Graduated Learning: Life after College

I got my degree, I got a job…now what?

Reading Books: Pound Foolish August 4, 2013

(Disclosure:  The Amazon links to books on this post are Amazon affiliate links.  You can read more about this on my Disclosures page)

I think I first heard about Helaine Olen and her book, Pound Foolish:  Exposing the Dark Side of the Personal Finance Industry, from Marketplace (or maybe Marketplace Money (now called Marketplace Weekend,and is soon to end.)).  I’m always listening to those shows, either on the radio or through their podcasts.  I also caught her interview (pt 1, 2, and 3) on The Daily Show, where she went into quite a bit of detail about the topics in her book.

The idea of taking on the personal finance industry and exposing the not-so-pretty realities definitely appealed to me.  I get sick of all the sneaky fees and “sponsored” financial products.  So I was interested to hear what she had to say about the personal finance movement.

The author takes on quite a few topics, from personal finance “personalities” to the “flip this house” mentality.  A common theme throughout the book is that the industry is just that, an industry, and so the focus of many advisers, authors, and companies is, in reality, to make money for themselves.  While they may also be helping us save money, they’re not ready to do it for free, out of the kindness  of their hearts.

The start of the book reviews the beginning of the personal finance movement.  Olen talks about the sometimes wrong/changing talking points that come from personalities like Suze Orman and David Bach.  She also emphasizes the point that all the frugality in the world can’t make up for stagnating wages and increasing medical costs and housing prices.

She goes into great detail about how screwy the whole retirement plan is now with 401(k)s, 403(b)s, etc.  A move from pensions to individual retirement accounts mostly means a much more uncertain future.  So much money can end up going to fees for managed funds and portfolios.  Fees cut into EVERYTHING.  Individual investors are left to fend for themselves, and they end up falling for expensive funds or buying investment products they don’t need.  Yes, sometimes we can find no load, low fee funds for our retirement accounts.  But it’s not always the case.   This chapter led me to want to learn more about Teresa Ghilarducci, one of the main opponents to the current 401k system.  She believes that leaving all the retirement planning to the individual was flawed and leaves most people woefully unprepared for retirement.  I also learned about Brightscope, a website that helps you see how your employer’s retirement plan stacks up.

Olen discusses many more topics in her book, including the focus on stock picking (and CNBC stock market obsession, Jim Cramer, etc.).  She also talks about the recent push to specifically help women control their finances, noting that while there are plenty of women who are lost when it comes to managing their money, there are just as many men in the same boat.  But that women are at a disadvantage mainly because “[w]omen have less money than men for most of their lives for a basic reason:  they earn less and live longer.”  There are other reasons, of course, and Olen goes into much more detail on the many misconceptions about Women and Money.  And while she is fine with young people learning the basics of personal finance, she is not so comfortable with the way that kids learn about it:  through branded experiences and sponsored programs by the big banks, all trying to get in on their lives early.

There’s plenty more to read, and Olen has pages upon pages of references and notes to back up her information.

Reading this book was a bit depressing, because it reminded me of quite a few of the harsh realities of personal finance.  She doesn’t quite present any “answers” to all these problems, though she does list a few suggestions as to what should be done.

I did still enjoy reading  her book, since I did find myself agreeing with most of her points.  It’s a lot easier to read a book that you agree with!  It’s a serious read, but got me thinking a bit more about what I’m doing with my money and to be a little more skeptical of all the big money personalities and financial companies.  And to watch out for fees!

Have you read Pound Foolish?  What did you think of it?  Did you agree or disagree with certain points?  And aren’t you glad that I give away my advice completely for free? 😀

 

The Approved Card? More like the DIS-Approved Card! January 11, 2012

Filed under: Personal Finance — Stephanie @ 10:37 pm
Tags: , , ,

Yes, I resorted to a Billy Madison pseudo-insult.  I do that sometimes.  But really, it’s the only way to start off this post. With a little bit of humor, before I tear into what may be my “meanest” blog post ever. Maybe.

On January 5, I got an email from Suze Orman. I don’t remember when I signed up to get emails from her, but that’s not the point. She alerted me (and all her other email subscribers) to her People First Movement, set to kick off on January 9th. Well, I can’t say I marked my calendar, but I was curious about what “new financial product” she was excited to tell us about.  I figured she was referring to another financial tracking website.  You know how much I love those 🙂

January 9th rolls around, and my inbox is blessed with another note from Suze.  She was offering a new pre-paid debit card.  I remember reading that email, and I’m pretty sure I said something to the effect of “HELL NO!” before closing the entire web browser in anger and disgust.

But seriously, I was kind of taken aback.  Suze Orman’s offering a pre-paid debit card.  On the one hand, I think it’s good that she’s making a pre-paid card that, on the surface, seems to have fewer fees than other pre-paid cards, assuming you know exactly how to get around most of them (http://theapprovedcard.com/fees/ for reference), but I still haven’t accepted the basic premise that some individuals can’t get even the simplest bank account, and must resort to using a pre-paid debit card.  I might be out of touch, but shouldn’t a credit union or bank be willing to offer a no-frills bank account?

Then there are the three ways to re-load the card: direct deposit, transferring from another account, or paying Western Union or MoneyGram $3.50 to add cash to the card.  All three of those seem like perfect reasons to NOT get the pre-paid debit card:  If you get direct deposit (from a paycheck), you can probably get a bank account.  That’s usually what banks like to see when opening accounts.  If you have another bank account, couldn’t you use that instead of a pre-paid, fee-laden card? And if you’re using cash, why pay $3.50 to load the cash then a $3 fee per month to use it? (except perhaps if you wanted to keep your cash safe in the non-bank account).

Ron Lieber posted a follow-up about the card, having asked readers for possible good reasons to get the card.  The three he lists here include: being unwilling or unable to get a bank account (for any number of reasons), as a budgeting tool to limit your spending to a set amount, or as a pseudo-checking account for kids.  I guess the other option is if you need to do online transactions or rent a car/book a hotel/flight etc., you’d need either a credit or debit card for payment.

The whole FICO score aspect of this is confusing, too.  It’s unclear (at least to me).  It sounds like she’s offering a free year of credit monitoring/scores/etc. from TransUnion.  Which is basically what you get from CreditKarma, but without having to use her pre-paid card.  Then there’s The Credit Project, where you can volunteer to have your transaction data sent to TransUnion, so they can decide if they maybe in the future want to include pre-paid debit cards in credit scores/reports.  I don’t have much faith that a credit agency is going to change any time soon.

Anyway, that’s a long enough rant. I just am always wary of these pre-paid cards, they seem to take advantage of people who already have trouble with money.  And it seems like Suze Orman is abusing her power as a “personal finance expert” in getting people to sign onto something that may not be in their best interest.  I know a lot of other people have posted their (negative) reviews of the Approved Card.  Let me know if you wrote one, and I’ll link to it!

I want to just finish this by saying that, usually, I’m okay with Suze Orman.  One of the books I read when I was first figuring out this whole personal finance thing was her book Young, Fabulous, and Broke.  And I enjoyed her keynote speech at the Massachusetts Conference for Women in 2009.  I just think that this is a bad move on her part, using her fans’ trust for financial gain.

 

Notes from Suze Orman January 12, 2010

As I mentioned in my recap of the Massachusetts Conference for Women, I was going to go into further detail about what Suze Orman said in her keynote speech.  I figured that, what with it being pretty good advice, as well as this being a personal finance blog, it would only be right to include it here for others to check out.

Suze Orman has written plenty of books.  In fact, she’s the author of one of the  books I read early on in my quest to learn about personal finance.  I remember reading Young, Fabulous & Broke, which was a good start into the personal financed world.  I also read The Wealthy Barber, which conveys the importance of paying yourself first and starting early (and other advice) through a story.  And most recently, I’ve finished reading Ramit Sethi’s book, I Will Teach You To Be Rich.  All pretty good books for getting yourself started on your way towards financial freedom!

I’ve heard most of what she said before, but it was good to be reminded to continue doing what needs to be done.  I’ve sorted out her advice into the separate topics she covered.

Opening Remarks:

  • To be powerful, you need a solid platform, which includes an 8 month emergency fund and no credit card debt (Debt=bondage)
  • If you have credit card debt, get a balance transfer to a credit union credit card.  She encouraged us to get away from “Big Banks”.  She recommends checking out credit unions here.  I’ve heard discussion recently on the topic.  The last thing I saw about it was at the Move Your Money project.

Retirement:

  • If there is a matched 401(k) or 403(b) available to you, you can’t afford not taking advantage of it, as getting matched contributions means you’re immediately getting returns of 50-100% (depending on the match you are receiving).  If your employee-sponsored retirement fund is matched, contribute up to the match.
  • 401(k)s are protected during bankruptcy, so if you are going to declare bankruptcy, don’t take money out of there to pay debts, it will be money you can use later.
  • If your 401(k)/403(b) is unmatched, or if you contribute to the maximum match, your next step is to open up a Roth or Non-deductible/traditional IRA.
  • Her view is that we’ll likely be in a higher tax bracket in the future; we’re currently at a low rate right now at ~35%.  She mentioned this because she wagers that the government is likely to raise tax rates to pay for a lot of what’s going on right now (I guess she threw a little politics into the mix).  Also, if the rates are this low, there’s a good chance they’ll go higher.  But I think the other reasoning is that you’ll be making more money later in life, and presumably have such a large retirement portfolio by the time you retire that you’d also be in a higher tax bracket.  Regardless, she mentioned this because she encourages everyone that is eligible to open a Roth IRA.
  • If your income level is too high for a Roth IRA, she encourages you to open a traditional IRA and then convert it to a Roth.
  • Regarding Roth IRAs:  Give up the tax write-off, so you can grow your money tax-free.  The benefits of Roths include:  You can take out your principle if you need to, you don’t have to start taking distributions when you reach retirement age, and you can leave your Roth to your children, and it remains tax-free for them.
  • NEVER TAKE A LOAN FROM YOUR 401(k)!!! You essentially get taxed twice, you will pay a penalty, you’ll owe income tax, and, you still have to pay it back.  And as mentioned above, your 401(k) is protected during bankruptcy.

Wills and Living Revocable Trusts

  • A will describes where your assets will go upon your death.
  • A living revocable trust will include an incapacity clause.
  • Both are important to have.
  • You can use her Will & Trust Kit to prepare your will/trust.

Life Insurance

  • The only type you should look to get is Term (she was very adamant about this).

The Stock Market

  • “Anything can happen at any time”,  so only invest in the stock market if you don’t need that money for at least 10 years.
  • If you’re young, now is the perfect time to invest.  Take advantage of Dollar Cost Averaging (buy more when the stocks are “on sale”, buy fewer when the stocks are pricier)
  • Other things to invest in:  High yield dividend funds (3-5% returns) and Exchange Traded Funds (ETFs)
  • Your investment portfolio should be 80% United States, 20% international
  • If you’re older, stay away from bond funds.  Instead, invest in bonds with a specified (and desired) maturity date.

Buying a House:

  • If you have your emergency fund, and are able to afford a 20% down payment, you can buy a house.  Those are the minimum requirements she gives.
  • If the administration gives incentives, and then extend them, they are afraid that ending the incentives will send the markets back down
  • If you are looking to own, but are waiting it out, be careful; it’s very difficult to time the market

Children (specifically, sending them to college):

  • Don’t put yourself on the back burner:  if you love your children, teach them it’s okay to put mom first.  Don’t feel guilty putting yourself first.
  • Your children can always get scholarships/loans/grants for their education; you can’t get those for your retirement.

Gift giving/the holidays:

  • Give the gift of time or money for the less fortunate.

Long Term Care insurance:

  • Speaking from experience with her mother, long term care can be very expensive, so it’s a good idea to look for long term care insurance, either for yourself, or for your aging parents (depending on the age)
  • She recommends getting long term care insurance through Prudential.

So, that’s what she said, in a relatively large nutshell.  I know there are other opinions on these matters (life insurance, investment choices, etc.), but I think this information, along with the info you can get in the books I mentioned and the blogs I link to will get you on the path toward financial independence!

Anything I missed from her speech?  Do you agree or disagree with her advice?

 

 
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