Woman painting wall

Women “Reactive,” Not Planning Finances

What motivates women to get to work on their personal finances? Change.

Emotions are also important motivators. But “the most compelling factor” spurring most of the women interviewed in a focus group to take action was a significant life change, Utah State University researchers write in the Journal of Financial Counseling and Planning.

Since April is financial literacy month, Squared Away is again making an appeal to women, who continue to make strides professionally, yet lag men in understanding how to manage their money.

“Major life changes like a premature death of a spouse or divorce are often the wake-up call to people to reassess their lives,” said Utah State researcher Jean Lown, who also teaches a workshop, Financial Planning for Women.

This tendency isn’t necessarily a good thing for women. Rather than being “reactive,” she said, women need to learn to plan ahead and prepare for the future.

For Megan Rowley, who conducted the focus group, the women’s stories hit home. While Rowley pursued her master’s and worked full-time at Utah State, her husband left a part-time job to complete his MBA. After they graduated, he found employment at a pipeline company in Salt Lake City, and she became a stay-at-home mother, said Rowley, who wants to become a financial counselor when her three young children are older. …Learn More

Long-Term Care Needs Sneak Up On Us

As I sat in an orthopedist’s office last week watching the doctor poke and prod my mother’s legs – an irritated nerve may be causing her severe pain – this thought struck me: long-term care is often an unspoken topic but one of enormous magnitude.

I’ve always taken for granted that my active mother, who plays a killer game of bridge, wouldn’t need much medical attention for another 15 years. I have evidence of this, I’d convince myself: her mother lived to age 92 and some uncles lived even longer. The pain makes it difficult for my mother to walk her dog, though she gamely hobbles through her day and even insists on league bowling on Wednesdays.

It’s so much easier to shove aside worries about long-term care for the elderly – our own or our parents’ – than it is to contemplate the financial and deeply emotional issues required to care for an aging parent. The video below tells a true story about what happens when the requirements of care slam us hard, as they often do.

Violet Garcia is a single mother of Filipino descent living in Kodiak, Alaska, which is situated on an enormous island south of Anchorage. The public school worker cares for her elderly mother, who can’t be left alone. Garcia aspires to send her middle son away to college soon, but that will create a problem on Sundays, when he takes care of his grandmother so his mother can run errands. …

Learn More

A woman wearing a backpack sitting on a grassy hill.

Loan Delinquencies, Need for Help Grows

As delinquencies by college graduates have increased, so have their personal financial risks: 15.1 percent of loans originated in late 2010 are now delinquent, up from 12.4 percent of late-2005 loans, according to a January report by FICO, creator of the credit score. More students are also delaying their loan payments.

“This situation is simply unsustainable,” warned Andrew Jennings, head of FICO Labs.  “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”

American Student Assistance (ASA) is a non-profit that helps college graduates with the complex task of managing their loans.  Debt prevention is the best course of action, and an increasingly urgent one for students.  For those who are already in debt, click here for how to call an ASA counselor. Click “Learn More” to read a May 2011 article about ASA. …Learn More

Why Minorities Need Social Security More

Source: Social Security Administration

The U.S. population is in the midst of a transition from predominantly white to one in which “minorities” will one day be the majority.

A Social Security Fact Sheet recently published by the Center on Budget and Policy Priorities in Washington throws a fresh perspective on the program, which provides the financial bedrock for most retirees. It shows that the program is even more important to African-Americans and Latinos than it is for white Americans.

Seventy-three years after Ida May Fuller became the first person to receive a Social Security check, on Jan. 31, 1940, Social Security provides more than half of the retirement income received by about two out of three elderly white Americans. But many more – about three out of four – African-American and Latino retirees rely on Social Security for more than half their income.

 

The obvious reason is that minorities earn lower incomes on average while they are working, according to Kathy Ruffing, a senior fellow at the Center, and that has “hampered their ability to save for retirement.”

Congress intended Social Security to be a progressive program that benefits lower-income individuals more. The Social Security Administration’s (SSA) formula for calculating the monthly check is designed to replace a larger share of the employment income of, say, a maintenance worker who has retired than it does for a retired corporate executive. …Learn More

Frustrations of Managing College Loans

During FAFSA season, remember this: getting the college loans is easier than managing them post-graduation.

Multiple telephone calls to Sallie Mae and the U.S. Department of Education (DOE) – and a reporter’s tenacity – were required to get to the bottom of what seemed a simple question: is my niece, a recent college graduate and special education teacher, eligible to have some of her loans forgiven?

Our maddening quest for an answer is one small example, but it raises serious concern about whether freshly minted graduates can navigate the student loan maze and figure out their best strategies for paying back their loans. Yet their success will be critical to ensuring they don’t pay more than they should and that they are able to take advantage of the federal government’s repayment and forgiveness programs.

Squared Away invites graduates and parents to share their experiences, as well as tips for managing loans, in the comments section at the end of this article.

Our saga began last summer, during an interview with a financial adviser who mentioned that the federal government offers a forgiveness program for special education teachers. I immediately thought of my niece, Rachael, who was hired last fall in a suburban Chicago district. Now I needed to confirm it.

The reason I had to make five calls is that the DOE and Sallie Mae —Rachael’s biggest single lender – repeatedly conflated my question with a loan forgiveness program for teachers in low-income school districts. Yes, I agreed each time, there is a program for teachers in low-income schools – but that’s not what I’m calling about. My question is whether special ed teachers qualify for forgiveness regardless of the income level of their school district.

My 26-year-old niece is a straight-A student and has a graduate degree and the determination learned from playing basketball in college. But when it comes to her loans, she admits, “I don’t know what to ask.” Once we entered the college-loan maze, I learned how confusing this process is – even for this veteran reporter who does know what to ask.

Here’s the chronology of calls – the first one led by my niece – between December 26 and January 2: …Learn More

Olen Explains ‘Pound Foolish’

New York journalist Helaine Olen lit up Twitter last week with her new book, “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.” She has attracted high praise – from The Economist, The New York Times, and others – and a few critics, in the online community and at Business Week: “Financial professionals,” Business Week wrote, “are not responsible for knitting the safety net, though Olen makes it sound as though they are.”

Squared Away asked Olen to explain her thinking behind the book.

Squared Away: Let’s get this out of the way. What do you have against financial planners?

Olen: I don’t have anything against all financial advisers, but a lot of people are selling themselves as experts in things they are not expert in. I believe that their commissions are almost inherently conflicted. I also believe that the minute you start selling things as, “I can protect you. I can do better than…,” you’re getting into dangerous territory, because it’s simply not true.”

Are there situations in which financial planning services are useful?

I would never want anyone to think I don’t believe a good, non-conflicted financial planner or coach isn’t useful. They are, very much so. I think very few of us actually see ourselves honestly, and we could all use an objective eye looking over things like our money and investing strategies at least occasionally. But consumers need to know how their chosen advisers are compensated and if that method of compensation can influence their recommendations and strategies.

You say, “No amount of savvy or money management can fully protect” people from a punishing economy that pummels wages and erodes high-quality employment. Are average individuals blamed for troubles that are larger than they are?

Olen: I absolutely think this sort of sentiment – the idea that we will all be okay if only we learn proper money management – is an excuse to blame people for their troubles. Since the late 1970s, a massive inequality issue has opened up. We have very little class mobility in our country. We know that our net worth plunged by 40 percent in 2007-2010. To turn around and tell people that their issues are all their fault is naïve at best and it’s an outright lie at worst. …Learn More

chart illustration

401(k) Mutual Funds Mediocre

A spate of research in recent months shows that the mutual funds offered in employer 401(k)s have fairly unremarkable – though not disastrous – investment performance.

As with any academic study worth its salt, the various authors’ findings are complex and loaded with critical twists, turns, and footnotes.  Descriptions of three research papers on 401(k) plan returns can be found by clicking “Learn More” below. But here’s the gist:

  • So-called Target Date Funds – investments are based on each employee’s planned retirement age – perform better than investments guided by financial advisers hired by one Oregon employer to advise its workers. TDFs also outdo employees who go it alone.
  • When the 401(k) plan’s trustee is also a mutual fund management company, it’s more reluctant to remove its own, poorly performing funds from the plans’ smorgasbord of funds.
  • Employers select mutual funds that outperform a portfolio of randomly selected funds but underperform passive indexes.

There’s a common thread in many of these studies: the extra fees that investors pay for advice or the stock pickers who manage their mutual fund often don’t translate to better returns… Learn More

...10...1718192021...