PBS Digital Studios is producing an excellent video series to guide 20-somethings who are starting their careers and want to get a handle on their finances.
In “Two Cents,” financial planners Julia Lorenz-Olson and her husband, Philip Olson, will make you laugh as they convey their very solid advice about personal finance. “How to Ask for a Raise” is perhaps the most relevant video to young adults – especially the ladies. Only one in three women believe that their pay is negotiable. Nearly half of all men do.
The potential for pay raises is highest for employees when they are in their late 20s and early 30s. But the boss isn’t likely to volunteer to increase anyone’s pay, the hosts explain – you have to ask. This is a scary thing to do, and the couple eliminates some of the anxiety by explaining how to prepare for that meeting with the boss.
The “Love and Money” episode asks the questions that are crucial to a successful partnership: how much does he or she earn and how much does this person owe? In “How Cars Can Keep You Poor,” the Olsons advise against buying a new car, which depreciates 63 percent in just five years – they compare it to investing in an ice cream cone on a hot day. A used car is a much better deal and the only sensible option for someone who’s already juggling rent and student loan payments. And the answer to “Should I Buy Bitcoin?” is, uh, no. Nearly half of all bitcoin transactions are illegal, Olson says.
For future-minded young adults, “How Do You Actually Buy a House?” walks through the entire process, explaining why it’s critical to get preapproved for a mortgage, how to choose a realtor, and what to expect in the closing. “Insta-Everything lays out the few pros and many cons of paying for on-demand services such as Grub Hub, InstaCart, and Task Rabbit.
Lorenzo-Olsen explains that the goal of their “Two Cents” videos is not to help young adults get more money (though a raise would be nice), “but to be happy with the money you have.”Learn More
Millennials are big users of payday loans, which have steep interest rates that can really mess up their finances.
Remarkably, two out of five people in their mid-20s to mid-30s have used a payday loan, which is more than double the frequency for people in their late 30s, says Melody Harvey at the Pardee RAND public policy school. Generation-Xers and baby boomers use them even less, other surveys have shown.
Harvey’s new research has produced some evidence that something can be done to protect vulnerable young adults in the future: require them to take money management classes while they’re still in high school.
The use of payday loans is part of a broader trend among Millennials, she said. They also turn to desperation financing such as pawn shops to raise quick cash or rent-to-own schemes that, in the end, require them to pay much more for consumer products like furniture and computers.
Many young adults probably gravitate to high-cost forms of financing, because they’re strapped for cash after paying their rent and student loans every month. They also start their careers at relatively low wages and haven’t established the strong credit histories required to qualify for traditional, lower-cost debt.
But while poor people are often forced to use payday loans to solve an impossible financial problem, young adults could be using them partly to fund profligate spending. …Learn More
The student loan problem has gotten under our collective skin – so much so that a new game show revolves around it.
“Paid Off,” on TruTV, promises to pay off a share of the winning contestant’s student debt – 20 percent, 50 percent, or 100 percent – depending on how many answers he or she gets right in the final round of questioning.
“Paid Off” is as inane as any television game show. The format is more “Family Feud” than “Jeopardy,” with softball questions designed to spark as much faux competition as possible among the former students who compete. One example: name the most romantic date costing under $10: picnic, walk, Netflix movie, etc.
The show’s host, Michael Torpey, who also plays a corrections officer in “Orange is the New Black,” explains in the first episode of “Paid Off” that he created it because he and his wife struggled with student loans. He was only able to pay them off because he landed a long-shot acting job for a television commercial.
Torpey says his goal is to help debt-laden students “achieve their dreams by paying off their student loans.” He’s right that college debt is, indeed, standing between many Millennials and the adult milestones of buying a house,saving some money, or getting married.
The average amount of debt owed by college graduates increased again last year, to more than $39,000, according to Student Loan Hero.
Unfortunately, the weekly show won’t make a dent in this growing problem. … Learn More
In the world of Big Data, do you fall into the industry’s Extra Needy category, or are you viewed as American Royalty? Perhaps Ethnic Second City Struggler or Small Town Shallow Pockets is a more apt description of you? Or how about Eager Senior Buyer or Tough Start: Young Single Parent?
While the media are focused on Facebook’s privacy breaches, a growing multibillion-dollar industry of data brokers is mining personal information online in order to sell our data dossiers to financial and other companies – sometimes to the detriment of our personal finances.
Big Data collection also can be innocuous, when it is used for marketing. In this form, it’s just the high-tech version of snail mail solicitations for credit cards, retail catalogs, or the services of a neighborhood real estate agent.
But Pam Dixon, the executive director of the World Privacy Forum, said evidence is growing that some consumers are being exploited by the unfettered sharing of personal data. Further, individuals generally do not have a legal right to see their dossiers, which are proprietary – “and we don’t know what they’re being used for,” she said.
In one egregious case, brokers sold data on an elderly veteran, who was then victimized by a scam that stripped him of his life savings. Some brokers compile lists of people living in trailer parks to sell to companies making “predatory offers to those in financial trouble,” Dixon testified before the Senate. …Learn More
Marketplace recently estimated that a family’s common expenses have increased 30 percent since the 1990s. This was based on the inflation-adjusted prices for 11 necessities and small luxuries, from food, housing, college, and medical care to movie tickets and air fare.
On the income side of the household ledger, one well-known study estimates that the lifetime, inflation-adjusted income of a typical 60-year-old man today is substantially less than it was for a man who turned 60 back in 2002. Women, who have benefitted from getting more education, are earning more, but they started out at much lower pay levels and still trail men.
These trends – rising expenses and shrinking paychecks – get to the essence of the middle-class struggle described in Alissa Quart’s new book, “Squeezed: Why Our Families Can’t Afford America.”
Putting faces to the numbers, she had no trouble finding workers who feel they are losing their tentative grip on the middle class. Her focus is the 51 percent of U.S. households earning between $40,000 and $125,000.
That’s not to say that Americans’ quality of life hasn’t improved in some ways. Consider the dramatic increase in the square footage of U.S. houses over the past 30 years or the enormous strides in medical technology. In today’s strengthening economy, the Federal Reserve Board reports that a majority of adults say they are doing okay or even living comfortably, and they are feeling more optimistic. Yet this doesn’t entirely square with another of the Fed’s findings: a large majority of adults would not be able to cover an unexpected $400 expense without selling something or borrowing money. …Learn More
Despite the mounting pressures on Americans of all ages to save for retirement, our saving habits haven’t changed in 10 years.
The combined employer and employee contributions to 401(k)s consistently hover around 10 percent of workers’ pay, according to “How America Saves 2018,” an annual report by Vanguard, which administers thousands of employer 401(k)s and other defined contribution plans.
Retirement account balances aren’t going up either. The typical participant’s 401(k) balance is no larger than it was in 2007, even though accounts grew 7 percent last year, to $26,000, thanks to a strong stock market. The balances, when adjusted for inflation, are slightly smaller.
The growing adoption of 401(k) plans that automatically enroll their workers is having both negative and positive influences on the account balances. Employers tend to set employees’ contributions in these plans at a low 3 percent of their pay. This has had a depressing effect on balances, but it has been offset somewhat in recent years by a modification to auto-enrollment plans: more employers are automatically increasing their workers’ contribution rates periodically.
Baby boomers with a few short years left to save are particularly under pressure to increase their savings. The typical boomer has accumulated only $71,000 in his current employer’s retirement account, according to Vanguard. Total account balances are generally larger, however – though still often inadequate – because many baby boomers have rolled over savings from past employer 401(k)s into their personal IRA accounts.
Overall, the situation for all workers hasn’t really changed and neither has Vanguard’s message to future retirees.
“Going forward, we need to reach for higher contribution rates for more individuals,” Jean Young, senior research analyst says in the company’s video above. …Learn More
Two of our readers’ favorite articles so far this year connected difficult bread and butter issues – personal finance and retirement – with a far more pleasant topic: travel.
The most popular blog profiled a Houston couple scouting locations for a dream retirement home in South America, which has a lower cost of living. Another well-read blog was about Liz Patterson, a young carpenter in Colorado who built a $7,000 tiny house on a flat-bed trailer to radically reduce her expenses – so she could travel more.
The downsizing efforts of 27-year-old Patterson inspired several older readers to post comments to the blog about their own downsizing. “From children’s cribs and toys in the attic, to collectible things from my parents’ 70-year marriage!” Elaine wrote. “Purging has been heart wrenching and frustrating and long overdue!”
The following articles attracted the most interest from our readers in the first six months of 2018. Topics ranged from 401(k)s, income taxes, and Americans’ uneven participation in the stock market to geriatric care managers. Each headline includes a link to the blog. …Learn More