make choices based on your short-term circumstances rather than your long-term aspirations.

Speaking of long-term aspirations, I’ll start there in a short exploration of suggestions for using your newly found free time effectively.

1. Re-evaluate your life goals. And if you don’t have proper life goals, now it a good time to think about it. A real life goal is not the specific, measurable, attainable, relevant, and time-based (SMART) goal that you hear about in corporate development retreats. Leave that to the MBAs. A life goal relates more to what the MBAs mean when they say “mission” and “vision.” (Disclaimer: I, too, am an MBA.)

So what is your mission? Here are a few things that it should not be:

• acquire a net worth of x by the age of y
• retire by the year z
• own my own business

All of these examples are means to an end, not goals in and of themselves. Your goal should explain what you will do with your money, what you will do with your time in retirement, or what you will do with your business. They need not be lofty, but life goals should not focus on numbers.

After you determine your mission, you have the opportunity to make decisions about your career, money, and time that align with that mission. If you need some more motivation, here are 9 tips for choosing a purpose in life.

2. Determine the steps for reaching your goal. With your goal or goals in mind, brainstorm your next steps. The only materials you need here are pen and paper. If you think hierarchically, create an outline in which your main points are the major milestones you’ll need to cross to reach your goals and the next level contain the tasks you will need to accomplish to reach those milestones. If you do not operate in this organized manner, just write down everything that crosses your mind when you think about what you need to reach your goal.

Even if your thoughts aren’t organized, determine the next step for your career. Your emergency fund won’t last forever. And here is what you need to keep your emergency fund as long as possible.

3. Get financial assistance. When you worked, you paid unemployment insurance premiums. Now is the time to be on the receiving end of the financial relationship with the state. Apply for unemployment insurance right away. Don’t stop to think about whether you need unemployment insurance with your emergency fund ready to help you out and with thousands of other people in more need. Unemployment is there for you, to make sure you have more freedom to prepare yourself for your next move.

You may also be entitled to health benefits through your former employer and COBRA. This means that you can still pay group rates for coverage rather than finding individual coverage. Group coverage can often be much less expensive, but you may find that you will still have to pay more than you did as an employee. Most companies subsidize or partially subsidize benefit premiums, and that subsidy disappears once you have left the company.

4. Make smart financial decisions. Here is a short checklist of the most important financial moves you can make while not working in addition to receiving unemployment and carrying over your benefits.

• If this is an emergency situation, don’t be afraid to tap your emergency fund. This is why you have it.
• With less income temporarily, take the opportunity to cut back on some luxuries. Evaluate your spending to determine where your opportunities are for reducing your expenses.
• If you have a 401(k) managed by your previous employer, consider moving it to a Rollover IRA. In many cases, you will find that your options for investing within an IRA are better than what you can find in most employer-sponsored 401(k)s.
• Don’t withdraw money from your retirement funds if you can help it. If you do, you will be required to pay taxes and penalties. It is not worth risking your future.

5. Refine your self-marketing package. It’s your move. If you have a goal in mind and you’re passionate about it, you’ll want to get back on track right away. Even if your goal hasn’t changed in step one, you have a chance to refine how you present yourself. Resumes and cover letters are not enough.

Even if you are not in a creative field, consider what examples of your work you might include in a portfolio. Just like a graphic designer won’t enter an interview without examples, don’t speak to anyone who has the ability to hire you without preparing some kind of presentation to showcase what you do, what you have achieved, and why you have what it takes.

6. Fashion yourself as an expert. This is part of your marketing package. A great way to establish yourself as an expert in your field is to publish articles in journals or magazines related to your profession. That’s the twentieth-century approach; today every writer is a publisher and every goal-seeker has the opportunity to show the world his expertise.

Start a blog, write frequently, and don’t stop. This works best if you possess writing skills, but you would be amazed at how many mediocre writers manage to find success. Find a community of bloggers who focus on your area of expertise and get to know the leaders of the group. Participate in discussions on their blogs, ask them for their advice, and give back to the community. Once you establish your online writing, look for opportunities to write for others, sharing your expertise to a wider audience. Don’t blog to earn money, blog to perfect your writing and give yourself public evidence of your passions.

7. Start networking with the right people without being obnoxious. Like Penelope Trunk from Brazen Careerist mentioned in last Sunday’s Consumerism Commentary Podcast (listen and subscribe if you haven’t already), sending a resume through an online job service is not enough. To get an advantage you need an “in.”

When someone I know is trying to “network” with me, I know it right away. They ask questions to determine my decision-making authority and anything else they feel I can do for them. Serial networkers tend to think only about themselves their needs; show more class by considering the larger picture, being empathetic, and showing your personal side.

8. Sharpen your skills. Your life goals may require you to establish new qualifications or credentials. There is nothing like time off to inspire you to enroll in a class, earn a new degree, or qualify for new certification. Above, while you were listing the steps for reaching your goal, education should have been at least one of the ideas you prescribed for yourself.

The great thing about pursuing additional educational opportunities, in addition to the knowledge you acquire, is it provides you with an answer to the question, “What were you doing between jobs?”

9. Start consulting. The steps for approaching your goals may lead you to working for yourself. But even if they don’t, start consulting in your field. With your blog established earlier, make it clear to the public that your expertise is available for a fee. You will have to do more than putting a billboard on your website, of course. Contact people, particularly the people with whom you networked in step seven, and ensure they are aware of your business.

Erica Douglass who writes at Erica.biz has a number of thoughts about creating a business identity for yourself online. In this upcoming weekend’s podcast, Erica has a number of suggestions for establishing your business as a self-employed individual. Her thoughts are destined for those permanently leaving the corporate world behind in favor of the make-your-own-rules lifestyle of an entrepreneur, but her suggestions will apply to those establishing themselves as a consultant as a means to advance their career and reach their ultimate goals.

10. Don’t lose confidence. Unemployment can be a financial and emotional strain on an individual and on a family. The good news is that all of these tips should keep you busy, and if you are busy, there is less opportunity to get drawn into negative feelings about your situation. Keep working, keep improving, and keep your ultimate goals in mind.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Ten Things You Should Do When You Get Laid Off

Or maybe not. Capital One conducted a survey of high school seniors to determine how many of these young adults are prepared to handle finances on their own. The company asked the students to rate their own levels of knowledge of personal finance. The results may be interesting, but they don’t reveal anything about financial preparedness.

If you ask students or anyone to rate their own knowledge, they can’t produce accurate answers. According to the survey results, 65 percent of the male students rated themselves “highly knowledgeable” about personal finance while only 49 percent of the female students rated themselves the same. With this information, Capital One came to the conclusion that young men are more prepared to handle personal finances independently than young women. That is the wrong conclusion here. This only proves that male students rate themselves higher than female students rate themselves.

Asking people to rate themselves is more a measure of confidence than actual knowledge. When it comes to knowledge, there are things you know, things you know you don’t know, and things you don’t know you don’t know. Think of the “known unknowns” and the “unknown unknowns” popularized by Donald Rumsfeld a few years ago. The world mocked him for sounding somewhat ridiculous, but in the case of this survey, students may not realize how many aspects of personal finance of which they have no knowledge.

Perhaps, in addition to finance, schools and parents should be teaching high school students how to understand statistics to better help detect false conclusions drawn from inadequate data. If drawn from a large enough sample size, we might conclude than male high school seniors are more likely to rate their personal finance knowledge highly, but we should not conclude that boys are more mentally prepared to handle their own finances than girls.

Capital One Survey of High School Seniors Reveals Gender Gaps in Financial Literacy

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Survey Reveals Gender Gap in High School Seniors’ Financial Literacy?

Do you have a 5-year financial plan? What about just a general idea? Do you know where you want to be financially in 25 years? Have you ever set a financial goal? If you decided you wanted to save $5,000 this year, could you do it? Far too often we get into situations where we let money control us, instead of being in control of our money. Learning to set and achieve goals is one of the simplest ways to achieve the financial freedom you’re seeking, but it might be one of the hardest as well.

A goal, a purpose, and a plan

A 5 year financial plan can sound like a daunting challenge. Most of us have trouble staying within our monthly budget (it’s those darn Jelly-Bellys), and trying to find the time and and energy to draw up a plan can be difficult. The good thing is, your financial plan or goals can be as complex or as simple as you’d like. You can simply decide that you’re going to save 10% of every paycheck, or that you’ll take your lunch to work three days a week.

Don’t cut back just for the sake of cutting back, though – have a purpose. If you cancel your cable to save money, save that money! If that $90 just cycles back into your monthly budget you’re reducing your expenses for nothing. You can use that extra money to pay off debt, or to save up for a new purchase. You could pay off your car, or buy the latest season of 24. See how easily a purpose can become a goal?

Motivation

A purpose and a goal provide an important factor that comes into play when you’re making a change in your life – motivation. If you don’t want to do something, it’s harder to do it. Spending is a habit for some people. It’s difficult to break habits. But now you have a carrot on a stick – your goal. You can weigh everything you want to do with your money with what you really want. If you’re not sure if you want something, compare it with how much you want your goal. Which one do you want more?

Put a visual reminder of your goal somewhere where you can see it every day. If you want a new dress, print out a picture and tape it on your fridge. My wife and I have our savings goals charted on a piece of paper on our bedroom wall. Every time I want something I head over to that chart and see how much closer we’d be to our goals if I would save that money instead of spending it.

Your Goals Become Your Guides

Now that you have a goal, and you’re weighing different ways to achieve it, you’re formulating a plan. That didn’t take very long, did it? In its simplest form, a plan is really just a collection of goals, and how you’ll achieve them. Short-term goals have smaller plans, and long-term goals can have elaborate plans. You can control a plan by limiting it to what you need to succeed.

If you’re trying to save up for a down payment on a house, your plan should include what you’ll do to get to that point. Not eating out once a week so you have money to save up for a TV is good, but it’s not a part of that plan. Your mini-plans and big plans (your goals) can help you determine what in your budget is a need, and what is a want. It can help you learn to moderate your spending and to make better financial decisions. If you want to retire in 10 years, you’ll think twice about buying a $100,000 boat if you don’t have the money for it.

Don’t Give Up

Now, a word on goals. If you set a goal and don’t reach it when you want to, or struggle and want to give up, don’t. You can always achieve your goals, you just need to re-think them and re-commit yourself to achieving that goal again. Just because you splurged and spent more than your budget or had some unexpected problem that threw you way off doesn’t mean you can’t try again.

Our financial strategy is goal-driven, and it’s brought success, happiness and peace of mind. We still have rough spots, but we’re more equipped to deal with them and can minimize the damage. Learning to let your purposes become goals and plans will help you on the road to financial independence.

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Goals Bring About Real Results