Get money smart. 25 tips to improve your financial well-being from CFPB

This is just a summary of a great website from the Consumer Financial Protection Bureau; it's almost like a complete personal finance course in one place. Click here: https://www.consumerfinance.gov/about-us/blog/get-money-smart-25-tips-improve-your-financial-well-being/?utm_source=newsletter&utm_medium=email&utm_campaign=General&utm_content=October2019

Understand where your money goes 

         1. Take our quiz to see how healthy your finances are. https://www.consumerfinance.gov/consumer-tools/financial-well-being/ 

         2. Learn where your money is coming from. 

         3. Learn where your money is going. 

         4. Write your bill due dates on a calendar. 

Small changes can make a big difference 

         5. Create a working budget that matches your cash flow. 

        6. Request due dates for your bills that help you stay on track. 

        7. Compare your spending month-to-month. 

Save for emergencies

8. Give yourself financial security with an emergency savings fund.

9. Set rules for your emergency savings–but don’t be afraid to use it.

10. Make saving easy by making it automatic.

11. Put extra money into savings at times when you have it.

12. Use your tax refund to help you reach financial goals.

Reduce your debt

13. Before making a plan to pay down your debts, know what you owe.

14. Choose a debt reduction strategy that works best for you. 

15. Learn about federal and private student loans repayment options. 

16. In the market for a car? Negotiating can save you hundreds or thousands of dollars over the life of your loan. 

Create better money habits 

17. Apply only for credit you need.

18. Set an annual reminder to check your credit reports. 

19. Set up alerts to stay on top of your checking account balance.

20. If you can’t make a bill payment, act fast and call your creditors.

21. When shopping for a loan, get quotes from at least three lenders. 

Plan for success 

22. When planning for the future, set SMART financial goals.

23. Set up a 529 savings plan for your children.

24. Make your savings consistent.

25. Prepare for life events and large purchases by planning ahead.

Think you can time the market?

October is notable for the many stock market crashes that occurred in this month. It's the 90th anniversary of legendary Crash of 1929. The Panic of 1907 and the October 1987 crash are other examples. But the month is not the point. Too many investors think they will cash out then jump back into the market after it recovers. Such a strategy guarantees selling at the bottom and buying near the top... not a way to get rich. Just as market crashes are sudden, unexpected and dramatic, so, often are markets recoveries. No one sounds a horn when the stock market bottoms out to announce the beginning of a recovery. "Trying to sit out a crash often means missing some of the market's best days" which come in fits and starts, no on a smooth trajectory. Numerous studies have revealed the penalties of sitting on the sidelines and trying to decide the best time to buy. Putnam Investments figured that "missing just the U.S. markets' 10 best days in the 15 years through 2018 would have cut your ending portfolio in half. Missing the 20 best days would leave you with two-thirds less" reports Spencer Jakab in The Wall Street Journal, 10/26-27/2019. Money you will need in the coming 5 years should not be invested in stocks. It was sad to hear about retirees bailing out of stocks in 2008 to early 2009, thus locking in huge losses. The longest bull market started on March 9, 2009 but those who panicked lost out by sitting on the sidelines after the trauma of inflicting large losses on their portfolio.

How to "pump up" retirement savings with a very late start

In his column "Ask Encore" Wall Street Journal columnist Glenn Ruffenach answers a reader's questions with the following advice: 1. Keep working 2. Slash debt 3. Get ruthless with expenses 4. Downsize Lots more advice on this topic in this blog.

Wall Street Brokers missed the memo on Index Funds

"In recent years, investors have been flocking to low-cost index funds, driven by their long-term record of outperforming higher cost actively managed funds" writes Randall Smith in The Wall Street Journal (10/7/19). However, clients of Wall Street brokers have just 29% of assets in passive index funds according to a report by Cerulli Associates. The situation is even worse for clients of regional and independent firms with only 20-22% of assets invested in index funds. Who is getting rich? Certainly not the client who is paying high fees for funds that under perform their indexes. The benefits of index investing has been a major theme of this blog. Check out other posts that may convince you that your charming, persuasive broker may not have your best interests in mind.

Amazon sells clothes from factories other stores shun

"After a 2103 factory collapse killed more than 1,100 people in Bangladesh, most of the biggest U.S. apparel retailers joined safety-monitoring groups that required tham to stop selling clothing from factories that violated certain safety standards" according to Wall Street Journal writers J. Scheck, J. Emont, and A. Berzon (front page WSJ 10/24/19). Except Amazon which sells clothing from dozens of Bangladesh factories that violate basic safety for employees.
So please... think twice before buying clothing on Amazon.

Flying is bad for the planet: What can you do besides fly less?

Flying is one of the worst contributors to climate change. Yet Americans are flying more than ever. Granted that some flights are deemed necessary by the passenger... We recently flew from Salt Lake to Baltimore to attend my father in law's funeral which attracted family members who flew from Chicago, St. Louis, Savannah and SLC.

Greta Thunberg is a 16 year old internationally known Swedish climate activist who recently sailed to the U.S. for a climate conference rather than fly. Check out her TED Talk: https://www.ted.com/speakers/greta_thunberg
https://www.theguardian.com/environment/2019/jul/29/greta-thunberg-to-sail-across-atlantic-for-un-climate-summits

For a small fee you can buy carbon offsets to mitigate the impact of the climate change causing emissions. If you fly Delta or United go directly to the links below. Not sure why American Airlines has no carbon offset program. Time to boycott AA? If you are flying a different airline you can still get info the approximate impact and cost at Delta or United. The money does NOT go to the airlines but to organizations such as The Nature Conservancy that typically use the funds to plant trees or other activities to fight climate change.

https://www.delta.com/en_US/about-delta/corporate-responsibility/carbon-emissions-calculator

https://www.united.com/ual/en/us/fly/company/global-citizenship/environment/carbon-offset-program.html

Another website where you can buy offsets with Euros or Paypal: https://flygrn.com/offset-carbon

Flying is really bad for the environment and climate

" The Swedes call it “flygskam,” or “flying shame,” the movement that encourages people to stop taking flights to lower their carbon footprints.

But should most Americans really be ashamed of getting on a plane to see grandma this holiday season?

The short answer: Probably not. If your flights are purely a luxury, though, that’s another matter.

A small group of frequent fliers, 12 percent of Americans who make more than six round trips by air a year, are responsible for two-thirds of all air travel and, by extension, two-thirds of aviation emissions, according to a new analysis by the International Council on Clean Transportation, a nonprofit research group.

Each of these travelers, on average, emits more than 3 tons of carbon dioxide per year, a substantial amount, particularly by global standards. And the most frequent fliers, those who take more than 9 round trips per year, emit the highest share." by By Hiroko Tabuchi and Nadja Popovich writing for the New York Times Climate Forward newsletter.

The countries with the highest CO2 emissions from passenger flights in 2018:
U.S: Americans are responsible for 24% of all air travel and thus, 1/4 of all emissions from flying
China is #2 with 13% of all air travel emissions.
Japan is #3 with 3.1%
WOW! Americans are really the most polluting.

"So what’s to be done to curb frequent flying? One idea, floated by a group in Britain called A Free Ride, would tax fliers progressively: Everyone gets one tax-free return flight each year, and a tax kicks in at a low rate from the second flight. Taxes then ratchet up for each additional flight in that year."

And just this month, a Britain-based commission recommended banning air miles and frequent flier programs so that airlines do not “incentivize excessive flying.” The report cites data showing frequent fliers “strongly tend to be wealthier and less price-sensitive,” and recommends they should “incur increasingly powerful taxation to discourage additional flights.”
"Business travel makes up roughly 30 percent of air travel in the United States, according to data from Airlines for America, a trade group representing airlines. But some corporations are starting to question whether all of that travel is really necessary in an age of email, Slack and teleconferencing. In Europe, companies are starting to give extra time off to employees who opt to travel by train or other less-polluting transportation options on vacation."

If you must fly, then buy carbon offsets.
"Consider a trip from New York to Los Angeles. Flying 2,500 miles in economy class will burn about 0.29 metric tons of carbon per passenger, according to the International Civil Aviation Organization’s carbon emissions calculator. And it will cost about $3.26 to offset the approximately six hour, one-way flight using the travel offset calculator by Cool Effect, a nonprofit organization. If you round up to a full ton of carbon, you’d still only spend $3.30 to $13.18 on the Cool Effect website, depending on the project." By Jillian Mock and Hiroko Tabuchi writing for The New York Times Climate Forward Newsletter

Buy offsets (in Euros) at https://flygrn.com/offset-carbon

https://www.delta.com/en_US/about-delta/corporate-responsibility/carbon-emissions-calculator

https://www.united.com/ual/en/us/fly/company/global-citizenship/environment/carbon-offset-program.html

If you airline doesn't offer carbon offsets go to the Delta or United websites to estimate the cost and contribute on their website.

Why waste money on bottled water?

Almost all Americans have access to clean water. According to Consumer Reports, More than 90% of Americans on municipal systems have pure water. Yet we spend more than $30 BILLION per year on water that is no cleaner than our tap water. In fact, numerous bottled water companies (Aquafina and Dasani)draw their water from municipal supplies! Just think was $30 billion dollars could buy!

As I often pick up trash along sidewalks, hiking trails and bike paths, the most common litter is plastic water bottles. While supposedly recyclable, the market for plastic recycling has almost evaporated since China decided to stop importing our waste.

All the microplastics going into our bodies and the environment is another reason to use a refillable water bottle.

Check out the November 2019 issue of Consumer Reports with its special report: "Is bottled water safe?"

How to Create a Personal Retirement Plan

Rachel Hartman explains that
Finding the right retirement plan involves:

    Thinking about your values and goals.
    Identifying your risk tolerance.
    Considering your age.
    Projecting your retirement lifestyle.
    Adjusting your plan as needed.


https://money.usnews.com/money/retirement/baby-boomers/articles/how-to-create-a-personal-retirement-plan

9 Myths About Credit Scores

"People think they know what causes a credit score to rise or fall. They’re often wrong."
Writing for The Wall Street Journal, Demetria Gallegos, explains how credit scores work.
Why are credit scores important?
"A higher score can mean better terms on credit cards, lower rates on mortgages and less expensive premiums on auto and homeowners insurance. It can make it more likely to win approval for an apartment, and get deposits waived when setting up services like electricity and cable in a new home. It can even mean a better chance at nabbing a job offer."

MYTH: Checking my credit score hurts my credit score

MYTH: If I pay my bills on time, that’s all I need to worry about.
Your credit utilization ratio plays a big part in determining your score.

MYTH: Carrying a balance helps boost my credit score.
No! It's one of the worst financial practices.

MYTH: Closing an old credit card with a high interest rate will help my score.
Hold on to old accounts even if you don't use them; having a long history of credit is important.

MYTH: Opening a new retail credit card is a good for your score.
No and these cards charge very high interest!

MYTH: It hurts my credit score to comparison shop for a mortgage, auto or student loan

MYTH: The older my unpaid debt, the more it hurts me.
While bankruptcy will remain on your report for up to 10 years, "it’s the newer delinquencies that will be more aggressively collected" and hurt your score

MYTH: Selecting ‘credit’ while using your debit card for a purchase is good for your credit score

MYTH: Credit reports are accurate. 21% of reports contain inaccurate information. Monitor your data by checking your reports every 4 months:
https://www.annualcreditreport.com/

There are a few existing and coming programs that aim to help consumers demonstrate responsible financial behavior in areas not previously visible to the credit-reporting companies.

Rental reporting "Paying your rent on time can now help your credit score. Such reporting is handled either by big landlords and property-management companies or by individuals who go through a company that verifies and reports the payments."
Phone and utility bills "Experian Boost, a free program launched last December by credit-reporting company Experian, factors household payments for services like telephone, cable and utilities into a person’s FICO score. Consumers connect Experian Boost to the bank account they use for paying these bills. The program then pulls the relevant payment history and immediately recalculates their FICO score."
Bank accounts "In a program expected to launch to consumers next year, FICO will begin taking into account consumers’ banking habits. Under the free program, called UltraFICO, consumers sign up to allow the program to link to their checking, savings or money-market accounts. Consumers are then rated on factors including the account balances they maintain, how long the accounts have been open and avoiding overdrafts."
Learn more about free credit reports: https://www.consumer.ftc.gov/articles/0155-free-credit-reports

Required Minimum Distributions from retirement accounts

"RMDs, as they are commonly known, are the minimum amount individuals who are age 70½ and older must take out of their retirement funds such as individual retirement accounts or workplace-based accounts such as 401(k) plans." Lorie Konish explains that RMDs are based on IRS longevity tables.
Key Points

    *"If you’re 70½ or older, or inherited a retirement account, you need to take your required minimum distribution by Dec. 31."
    *"Now is the time to get organized and start thinking about that distribution. If you miss the Dec. 31 deadline, you will face a tax penalty."
    *"Here are the steps to take and moves to consider so you don’t leave money on the table."

“Always take an inventory first, so you know where all your retirement accounts are."
Consult the IRS RMD tables to determine the amount but have a financial professional or the institution holding your account double-check your RMD calculation.

If you have multiple IRAs or 403(b) accounts, you can take your total RMD from any one or a combination of those accounts.

However, if you have more than one 401(k) account, you have to take money from each one.

Be sure to have a plan for paying your income taxes. The full article offers suggestions.

One way to avoid paying taxes on your RMD: Give the money to charity.

"A qualified charitable distribution allows you to make donations to a charity directly from your IRA."

"So if your RMD is $5,000 and you typically give $5,000 to charity each year, you can donate that money and not pay tax on it."

Safety-First Retirement Planning

"Two fundamentally different philosophies for retirement income planning, which I call probability-based and safety-first, diverge on the critical issue of where a retirement plan is best served: in the risk/reward trade-offs of a diversified and aggressive investment portfolio that relies primarily on the stock market, or in the contractual protections of insurance products that integrate the power of risk pooling and actuarial science alongside investments. The probability-based approach is generally better understood by the public. It advocates using an aggressive investment portfolio with a large allocation to stocks to meet retirement goals. My earlier book How Much Can I Spend in Retirement? A Guide to Investment-Based Retirement Strategies provides an extensive investigation of probability-based approaches. But this investments-only attitude is not the optimal way to build a retirement income plan." Read more on the Amazon website about the contrast between "Probability based" and Safety first" approaches to retirement income strategies.

Probability based strategies rely on investing heavily in the stock market. A safety first approach is built upon a lifetime annuity to ensure income lasts as long as you do.

Dr. Wade Pfau is one of the most respected retirement researchers writing and sharing his wisdom today. His new book, Safety-First Retirement Planning: An Integrated Approach for a Worry-Free Retirement is available at Amazon.

Check out Dr. Pfau's list of important questions to answer for the three major types of annuity products.

https://www.advisorperspectives.com/articles/2019/10/18/safety-first-retirement-planning

Pelosi's drug-negotiation proposal would save Medicare $345B

A provision in a bill introduced by House Speaker Nancy Pelosi, D-Calif., that would permit Health and Human Sservices to negotiate prices for as many as 250 drugs per year would save Medicare $345 billion from 2023 to 2029 and lower pharmaceutical industry revenues by $500 billion to $1 trillion over 10 years, according to a preliminary analysis from the Congressional Budget Office. A separate analysis from the CMS Office of the Actuary found Pelosi's plan would reduce health care spending by $480 billion and save US households $158 billion over 10 years through lower premiums and reduced cost-sharing on drugs.

Details at: https://thehill.com/policy/healthcare/465491-cbo-pelosi-bill-to-lower-drug-prices-saves-medicare-345-billion

The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its Cars

Do you wonder how your neighbor affords a new vehicle every few years? The truth is often ugly!

Ben Eisen and Adrienne Roberts explain in The Wall Street Journal: "Approximately one-third of loans on new vehicles agreed upon in the first half of 2019 were for more than six years,compared with less than 10% a decade ago, according to Experian. With increases in vehicle prices outstripping income growth, the trend is seen as an indication many households struggle to finance their lifestyle."

"For many Americans, the availability of loans with longer terms has created an illusion of affordability. It has helped fuel car purchases that would have been out of reach with three-, five- or even six-year loans."

If you've ever tried to buy a vehicle with cash you likely experienced the hard sell to finance it instead. A buyer can feel like they are being held captive by the dealership if they want to make a cash purchase. That's because "dealers now make more money on the loans their customers take than on the cars they sell."

"The average loan stretches for roughly 69 months, a record. Some last much longer. In the first half of the year, 1.5% of auto loans for new vehicles had terms of 85 months or longer, according to Experian. Five years ago, these eight- and nine-year loans were practically nonexistent."

"As a result, a growing share of car buyers won’t pay off the debt before they trade in their cars for new ones, either because the car is in need of repairs or because they want a newer model. A third of new-car buyers who trade in their cars roll debt from old vehicles into their new loans, according to car-shopping site Edmunds."

And people wonder why so few Americans are financially prepared for retirement!

How a kid’s allowance can teach money management skills

"Teaching children about money management is a big job for parents. Money talk often starts by paying an allowance. According to new research from the American Institute of CPAs (AICPA), two-thirds of parents (66%) give their child an allowance at an average of $30 a week. An allowance is just part of a larger conversation about effective financial management. Parents must make sure the lessons sink in."

"The good news is that nearly half of parents (49%) say they take time to teach their child about money at least once a week. However, nearly a third (32%) say they only teach their children about money no more than once a month, including the 7% who admit they never teach their kids about money."

Of course, much of what children learn about money management from their parents comes from daily observation. Parents who think they don't teach their children financial lessons are kidding themselves.

The article explains how parents can make decisions about how much allowance to give, which should vary with age. Ideas on how to teach children prudent money skills are also addressed. Check out: https://blog.aicpa.org/2019/10/how-a-kids-allowance-can-teach-money-management-skills.html#sthash.ymIVwxYO.dpbs

Help choosing a college major and potential career

The Utah legislature mandated creation of a website to help college students choose a major and explore career options. Check out: https://www.utahfutures.org/

It is still a work in progress with features under construction. It's a good way for high school and college students (and their parents) to explore the important decisions facing post-secondary students.

 Thanks to Eric S. Peterson, Tori waltz, and McKhelyn Jones writing for The Salt Lake Tribune. 10/9/19