Strategies for Improving Workplace Behavior and Performance

From Leadership Expert Dr. Diane Hamilton

Entrepreneurs and Celebrities Use Kickstarter for Funding

 

Kickstarter has been a successful crowdfunding option for potential entrepreneurs to garner cash.  However it has not been without some issues.  According to The Wall Street Journal article The Trouble With Kickstarter, “The only thing worse than having to watch your friend’s arty movie is having to pay for it too.” Aside from the problems associated with pestering friends to donate, there have been some successful ventures thanks to this site.  The following list contains some of names of celebrities who have used the site:

Continue reading “Entrepreneurs and Celebrities Use Kickstarter for Funding”

Credit Report Options

DrDianeHamiltonCreditScoreSavvy

Anyone who has applied for a home loan probably has some familiarity with the importance of having a strong FICO score.  FICO stands for Fair Isaac Company.  There are three major bureaus that provide credit information (Experian, Equifax and TransUnion).  These bureaus got together and created a competing score called the VantageScore. CreditKarma explained, “The VantageScore offers additional features, such as predictive scoring and a 24-month review of credit history, that the classic FICO model doesn’t incorporate.” For a comparison of the Vantage Score to the FICO score, click here.

This new score has a different scale.  Experian, Equifax and TransUnion used a score that ranged from 300 to 850.  This new VantageScore has a range from 501 to 990.  This has led to some confusion as to how these scores compare.  Lenders usually charge consumers to check their credit. They obtain the three scores from the major bureaus and generally use the middle score to base the lending rate that they offer the borrower.  Some lenders have begun to use the VantageScore.  For more information see:  What Credit Scores to Mortgage Lenders Use?

Borrowers may want to obtain their score in order to repair any issues prior to applying for a loan. This can cost them around $20 if they want to receive a full Equifax or TransUnion score.  Experian does not offer reports to consumers.

There are some other free options for credit reports.  These include:

CreditKarma.com – Offers a TransUnion Transrisk and Vantage Score report.

CreditSesame.com – Offers Experian National Equivalency Score

Credit.com – Offers Vantage Score

While many sites offer different reporting options like these, they may not show exactly the same scores that the lender will obtain when they receive all three major bureau reports.  Consumers, who apply for a loan and have paid to have their credit checked, can ask for a copy of their credit report from their lender.

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How to Avoid Paying 85% Tax on Social Security

 

Baby Boomers (those born between 1946 and 1964) have found out some hard lessons recently about how easily their retirement money can disappear.  One thing they may not have counted on is how much they may be taxed on Social Security benefits.

According to the Social Security Administration Website, the guidelines for paying taxes on social security include:

  • file a federal tax return as an “individual” and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable.
  • file a joint return, and you and your spouse have a combined income* that is
    • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
    • more than $44,000, up to 85 percent of your benefits may be taxable.

Many adults receive social security as their only form of income. If that is the case, there income level would be low enough that they would not have to pay taxes or even file a tax form.  See topic 423.

For individuals who are lucky enough to have saved a few bucks for retirement, check out the following articles for help to avoid having to pay this high percentage:

  1. When Uncle Sam Wants His Money Back
  2. Avoiding the Social Security Tax Trap
  3. History of Taxation of Social Security
  4. AARP: Social Security and Taxes
  5. How Much Social Security Benefit May Be Taxed

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Top 7 Ways for Entrepreneurs to Obtain Funding

 

The good news is that entrepreneurs have more options for funding than in the past.  According to Entrepreneur.com, access to capital is improving for small businesses. This may be a frightening time to begin an entrepreneurial venture.   However, there are an increasing number of available financing options. The following list contains some of the most prevalent in the current market.

  1. Banks – The number of people going to banks for loans is increasing. “According to a report this week on banks with more than $10 billion in assets, the overall volume of loan applications increased by 5.6 percent in September over August, reports Biz2Credit, an online credit marketplace in New York City that connects small and midsize businesses with lenders.”
  2. SBA Loans – Entrepreneurs have also traditionally gone with loans from the Small Business Association.  “In 2011… it backed $30.5 billion in 61,689 loans to small business.”
  3. Angel Investors – “Angels invested $9.2 billion in 27,280 startups in the first two quarters of 2012, a 3.1 percent increase in dollars and a 3.7 percent increase in number of entrepreneurial ventures over the same time in 2011, according to a report this week from the Center for Venture Research at the University of New Hampshire.”
  4. Venture Capitalists – “In 2012, venture capital firms have raised $16.2 billion, representing a 31 percent increase from the $12.4 billion raised in the first nine months of 2011, according to a report from Thomson Reuters and the National Venture Capital Association released this week.”
  5. Crowdfunding – There have been some unusual ways that entrepreneurs have managed to raise funds.  Crowdfunding has been growing in popularity.  Entrepreneurs can raise funds through networking on the internet.  Supports fund other people’s ideas or interests.
  6. Microlending – One of the top microlending sites is Kiva.org. Kiva is “a non-profit organization with a mission to connect people through lending to alleviate poverty. Leveraging the internet and a worldwide network of microfinance institutions, Kiva lets individuals lend as little as $25 to help create opportunity around the world.”
  7. PledgingKickstarter is a unique site allows entrepreneurs to keep ownership and control over their work while tens of thousands of people pledge millions of dollars to help finance their creative ideas. The idea must reach its funding goal or no money changes hands. Entrepreneurs that receive their anticipated funds, can test concepts without risk.

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Apple and Other Top 10 Company Financial Statements

 

With all of the reports about the successes and failures of IPOs in 2012, there may be renewed interest in deciphering financial reports.  The follow are explanations of the four major financial statements.

  1. Income Statement:  One of the most important reports for a company is their Income Statement.  This may be referred to as the Statement of Income or the Profit and Loss Statement. This report shows profits and losses over a specific period of time.
  2. Balance Sheet:  The balance sheet is also referred to as the Statement of Financial Position. The balance sheet displays a company’s position at a single moment in time.
  3. Cash Flow Statement:  This may also be referred to as the Statement of Cash Flows. The Cash Flow Statement shows information about how money flows in and out of a business.  This may be helpful in determining the viability of a company.
  4. Statement of Retained Earnings:  This may also be referred to as e Statement of Changes in Equity.  This statement explains the company’s retained earnings over a period of time.  This will be reported under shareholder’s equity on the balance sheet.

The following are examples of the top 10 company financial statements:

Income Statements:

Balance Sheets:

Cash Flow Statements:

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Boomer Entrepreneurs Can’t Retire

 

One of the things entrepreneurs plan for is the time that they will eventually sell their company.  Currently many older business owners have found it difficult to reap the anticipated rewards of retirement. As the author of the Entrepreneur Exit Strategies for your Business pointed out, “it’s not enough to build a business worth a fortune; you have to make sure you have an exit strategy, a way to get the money back out.” If businesses were once very successful, the economy may have impacted their current worth.  Even with what may once have been considered a strong exit strategy, plans may have been affected by the economic downturn.

Boomers trying to sell their businesses are receiving offers that are not enough to finance their retirement.  In the Wall Street Journal article The Economy Stole My Retirement, it noted that one small business owner expected to sell for $2 million but recent losses from the recession has made that impossible.  She now has seen offers as low as $250,000.

Business owners who had planned to travel and relax in their golden years are now spending 10-12 hours a day or more working to salvage companies.  Some have no foreseeable chance of selling in the future.  Many have put all of their money into their businesses and would have to live only on social security if they let the businesses fail.

While it is admirable to have high expectations for an entrepreneurial venture, it is the wise business owner who does not keep all of his or her eggs in one basket.  Just as Enron employees learned the hard way, it is not a good idea to have all of your money invested in the company in which you work.  If the company goes under, people not only lose their jobs but their life savings as well.

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Basics Every New Home Buyer Should Know

 

It may not be as easy to purchase a new home in today’s real estate market.  I teach real estate courses, I have a real estate license, and I spent years working in the lending industry.  Because of that, people often ask me about what a home buyer should know about the process.

When I was a loan officer, the market was considerably better.  First time home buyers had more options.  Currently banks are hesitant to lend and buyers need to come up with more funds on their own.  In the past, it wasn’t unusual for banks to lend at least 95% of the cost of the home. Now it isn’t unusual for banks to only cover 80% of the cost.  FHA loans offer higher percentages but the amount you can borrow is limited.

Getting the Loan

As a loan officer, I did a lot of first time home buyer seminars.  At those seminars, people had a lot of questions about the home-buying process.  A big part of what they wanted to know was how their credit score affected their ability to get a loan.

A person’s credit score is extremely important in the loan process.  The score alone does not dictate whether you will get the loan, but it is a big piece of the puzzle.  Banks will also look at your work history, income and how much money you have for the down payment.

If you have a poor credit history, it doesn’t mean that will hurt you forever.  As time goes by, your poor credit history fades if you do the right things and is replaced with good payment history.  Your credit score should not vary that much from month to month.  However, if you have had late house payments in the past or a bankruptcy, it can drop your score more quickly than other things.  Improving your score takes longer than hurting your score.  It isn’t common under normal circumstances for a score to change 20 points in a few months’ time.

That is why it is important to periodically check your credit report and contact the credit agencies if there is incorrect information on it.  There are three main credit agencies:  Equifax, Experian and Transunion.

If you report an error to these agencies, they must investigate it and respond to you within 30 days.  Sometimes certain information will show up on one agency report and not on another.  In order to get information removed from all of them, you need to contact all of them.  Don’t assume that because you take care of contacting one agency, that the others will be corrected automatically.

Your score is sometimes referred to as a FICO score, which stands for Fair Isaac and Co., the software company that developed the score.  In order to have a FICO score, you must have at least one account that has been open for 6 months or longer.  Also, there has to be one account that has been updated in the past 6 months.  The higher your score, the better risk you are and the more likely a bank will lend you money.

There are 5 main categories of information that are taken into account in determining your FICO score:

•           Payment history accounts for about 35 percent of the score.  Do you pay your bills on time?  Are there any collections or bankruptcies? Bankruptcies will stay on a report for seven to ten years, depending on the type.

•           Amounts owed accounts for about 30% of the score.  How much do you pay on your accounts? How high of a balance do you have?  How much of the credit granted do you actually taken advantage of?

•           Length of credit history accounts for about 15%. How long have your credit accounts been established?

•           New credit accounts for about 10%.  How many recent requests for credit do you have?

•           Type of credit accounts for 10%.  What kind of credit mix do you have?  Do you have credit cards, retail cards, mortgages, etc?  You don’t have to have all types, and it isn’t a good idea to have accounts that you don’t use.  However, it is worse to close an account that you don’t use than to leave it.

Here are some tips you can use to raise your credit score:

•           Pay on time.

•           If you missed payments, get current.

•           Paying off a collection doesn’t remove it from your report, though it does improve your score.

•           Contact creditors if you are having trouble making payments to see if they can help you.

•           Don’t maximize how much you take out on your accounts. Keep balances as low as possible.

•           Don’t move debt around unless it means you’ll be getting a lower interest rate. You still owe the same amount of money.

•           Don’t think closing unused cards will raise your score.

•           Don’t open a lot of cards just to have available credit.

•           Don’t open too many new accounts too quickly.

•           If you have had problems, re-establish new credit history.

•           Check out your credit score from time to time.

•           Only get new credit cards as needed.

•           Manage the cards you have responsibly.

•           A closed account will still show up on your credit report.

When people came to me to apply for a loan, I would ask them if I could run their credit.  That is what you can expect a loan officer to do as well.  They have to know what your credit is in order to know if you will qualify for the loan.  Although many people are worried that their credit will affect their credit score, one inquiry will take less than 5 points off of their score.  Rate-sopping can cause multiple requests on a report, but as long as the inquiries are within a 14-da6 period, it will only count as one inquiry as far as points taken off.  Also the score ignores all inquiries made during the 30 days prior to scoring, so if you find a loan within 30 days, those inquiries will not affect your score while you are shopping.

What is a good score?  Traditionally lenders usually liked to see at least 620 to get better rates.  Scores over 700 sometimes can get even better rates.  If your score was under 620, you could still get a loan, but you would pay a higher interest rate.  The numbers change as programs change, but it is a good idea to try and keep scores as high as possible.

Once you get into a house and have house payments to make, whatever you do, do not be late on it.  That is one of the worst things you can do to your credit.  Should you be late with a house payment, the next time you go for a home loan, the bank is less likely to forget that tardiness than a late credit card payment.  Having one late house payment in the last 12 months prior to applying for a home loan can severely affect your ability to qualify for a home loan.  If you have a 30 day late payment in the last year, you will have to pay a higher interest rate on your new loan, which could cost you many thousands of dollars.  Many lenders offer automatic withdrawal from your checking account.  If you have problems remembering to pay your payments, I highly recommend calling your bank and signing up for that service.

Finding the Agent

The first part of the home-buying process is actually getting pre-approved for the home loan.  It is only after you have received that, that you can actually start looking for a home.  If you don’t have a real estate agent, you might ask your lender to recommend someone.

Another good place to find an agent is by asking friends and family.  If they haven’t really had a chance to use anyone yet, you might drive through neighborhoods where you are interested in buying and see if there are any signs up of agents in the area.  If you see several signs with a certain agents name on it, it probably means they know the area well and may be a good person to contact.

Remember you do not need to stay with a real estate agent or loan officer that you do not like.  You have the right to drop them.  They are working for you and if they make you feel uncomfortable or aren’t responsive, you should exercise your right to pick someone else.

The good news about being the home buyer is that the home seller is the one who pays the real estate agent.  Your agent will receive a commission for helping you but it will not have to come from you.

Protecting Yourself

There are a lot of things you can do to protect yourself in the home-buying process.  Your agent should help you with home inspections and direct you to appropriate insurance agents if you don’t have one.

The Important Things to Remember

Here is the minimum you should know about Home Buying and Renting:

•           If you can afford to buy, there are tax advantages over renting.

•           Understand what constitutes a FICO score.

•           Fix any bad things you have on your FICO score by contacting all 3 credit agencies.

•           Get preapproved for a loan before ever looking at homes.

•           Find a real estate agent through referral or through checking out neighborhoods where you are interested in buying.

•           If you don’t feel comfortable with your agent, get a new one.

•           Remember the home buyer does not have to pay the real estate agent.

•           Protect yourself with home inspections and insurance.

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LinkedIn vs. Facebook IPO Success

 

LinkedIn’s recent IPO performance appears to have crushed the perception of big named company IPOs from Facebook, Yelp, Zynga, Groupon and Pandora. Based on their recent closing price, LinkedIn is up 141%. According to BusinessInsider Linkedin is, “the best-performing IPO this year by a huge margin. The next closest competitor, Bankrate, is up about 28 percent from its initial public offering.”

Timing may have been a factor for LinkedIn’s success. They have also seen consistent growth in unique visitors. Investors waiting for highly anticipated IPOs like Facebook may have helped increase the success of LinkedIn as well.

Although Facebook has had a lot of negative press regarding its IPO, CBS news reported that Facebook’s IPO was actually a success. CBS explained, “LinkedIn (LNKD) shares popped from the start in the professional networking company’s 2011 IPO and more than doubled in the first few days.”  Investment bankers made a bundle. This led people to think Facebook had been a flop. However, CBS author Allan Roth explained, “my definition of a successful launch of a new publicly traded stock doesn’t rest on how much money the investment bankers make. It rests on how close the offering price is to where the stock actually trades. The fact that Facebook shares closed at nearly their offering price tells me that that investors thought it was fairly priced. That’s pretty amazing, in my view, given all the hype over Facebook.”

Colin Lokey from SeekingAlpha explained that when comparing Facebook to Linkedin, fundamentals show that Linkedin is overvalued. Lokey warned, “Investors should of course, keep in mind that the fact that LinkedIn is far too expensive doesn’t mean Facebook is fairly valued at half of LinkedIn’s price.”  Prices have been affected by the recent Facebook IPO. Yahoo’s Finance writer Jeff Macke did not share Lokey’s opinion on pricing when he stated, “Linkedin stock has been dragged down over the last few weeks by the undercurrent of the Facebook Titanic.” He sees LinkedIn as a “screaming buy”.

Only time will tell how well LinkedIn and Facebook will perform. BizJournals recently quoted Linkedin’s CFO Steve Sordello about the importance of a company’s IPO results. “”An IPO is a one-time event, and what really matters is the long term. If it rains on your wedding day, you’re going to remember it rained but it’s not going to influence the marriage.”

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Entrepreneurs: Crowdfunding Options from Fundable

 

Crowdfunding is the latest buzz word in entrepreneurial lending. Fundable is a new company that offers “crowdfunding for startup companies”.  Crowdfunding occurs when people network through the internet to raise money to support other people’s ideas or interests. Fundable’s site allows entrepreneurs to raise capital through crowdfunding activities.  Fundable’s site states, “Startups create a funding profile that provides an overview of their company, their fundraising goals, and the rewards they are willing to provide potential backers. Thereafter, they reach out to their personal networks as well as the broader Fundable community to enlist their support.”

 

Backers may pledge money and/or offer assistance.  Fundable mixes Kickstarter-style and equity-based crowdfunding.  Fundable shares similarities to Kickstarter, in that the process involves all-or-nothing funding.  Goals must be met in order to receive the funds and there is no limit to the amount of money that may be raised. Scribd.com explained that there are differences between Fundable and Kickstarter.  “Fundable will seek to fund for-profit companies, while Kickstarter is all about creative projects, like literature, movies and the like.”

 

With the recent push for Obama’s Jumpstart Our Business Startups (JOBS) Act, Fundable may be able to take advantage of the crowdfunding law to solicit funds online from unaccredited investors.  However, Mashable explained, “Crowdfunding legislation is so new that the U.S. Securities and Exchange Commission (SEC) hasn’t set rules for it and Fundable needs to be approved by the SEC as a broker/dealer before it can handle investments. In the meantime, the company is focusing on offering rewards-based deals — which makes it look, for the time being, like a less-populated version of Kickstarter.”

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Entrepreneurs: Funding Options from Kickstarter

 

Entrepreneurs often find that one of the hardest parts of realizing their dream is to obtain financing.  Some have tried microlending sites like Kiva.org.  Others have discovered a new lending platform called Kickstarter.  The site’s tagline is “a new way to fund and follow creativity.”

Kickstarter describes its site as the world’s largest funding platform for creative projects.  This unique site allows entrepreneurs to keep ownership and control over their work while tens of thousands of people pledge millions of dollars to help finance their creative ideas.  The idea must reach its funding goal or no money changes hands.  Entrepreneurs that receive their anticipated funds, can test concepts without risk.

Kickstarter’s Blog offers advice to those interested in creating a new project. The site allows for people to browse current ideas or to create their own.  To begin a new project dedicated to film, art, technology, design, food, publishing and more, creators can check out Kickstarter school.

Once a project is listed on the site, it displays timeline and pledge information including:  Percent Funded, Amount Pledged, Number of Days Left to Receive Funds.  The picture displayed below demonstrates some examples listed on Kickstarter’s site.  On the site’s curated page, it lists “projects curated by some of the world’s foremost creative communities.” The site also allows users to view projects by staff picks, most popular, recently launched, ending soon, small projects, most funded, as well as by category and location.

 

For additional help with the entrepreneurial process, check out the Top 30 Links for the Successful Entrepreneur.  

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Credit Score Savvy

With the New Year, people often make resolutions to fix problem financial situations.  Part of cleaning an individual’s financial house includes taking a hard look at his or her credit.  Credit Score Savvy (2003) was one of my earlier articles that I wrote for a local magazine. At that time, I was a loan officer and found that many people were confused by FICO scores and credit issues.  In the article I explained factors that affected scores and the ability to finance a home.  Although the market has changed since then, a lot has remained the same in terms of confusion about credit issues.  A more recent article titled Polish up Your Credit includes some information about things people can do to improve his or her credit score now.  What may be most useful from this article are some of the statistics. The following chart provides answers to some of the most basic credit-related questions.

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Things To Know Before Investing in an IPO

 

There is a lot of talk about IPOs lately.  IPO stands for initial public offering.  When a company decides to make shares of the company available to the public, it may sound like a great opportunity to get in on the ground floor.  However, it may not be easy or sometimes wise to buy into an IPO as soon as it is offered.

USA Today had an excellent article about Five Things You Should Know Before Investing in an IPO.  According to this article, some of these things include:

  1. Learn the Lingo – Do you know what a red herring is or an IPO offer price?
  2. It’s Difficult to Get In – It may not be impossible, but you may have to be a preferred client.
  3. First-Day Investing May Be Risky – If you like the thrill of rolling the dice, the first day can be a wild ride.
  4. Know the Sales Figures – Find out about the company’s annual sales performance.
  5. Know the Long-Term Outlook – “The Federal Reserve identified two characteristics of successful IPOs in a 2004 study: The companies have been around longer than other companies issuing stock for the first time, and they’re making a profit before they do so.

To learn more about each of these 5 areas, check out the article by clicking the link listed above.

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Women Becoming More Successful Than Men

 

Women are passing men in their abilities to get a degree, handle families and garner success at work.  As men are falling behind, women are making huge strides.  CNN reported that, “For the first time in history, women are better educated, more ambitious and arguably more successful than men.”

Over half of college degrees are now being awarded to women. “In 1970, men earned 60% of all college degrees. In 1980, the figure fell to 50%, by 2006 it was 43%. Women now surpass men in college degrees by almost three to two. Women’s earnings grew 44% in real dollars from 1970 to 2007, compared with 6% growth for men.”

Women are becoming stronger entrepreneurs as well.  Forbes recently reported:  “As of 2011, it is estimated that there are over 8.1 million women-owned businesses in the United States. Overall, women-owned firms have done better than their male counterparts over the past 14 years. The number of men-owned firms (which represent 51% of all U.S. firms) grew by only 25% between 1997 and 2011—half the rate of women-owned firms.”

A study by Barclays Wealth and Ledbury Research may have some of the answers to why women are surpassing men.  One of the reasons they found is that women are less likely to take unnecessary risks or make rash decisions.  The Huffington Post backed up this point stating, “A 2005 study by Merrill Lynch found that 35% of women held an investment too long, compared with 47% of men. More recently, in 2009, a study by the mutual fund company Vanguard involving 2.7 million personal investors concluded that during the recent financial crisis, men were more likely than women to sell shares of stocks at all-time lows, leading to bigger losses among male traders.”

Purchasers from Amazon Responsible for StateTaxes

 

Article first published as Purchasers from Amazon Responsible for StateTaxes on Technorati.

Amazon has enjoyed an advantage over their competition.  They have not had to add tax to the purchase amount in states where they don’t have a physical presence.  Slate reported, “According to Quill Corp. v. North Dakota, a 1992 Supreme Court ruling, companies are only required to collect sales taxes from their customers when they have a presence in the state in which they reside.”

This has been a sore spot for many of Amazon’s competitors.  Many of them feel that if they should have to handle the taxes for customers, so should Amazon.  This advantage has made them undersell big competitors like the Apple Store and Best Buy.

Purchasers from the Amazon site may think they are getting a better deal. In reality, there may be taxes owed, but it won’t be by Amazon.  What many people in certain states like Arizona don’t know about their purchases on Amazon, is that it is going to be up to them to keep financial records of what taxes are due.  At the end of the year, when they file their tax returns, these taxes should be included in any amount owed to the government.

According to the Arizona Republic, “If you buy something online from a retailer who doesn’t have a physical presence in Arizona and they don’t charge state tax or the tax from the state where they’re located, then you’re probably liable for the use tax – the 6.6 percent tax. The safest thing to do is if you buy something online and you get a receipt, save it. It’ll probably show if there was any sales tax from the state where it was charged. If there’s not and there is no Arizona tax, then you should think about paying the use tax on that.”

What if you haven’t kept all of your Amazon receipts?  Go to your account page on Amazon and under Order History, click on Download Order Reports.  This tool allows you to put in the date range of purchases to request a report of purchased items.

According to Amazon’s site, “Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the states of Kansas, Kentucky, New York, North Dakota, or Washington are subject to tax.”  It is wise to check with your state to see what your tax obligation is.  For more information from Amazon regarding taxes, click here.

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College Students Beware of Financial Aid Scams

In the recent article 15 Common Financial Aid Scams to Watch Out For, the author points out that college students may be a vulnerable demographic.  So-called financial aid experts may be out to take advantage of those looking for legitimate ways to finance their education.  Watch out for some of the following wording:  Unclaimed Money, Buy Now, Application Fees, Free Seminar, and Guaranteed.  For the complete list of scams with explanations, click here

Finaid.org claims, “Every year, several hundred thousand students and parents are defrauded by scholarship scams. The victims of these scams lose more than $100 million annually.”  There is some protection against fraud.  The Scholarship Fraud Protection Act of 2000 has increased the penalties for this fraud, including a maximum fine of $500,000 and jail time. 

If you feel you have been scammed, you have recourse.  According to the Finaid.org site, “The following organizations can help you determine whether an offer is legitimate. They will tell you whether they have received any complaints about the company, or whether it’s currently under investigation. They can also provide you with additional information or assistance.

National Fraud Information Center (NFIC)
In addition to providing helpful information, the NFIC will pass your complaints along to the appropriate authorities, such as the Federal Trade Commission (FTC) and your state’s Attorney General’s Office. The NFIC also maintains a toll-free hotline at 1-800-876-7060.”

Who is Buying Stocks When Everyone Is Selling?

With the recent stock market drop, there was a mass sale off of stocks.  This may lead to the question:  If everyone is selling, is there a chance that there are stocks that no one wants to purchase?  The answer is technically no.  There are always as many buyers as there are sellers and that keeps the system going. 

If you are wondering who would want to buy stocks when the market is going down, the answer is:  a lot of people.  Some shares are picked up through options and some are picked up through money managers that have been waiting for a strike price. 

There are many people who set up stock limit orders so that when a stock hits a certain dollar amount, it is automatically purchased.  According to Money.cnn.com, “If you place a market order with your broker, then you are saying that you’re willing to buy at whatever happens to be the prevailing price for the stock. If you have a specific price in mind, you can set a limit order specifying the price you’re willing to pay. If the stock dips down to that level, your order will be automatically filled. Limit orders can be left open for a single day (a day order) or indefinitely (good until canceled). After you’ve bought a stock, you can instruct your broker to sell it if the price drops to a level you specify (a stop loss order). That’s a kind of insurance; it means that no matter what happens to a stock’s price you’ll never lose more than a specified amount.”

Some may look at this as legalized gambling.  A capitalist is always on the look out to get a better price or better dividend yield.  Dividend yields are based on the price of the stock.  If the stock goes down, the yield may go up.  For example since dividends are in dollar amounts and not percentages, if a $1 dividend is divided by a $20/share price then the dividend yields 5%.  If that $1 dividend is divided by an $18/share price then that dividend yields more at 5.5%.

The sheer volume of trading is staggering.  A local stock broker looked up today’s trade volume.  For August 9, 2011, 9 billion shares traded. 

Defaulting on a Mortgage: How it Affects Your Credit Score

Many consumers have taken a financial hit with the recent economic climate.  As more people are defaulting on their home loans, it is interesting to see the impact on FICO scores. 

What may be a surprise is how many wealthy people with good credit are going into foreclosure.  A recent article by the Arizona Republic mentioned how affluent, savvy homeowners are choosing to default on their home loans based on weighing the pros and cons to such a decision.  “Recent research suggests that affluent people tend to be the main strategic defaulters, and these individuals are also the ones who would sustain more serious credit-score damage.  This chart shows the resulting credit scores for two hypothetical consumers – one with an average initial score of 680 on the FICO scale and another with a high initial score of 780.”

Situation Initial 680 Score Initial 780 Score
     
30 days late on mortgage 600-620 670-690
90 days late on mortgage 600-620 650-670
Short sale, no deficiency 610-630 655-675
Short sale with deficiency or foreclosure 575-595 620-640
Bankruptcy 530-550 540-560

The savvy homeowner that sees their home investment as a money pit, may go ahead and buy what they perceive as a better home  purchase, perhaps a short sale, before they default on their original investment.  In this way, they have good credit to purchase the new home before they take the hit to their credit score caused by the default of their original home purchase.

What to Know before Investing in IPOs like LinkedIn or Pandora

Is investing in an initial public offering (IPO) a good idea?  With the recent LinkedIn and Pandora IPOs and talk of future IPOs with Twitter and Facebook, this is a question that many investors may be considering.  Imagine getting in on the ground floor of a giant like Coca-Cola? It might have been a wild ride, but those that hung in there, had a nice payoff.  Joshua Kennon of About.com reported, “A single share of Coca-Cola purchased for $40 at the IPO in 1919, for example, crashed to $19 the following year. Yet, today, that one share, with dividends reinvested, is worth over $5 million.”

Kennon suggests that if you have the stomach for risking your investment, you might want to consider whether the company can grow at a rate high enough to justify its price, whether there are any patents or trademarks to protect the business, whether you’d want to hold onto this stock for 30 years and if it fell by 50% would you have the stomach to handle it?

DailyFinance reported some additional questions to ask before investing in an IPO: (1) Is there an attractive market for the product? (2) Does the company have a significant share of the market? (3) Is the company’s management team experienced? (4) Is the company growing and profitable?

The following list shows some more recent IPO original offering prices compared to their current price (as of July, 2011):

Google Initial Offering Price, 2004:  $85/share

Google Price July, 2011:  $530/share

Pandora Initial Offering Price, June, 2011:  $16/share

Pandora Price July, 2011:  $19/share

LinkedIn Initial Offering Price, May, 2011: $45/share

LinkedIn Price July, 2011:  $98/share

Many employees of companies like Google became wealthy overnight when their companies went IPO. The New York Times article Google’s IPO 5 Years Later stated, “When the offering finally happened, it turned an estimated 1,000 Google employees into millionaires, at least on paper. Since then, many more millionaires have been minted inside the Googleplex, the Web search company’s headquarters in Mountain View, Calif.”

Not all startups have been this successful.  Businesspundit lists the 25 Internet Startups that Bombed Miserably. MSMoney also warned, “Many investors fret they’ll miss the next big thing because they have no access to the IPO market, but study after study has proven that IPOs historically underperform the broader markets.” FIGuide echoed that same sentiment in their article Should You Invest in IPOs, stating that there might be better options.  “A seminal paper published in The Journal of Finance looked at IPOs from 1970 to 1990. During the five years after issuance, investors in these IPOs got average annual returns of only 5%.(1) By contrast, the overall stock market’s average annual return from 1970 to 1990 was more than double that figure, at 10.8%. To put this in perspective, $1,000 invested at 5% for 20 years would have generated $2,653, while $1,000 invested at 10.8% would have generated $7,777, almost three times as much.”

Can the Unemployed Manage to Eliminate Debts?

 

Unemployment is at its worst in this recent economic meltdown and these unemployed people are struggling to pay off debts. Are you in a similar situation? Then you can file bankruptcy as it is considered to be the last option of debt relief programs. But if you declare bankruptcy then it might ruin your financial future. Therefore, you can follow a debt management plan to avoid the adverse effect on your financial situation.

Here are a few tips that will help you eliminate your debt without damaging your financial situation:

1. Look for a job:
You can be successful in eradicating your debts if you get a job immediately. You can use your income to pay off the debts and attain financial liberation. You need to work hard in order to get a well paid job therefore start applying for it. Until you get a job try to deliver newspaper, set up a roadside soft drink stand or deliver pizzas and utilize the money towards paying off your debts.

2. Negotiate with the creditors:
The next crucial step to eliminate your debts is to negotiate with the creditors to lower the principal balance and interest rate to make it affordable. You can easily convince the creditors by stating your financially distressed situation. If you directly approach the creditors then you can avoid the threatening calls from the creditors. Make sure that you are aware of the Fair Debt Collection Practices Act (FDCPA) then you can take action against your creditors if they harass you.

3. Pay the accounts down.
Right now do you have a part time job? Then inculcate the habit of saving so that you can start paying off your debts immediately. If you are unable to manage your expenses then formulate a budget plan as it will help you pay off the debts in an organized way.

4. Keep a track of your credit report:
You need to keep a track of your credit report once you pay off your debts. Make sure that your credit report shows paid in full otherwise your credit rating will drop. Therefore, request your creditors to notify the credit bureau as “paid in full”. You should review your credit report every three months in order to check if there is any discrepancies on it. If you locate any wrong entries on the credit report then ask the credit bureau to remove it.

5. Avoid borrowing:
It is advisable to avoid borrowing in order to secure your financial situation. You can create an emergency fund and deposit a portion of your income in the savings account then you can prevent yourself from taking out new loan.

GUEST POST: Stewart Smith, financial writer.

Cohabitating: Financial Reward Different for College Graduates

Just because two people live together doesn’t necessarily mean they will have a higher household income.  The Pew Research Center recently analyzed U.S. Census Bureau data and found that there are 7.5 million couples, in the 30-44 age range, that are cohabitating.  This analysis  indicated that an economic advantage was obtained for those that were college-educated and cohabiting but there wasn’t the same advantage for married couples or those without an opposite-sex cohabitant. 

Pew analyzed their economic well-being and that data was reported in  USAToday: “Median adjusted household incomes of college-educated couples were $106,400 for cohabitors, $101,160 for married couples and $90,067 for adults with no opposite-sex partners. But for less-educated couples, cohabiting is an arrangement that looks a lot like marriage and may well include kids: Incomes were $46,540 for cohabiters, $56,800 for married couples and $45,033 for adults without opposite-sex partners.” 

To read the USAToday article, click here.

Who’s living together?

Partnership status by education

All:
Married, 58%
Cohabitor, 7%
No partner, 35%

Not a college graduate:
Married, 54%
Cohabitor, 8%
No partner, 38%

College graduate:
Married, 68%
Cohabitors, 4%
No partner, 28%

Notes: Based on 30- to 44-year-olds. “No partner” includes those living without an opposite-sex partner or spouse.

Source: 2009 American Community Survey, Pew Research Center

New Study Shows Young Adults Find Power in Debt: Lack of Education to Blame

In recent research published in the journal Social Science Research, the data showed that young adults aged 18-27 actually felt empowered by having debt.  They felt that it increased their self-esteem and made them feel in control of their lives.  Because they were able to attain goals of buying things, they perceived this as a good thing.

ScienceDaily reported, “The study involved 3,079 young adults who participated in the National Longitudinal Survey of Youth 1979 — Young Adults sample. The NLSY interviews the same nationally representative group of Americans every two years. It is conducted by Ohio State’s Center for Human Resource Research on behalf of the U.S. Bureau of Labor Statistics.”

The young adults who had less money to begin with, felt more empowered by this new found ability to purchase things.  “Results showed that those in the bottom 25 percent in total family income got the largest boost from holding debt — the more debt they held, both education and credit card, the bigger the positive impact on their self-esteem and mastery.”

The study found that as young adults became older, they had a more realistic idea of what this debt was doing to their lives.  By age 28-34, the stress caused by the debt was starting to be felt.

The results of this study back up what has been called a movement toward an instant gratification society.  The Arizona Republic reported, “Many young adults might feel good about incurring debt because it lets them purchase desired items without having to delay gratification.  They are happy they can actually get credit and feel more like adults now.  .  .But they don’t actually understand what that entails.”

Eventually the bills start piling up and these young adults will have to face the consequences of paying off what they have charged.

How did this generation get to this point?  Lack of education may be to blame. Here is a reprint of an article I wrote several years ago that addressed this problem:

Lack of Education to Blame for Financial Crisis 

The current financial crisis is entirely our fault.  We are a nation of financially-ignorant people doing crazy things like buying a $450,000 home on a $40,000 a year salary with a 120% loan. How in the world did we think that this was OK?  What are we doing to be sure that this won’t happen again?  People are sick of reading about bad news and the economy. They’d rather just put their heads in the sand and hope Obama is here to save the day. Well I’m here to tell you, if we don’t change the way we teach personal finance to the youth in our country, we will have learned nothing from this economic disaster and future generations are doomed to repeat our mistakes.

FROM AN EDUCATOR’S PERSPECTIVE

Having taught college business students for many years, I am horrified by the lack of personal finance training our youth receives.  Should it be up to the young adult to learn this on their own? There are a lot of books on personal finance out there.  If you hang out at a bookstore and watch the type of people who are reading them, however, you will notice it is not the young generation purchasing them.  It is usually the 30 and older crowd that has now found themselves in financial straits and want to know how to get out of it.  The younger generation doesn’t realize that they need this knowledge yet.  Their parents probably never taught them because they probably have a limited understanding of personal finance themselves.  How can we expect parents to teach children something they never learned in the first place?

Shouldn’t personal finance be something we learn in high school and college to prepare us for our financial futures?  Arizona State University’s W.P. Carey School of Business has a good reputation.  I use that as an example because that is where I received my BS in Business.   Business Week lists ASU in its 2007 rankings as 66th out of the top 100 business schools.  I am not trying to pick on ASU because it is a wonderful school.  However, last semester they offered only one course that addressed personal finance and retirement planning.  Only three sections of this course were even offered.  For one of the largest business schools in the US, there was not much of a focus on educating our youth to be financially savvy.   ASU only required that business minors take this course.

I recently ordered the textbook that ASU uses for this course. I love to read all I can read about personal finance; I realize that I am not typical in that regard.  However, even with my keen interest in the subject, just looking through this text, I was so bored!  If I see the words “net present value of money” . . .  even I want to run.  I just don’t think that it teaches the types of things young people need to know in a way that would spark their interest.  This text is busy with charts, pictures, numbers and balance sheets.  A young adult that isn’t savvy in math might get immediately turned off by that.  To be fair, this course is offered to business majors who are probably decent in math.  However, what about the rest of the students who are not?  Why are we only teaching personal finance to business majors?  Granted, it is a class that is open to everyone, but it is not required.  To me, this text would be a “next level” type of teaching tool for those who understand the basics already.  Unfortunately if ASU is typical of what other schools offer, they are missing the boat of what it takes to reach the average student.

Even if some form of money management is taught before college, part of the problem stems with allowing kids to be able to advance through school without passing tests to prove their personal finance knowledge.  Dr. Danielle Babb, author, entrepreneur and professor who appears frequently on national television and radio claims, “Kids shouldn’t be allowed to move on if they haven’t mastered the basics.”  Unfortunately many are learning about finance the hard way.  Right now that may be through watching the collapse of the current economy. As Dr. Babb pointed out, “Right now an entire generation is learning about markets; that they don’t just go up – they can go down, too.”

Paula Zobisch, Ph.D., a well-respected professor who teaches business at ten online universities, agreed that this issue needs to be addressed.  When asked how she felt about the personal finance education that our youth is receiving she responded, “Sure, let us lean on the high educational institutions to teach financial management, but let us not also forget high school. And even more importantly, let us remember parents who could teach financial management by giving younger children an allowance and then guiding the management of that allowance. Financial management begins long before college.”

 

Fox News (2009) reported 48% of high school seniors correctly answered finance and economics questions.

This is not to say that more colleges and universities aren’t realizing the importance of teaching personal finance.  In fact, universities such as Lynn University, University of Cincinnati, Kent State, Fairfield University, Scripps College and Texas State all are among the colleges offering courses in personal finance and money-management.  However, some universities have had some convenient relationships with credit card companies which seem at odds with teaching fiscal responsibility.

New York Times recently featured a story about how colleges profit from marketing credit cards to their students.  Michigan State University came under fire as it was noted that they allowed Bank of America to offer advertising items to their students to sign up for banking and credit services.  In fact, according that the New York Times (2008) “Bank America’s relationship with the university extends well beyond marketing at sports events.  The bank has $8.4 million, seven-year contract with Michigan State giving it access to the students’ names and addresses and use of the university’s logo.  The more students who take the banks’ credit cards, the more money the university gets.  Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.”

If we step back to look at our children’s personal finance education even before college, it is interesting to check out the National Standards (2007) in K-12 personal finance education.  The standards define financial literacy as “the ability to use knowledge and skills to manage one’s financial resources effectively for life time financial security”.  The standards include areas such as financial responsibility, planning and money management, credit card and debt, as well as saving and investing.  Some of the 12th grade goals include having the ability to “analyze how economic, social-cultural, and political conditions can affect income and career potential” as well as “explain the effect on take-home pay of changing the allowances claimed on an employee’s withholding allowance certificate (IRS form W-4).  What they don’t really cover is how much time they are devoting to these topics.

 

The National Standards are created by the JumpStart Coalition for Personal Financial Literacy in Washington, DC.

There are educators and organizations set up that are trying to do something about educating our youth.  The DuPont Fund is one of these organizations. In 2008 this organization created a presentation to increase awareness of the lack of financial literacy.  In that program, the author addressed the areas that required attention.  “There are three parts to a successful financial literacy education program. (1) Quality Financial Education Products (2) Qualified and Trained Financial Educators (3) Evaluation Program in Place to Measure Results” (Lindfield, 2009).  If we do not have quality financial education products, then we are limiting the educators’ ability to reach this group of students.

FROM A YOUTH’S PERSPECTIVE

Having two grown daughters and after teaching for 6 different universities online, I personally have not found too many students who can meet many of the required standards.  If we have set guidelines for what seems to be admirable goals in educating our youth, why haven’t the graduating high school and college seniors learned these important lessons?  There are several reasons.  These schools may only be devoting a small amount of time to very important topics.  It is also quite possible that personal finance is the last thing on their minds while attending school.  They can’t even relate to it yet.  Lastly, when and if they actually do receive personal finance training, it is usually in a format that is hard for them to digest.

Many financial websites like Charles Schwab’s have some interesting statistics on how our youth view the importance of personal finance training. “Among the ideas tested, young people believe providing incentives for states to mandate financial education in schools is the most important step the Obama Administration can take to improve financial literacy.” (Schwab, 2009).  In fact, studies are showing that facing future demands without a financial education is a source of serious concern for young adults.  “Seven in 10 (71%) are “very concerned” about the country’s economic future. More than half (53%) are “very concerned” about their personal financial future” (Schwab, 2009).

The US Census Bureau (2009) predicts there will be 18.4 million college students this fall.

Part of the problem with educating our youth about personal finance is that books on the subject are written in an unfriendly or boring manner.  Even the books that are aimed at a young audience can be in question and answer format or simply read like text books.  When something is so far-removed from what they deal with on a daily basis as personal finance is in those early years, it must be taught in a way that allows young people to picture themselves in situations that they could relate to. It’s critical to sell them on the idea of the importance of understanding personal finance.

Having been in sales for over 25 years, I learned many tricks for things to do to “sell my point” so that customers would want my solution.  When I was in pharmaceutical sales, part of my sales training was to paint a picture in the doctor’s mind. If our youth is taught personal finance through picture painting or storytelling, perhaps they will learn more. Techniques like placing images in their heads are important for the person to get the point you are trying to get across.  If I told the doctor to prescribe my drugs because they were good, I got nowhere (this is what the traditional personal finance book does).  If I told them that their patient would be calling them at midnight complaining about migraines or inability to breathe if he didn’t prescribe my drugs, then he had a picture and more reason to do it because he didn’t want to be disturbed in the middle of the night. We need to paint the picture of why personal finance is important in students’ minds.

It is important to get the message of personal finance responsibility in front of the next generation so that they don’t end up the way previous generations are now, having to file bankruptcy or losing their homes.  By targeting our high school and college students with education that delivers the message in a picture-painted storytelling format to explain the importance of personal finance, perhaps the next generation will avoid the tragedies that we are all dealing with now.  To do this, we need to focus on creating educational materials that are delivering the message in a way that allows us to meet the standards that we have set for our youth.

FROM A POLITICAL PERSPECTIVE

Every day there is another article or news story about families facing foreclosures or bankruptcy.  According to Realty Trac there were more than 3.1 million foreclosures filed in 2008.   Even if people were able to keep their homes, suddenly they are upside down, owing more than it is worth.  We have over 3.5 million homeless people in the US.  If we are fortunate enough to still have a job . . . that may be all we have.  Those of us who had our retirement savings in a 401k are now wondering what we will do when we retire.  As we watch our life savings dwindle away with the falling stock market, shouldn’t we be thinking about how we got here and how we could have avoided this in the first place?

 

RealtyTrac (2009) data shows a steep include in foreclosure activity.

There are foundations and coalitions that focus their attention on such issues.  The New America Foundation addresses challenges facing future generations. Their site has had articles addressing the importance of utilizing what we have learned throughout this crisis to teach our youth.  “Such moments of financial trouble are teachable opportunities for children and youth to learn about personal finance, and to improve their own money management skills.  However, comprehensive strategies for educating children and youth about personal finance so that they can successfully navigate a complex financial market place have not yet emerged.” (Lopez-Fernandini & Murrell, 2008).

The problem is that changing the education system is no easy task.  Proposals must be made.  Money must be spent.  I recently sent a letter to Arne Duncan with the U. S. Department of Education, explaining my concern about the current lack of personal finance education for our youth. I explained I would like to propose a solution.  What did I get back?  I received a form letter commending my interest in education but politely stating that I should check out the Excellence in Economic Education (EEC, 2009) program already in place.  At the site, you can download current information about national programs currently in place.  According to the EEC, there was $1,447,267 worth of appropriations available for 2008 allotted to personal finance education.  Making grants available is a good start. But what about addressing the problems in the school’s curriculum?

Obviously the current programs are not working.  If we are not open to looking at alternative solutions to our current lack of education our children are receiving, aren’t we doomed to repeat our past mistakes?  I realize the government has its hands full with the current crisis.  However, our government may need to learn from its past mistakes.  Isn’t the definition of insanity doing the same thing over and over and expecting a different result?  By not addressing the problems within our educational system, we are doomed to repeat our past mistakes.

Related Articles:

Where Your College Tuition is Spent

 

Many people are going back to school to further their education in the hope of being more marketable in the workplace. As tuition increases, students may be wondering where their money is being used.

Onlinecolleges.net reported 10 Telling Stats on Where Your Tuition Money Goes. It is interesting to note that the professor’s pay is not a big factor in these increases. It may be surprising how much goes to construction and renovations. Also of note is how much is being spent on entertainment. “Travel and entertainment are major expenses for universities. For example, Kansas State University spent $9 million in travel and entertainment related expenses in 2010.” For the complete list explaining where your funds are being spent, click here.

Fear of Past Dot Com Crash: Venture Capitalists Only Interested in Consumer-Targeted Companies like Facebook or Groupon

 

The dot com crash has had a big impact on how venture capitalists invest in the current market. To understand why, it is important to know a little history about the impact of the Internet and why these investors are leery.

The Internet became commercially popular in the mid-1990s.  By 1995, there was an estimated 18 million users on the net.  This led to the creation of online businesses which led to speculation about how big these companies could grow.  The problem came with how much these companies were actually worth vs. how much they were perceived to be worth. 

What causes a bubble and eventual crash?  When people get excited about a company stock, it can drive the price up but if it inflates to an unrealistic point where investors get wise to the fact that the company can’t be worth as much as they hoped, people bail, sell the stocks, the price drops, and the company crashes. 

The pain of those dot com crashes are still felt today.  Venture capitalists now may be more hesitant to invest.  Tom Abate with SFGate.com said that venture capitalists in 2000 made about 8000 investments valued at $100.5 million.  “In 1999 and 2000, Wall Street invested in 534 venture-backed initial public offerings.” Those, who cashed in early, made a lot of money.  As large amounts of money were being put into the market and speculation was growing, the bubble was forming.  NASDAQ hit its peak on March 10, 2000 at 513252, only to lose 78% of its value by October, 2002 when it dropped to 11411.

In 2001-2002 while a lot of companies were over-valued and going bankrupt, people found their stock purchases were not such a great investment.  So now when Facebook and Twitter are considering going IPO it has some potential investors concerned.  This is especially true in the case of Twitter that has yet to publically show their business plan. 

What has the effect been on venture capitalists investing?  An article in Investopedia stated, “In the year 1999, there were 457 IPOs, most of which were internet and technology related. Of those 457 IPOs, 117 doubled in price on the first day of trading. In 2001 the number of IPOs dwindled to 76, and none of them doubled on the first day of trading.” SFGate.com reported, “In 2008 and 2009, a total of just 18 venture-backed companies went public.”

Investments have picked up for the consumer-oriented companies like Facebook and Groupon.  However there has been a venture squeeze for companies with business products.  Wall Street Journal reported, “In the first three months of this year, venture-capital investment in consumer tech companies nearly tripled to $874 million from $310 million a year earlier. Meanwhile, investments in tech firms with business products rose at a slower rate to $2.3 billion from $1.9 billion a year earlier.  The shift away from business-oriented technology start-ups has been gathering steam over the past few years. Venture investment into such companies was $11.9 billion in 2010, down 35% from $18.4 billion in 2006, according to VentureSource. The overall number of financing rounds these companies received also dropped 18% to 1,261 during that time.”

Is Your Target Date 401k Fund Not As Safe As You Thought?

Target date funds have become a very popular way for people to invest in their 401k. Target-dated funds are mutual funds that automatically adjust the asset mix of stocks, bonds and cash usually based on the investor’s future retirement date.  There are a lot of people out there that don’t want to take time to think about if they are invested in the right balance of stocks and bonds.  Target date funds take care of this balancing act for them.  As people get closer to retirement age, they have less time to weather the ups and downs of the stock market.  Because of this, as retirement draws near, these funds have traditionally been adjusted to be in less risky investments.  Bonds have often been considered less risky at times than stocks and therefore the closer the target date, the more these funds may tend to be heavily bond-loaded than stock-loaded. 

Recently there has been some debate as to whether these target date funds have a hidden risk.  As the market has become more volatile, some fund managers have been moving toward more bond funds. According to WSJOnline.com “Of the 45 funds with a target date of 2016 to 2020 tracked by investment-research firm Morningstar Inc., the average has about 32% in bonds and about 58% in stocks—up from 25% in bonds and 67% in equities three years ago.”

The concern is that there is debate as to the safety of these bond funds and that this move could actually cause more risk.  Some experts believe that the bond market may be headed for trouble.

For an interesting discussion of how the different fund managers perceive this to be a possibility, check out the Wall Street Journal article:  Hidden Risks in Target Funds

401K Reinrollment: Why Your Money May Be Put Into Target-Dated Funds

Target-dated funds are mutual funds that automatically adjust the asset mix of stocks, bonds and cash usually based on the investor’s future retirement date.  Companies have been offering these options for their employees for many years.  Some companies are now even having employees have to acknowledge if they don’t want to have their money put into target-dated funds.

In the hope of helping employees keep their money safe, companies are stepping in and trying to control where they hold their retirement funds.  Employees can continue to choose from their company’s listed fund choices, but if they don’t opt out of the target-dated funds, their money may just be moved for them.

For those people who don’t want to hassle with choices and watching their funds, this may be a good choice.  For those who are more financially savvy, the target-dated funds may not appeal to them; they may prefer to have control over their investments.

There are pros and cons to using target-dated funds based on gender, age and risk tolerance.  For more information about target-dated funds and employers utilizing them, check out a recent article by the Wall Street Journal by clicking here.

Baby Boomers Turn 65 This Year: Keeping the Illusion of Youth While Staying Healthy

This year the oldest baby boomers will turn 65.  If you call a baby boomer “elderly”, you might find that is not a term they take lightly.  The days of older generations taking it easy and moving to quiet communities have faded.  This is a very proud group that wants to remain vital and active for as long as possible.

Although boomers may not have noticed it, marketers are using subtle targeting methods to reach this group without insulting them. Some companies are using larger typefaces and avoiding colors that are hard to distinguish between to allow for their packaging to be distinct to older eyes.  If aging boomers haven’t realized their clothing size may remaind the same, while their body size increases, they may not be aware that clothing companies are doing something called vanity sizing.  Although not necessarily unique to only boomers, Mesh.com reported, “Gap, the parent company of Banana Republic, was contacted to ask about the new double-zero size. They said they’re responding to the demands of their customers. They said women want smaller sizes.”

Boomers may dress for success still but father time is creeping up on them.  Companies are doing their best to allow boomers to age gracefully, keeping their dignity intact.  WJS.com reported, “Kimberly-Clark spent two years overhauling its Depend brand, anticipating boomers would demand changes to the image and design of a line long considered too diaper-like and institutional. By 2020, Kimberly-Clark expects 45 million boomers will need incontinence products, up from 38 million currently.”

Those not ready for diapers, are not ready to sit on the porch swing and rock either.  In the past, retired generations paid off their mortgages to live their twilight years free of debt.  Boomers may be downsizing but many plan to move into new homes.  “A big driver of boomers’ increased spending is the fact that over one-third plan to move to a new home within five years of becoming empty nesters.”

Boomers may not be retiring as early either.  The stock market crisis is partly to blame, but there are other reasons.   Another issue facing this generation is that they often have to not only care for their children but their own aging parents.  They have often been called the sandwich generation because of this.  US News Money reported, “Almost a third (31 percent) of relatively wealthy Americans are supporting older and younger immediate family members at the same time, according to a new Merrill Lynch Wealth Management survey of 1,000 people with investable assets of $250,000 or more.” The stress from this has caused many boomers to have difficulty with their jobs and health, leading to a generation that experiences higher rates of depression.

RetirementBoomerStyle listed some recommendations for this generation and how to stay as healthy as possible, “So, while baby boomers are caring for the health of their family, they should keep themselves in mind as well. A diet that is high in fiber is ideal for the baby boomer, and including lean meats in the diet will provide the protein that is needed for energy and muscle toning. Baby boomer women should also considered taking a supplement that includes omega-3 fatty acids; this will improve memory and brain function, and make it easier for the body to fight off free radicals. In addition to taking supplements, women should also be sure to eat some form of fatty fish each week, such as salmon or tuna. Men of this generation should be sure to eat foods that are rich in lycopene, a substance that can reduce the risk of prostate cancer. Lycopene can be found in foods like tomatoes and watermelon, so eating these fruits fresh a few times a week can make a big difference when it comes to preventative health.”

Gainful Employment Rule: Effect on For-Profit Schools and Graduation Rates

 

For-profit education is beginning to feel the squeeze.  July 2, 2012 marks the day that the U.S. Department of Education rule goes into effect.  This rule restricts students from using government aid to pay for schooling that doesn’t include occupations that have a strong entry-level salary.  

This isn’t the only issue that for-profits are facing.  A loophole has been close that would allow schools to financially reward admission counselors for enrolling students.  This is one of the reasons enrollment is down at some of the major for-profit universities.  This has also led these universities to increase tuition to cover their losses. 

The programs that are considered not high paying enough to meet the Gainful Employment rule will be shut down.  The New York Times reported that accounts for only about 5% of these schools’ programs. What happens to the students already enrolled in them? The Arizona Republic reported  that they are allowed to continue with the program under the “teach out” rule.

Many for-profit universities are implementing new programs to help face their new challenges including:  orientation programs to improve retention, trying to bolster brand awareness, and finding ways to comply with the July deadline to meet the Gainful Employment Rule. 

Many of the guidelines that are changing now are to protect students and to be sure that they are graduating with degrees that will be worth their expense. Politics Daily reported that a study completed by the Committee of Health Labor Education and Pensions found “94.4 percent of students attending for-profit schools take out loans, compared to 16.6 percent attending community college and 44.3 percent enrolled in traditional four-year public schools. Much of that money comes from federal Pell Grants, which help low-income applicants attend schools of higher education, but is often never returned if they don’t graduate.”

It is important that students are able to complete their programs, not only to pay back the loans, but to move ahead in their careers.  The New York Times claimed, The report, “Subprime Opportunity,” by the Education Trust, found that in 2008, only 22 percent of the first-time, full-time bachelor’s degree students at for-profit colleges over all graduate within six years, compared with 55 percent at public institutions and 65 percent at private nonprofit colleges.

For now, for-profit colleges are making some needed changes. The Arizona Republic reported that Peter Wahlstrom of Morningsar, who tracks major for-profit education companies, stated, “What you are trying to do is create a solid program based on academic quality, which, in turn, helps with student outcomes. That helps with retention, that helps with enrollment, and that eventually helps with financial results.”

Find Out How Much Jobs Pay

imagevia sixapart.com
In a presentation I gave the other night, someone in the audience asked if there was any questions you should not ask in the job interview.  One thing that many career experts will tell you is not to bring up money.  How then, are you supposed to know if the job is something you even should be considering?  There is a way to get an idea of what you can expect in terms of pay from a specific company.  The site is SimplyHired.  I used to use Salary.com quite a bit when I worked in loans and underwriting.  What is nice about SimplyHired, though,  is that it gives some more specific information about individual companies. 
 
I thought I would put it to the test by looking  AstraZeneca.  I chose that company since I worked there for so many years and was curious about the accuracy of SimplyHired.  This is what they showed:

Average Astrazeneca Salaries in AZ

 

astrazeneca

$65,000    

Average Google Salaries in AZ

 

google

$52,000    

For GoDaddy:

Average Go Daddy Salaries in AZ

 

go daddy

$20,000    
 
For Insight:

Average Insight Salaries in AZ

 

insight

$64,000    

 

Top 10 Personal Finance Articles

Investopedia Logo
I am a contributing writer for investopedia.com.  The following is a list of my top 10 personal finance articles I wrote for that site:
•  Condo Complications: The Issues Behind Ownership  – Being a “condo person” is just one of the issues you’ll have to examine when deciding if a condo is right for you.
•  Improve Your Karma With Microlending  – Not all businesses are self-sustaining – many rely on microlending in order to survive.
•  Things To Know About The Home Modification Plan  – This program allows FHA borrowers to reduce monthly mortgage payments through negotiation with lenders.
•  How Unemployment Affects You (Even If You’re Working)  – Rebounding from a stint of unemployment can be a frustrating thing to do. These tips should soften the blow.
•  Affinity Fraud: No Safety In Numbers  – Ponzi schemes are just one example of this type of scam; learn how to avoid becoming a victim.
•  Bankruptcy Filing Changes That Could Affect You  – When the economy is down, more people file for bankruptcy. Make sure you know about the changes that have been made to this process.
•  Recognize And Avoid “Work At Home” Scams  – From pyramid schemes to envelope stuffing, there are a lot of scams masquerading as legitimate part-time work.
•  Using Age-Based Funds In Your 401(k)  – If you prefer a “hands-off” approach to saving for retirement, target-date funds may be for you.
•  Lending From A Loan Officer’s Perspective  – Learn how a loan officer thinks, so that you can get the best and safest loan.
•  Employee Benefits: How To Know What To Choose  – Starting a new job is stressful but you don’t need to sweat about setting up a benefits package.

College Costs . . . Good News Bad News

[Tuition]

image via online.wsj.com

If you are considering going back to college, you may be interested to know that tuition rates are going up.  That is the bad news.  The good news is that the Pell grants are on the rise.  I give a lot of advice about paying for college in my book, The Online Student User’s Manual.  For more information, you can also check out some of my recent articles by clicking here.   

According to an article in WSJ.com by Stephanie Banchero, “The average price of tuition and fees for in-state students at public four-year institutions is $7,605 this school year, a 7.9% increase over last year. At private nonprofit colleges and universities, the average price is $27,293, a 4.5% rise. Two-year state colleges saw a 6% rise to $2,713.”  To read the entire article, click here.

Which Degree Will Make You The Most Money

 

If you are considering going to school or going back to school, check out some of these figures gathered from over 11,000 graduates.

[MAJORPAY]

What is Rapleaf and What Do They Know About You?

 

If you look at Rapleaf’s site, they describe their business in the following manner: “Rapleaf is a San Francisco-based startup with an ambitious vision: we want every person to have a meaningful, personalized experience – whether online or offline. We want you see the right content at the right time, every time. We want you to get better, more personalized service. To achieve this, we help Fortune 2000 companies gain insight into their customers, engage them more meaningfully, and deliver the right message at the right time. We also help consumers understand their online footprint.”

According to an article by Emily Steel from the Wall Street Journal, Rapleaf is building a database with all of our information in it.  They do this by tapping into voter-registration files and looking at our social networking, shopping and real estate purchases.  According to that same article, “Rapleaf says it never discloses people’s names to clients for online advertising.”

I’ve seen blogs that consider this “scare journalism”.  Are these articles meant to scare us or are they something we need to worry about?

Here is what The Wall Street Journal found:

  • Rapleaf knows your real names and email addresses.
  • It can build rich profiles by tapping voter-registration files, shopping histories, social-networking activities and more. In effect, it can built the ultimate dossier on you.
  • Rapleaf sells pretty elaborate data that includes household income, age, political leaning, and even more granular details such as your interest in get-rich-quick schemes.
  • According to the WSJ, Rapleaf segments people into 400 categories.
  • Rapleaf says it doesn’t transmit personally identifiable data for online advertising, but the WSJ found that is not the case. Rapleaf shared a unique Facebook ID to at least 12 companies and a unique MySpace ID number to six companies. Any sharing was accidental, the company said.
  • Politicians, both Democrats and Republicans, are using Rapleaf. It has provided data to 10 political campaigns

Bad Credit Causing More Unemployment

How to Reinvent Your Career by Dr. Diane Hamilton
Think about the person who is trying very hard to find that new job.  They may have missed a few payments due to being out of work.  This has caused their credit to be less than stellar.  If they should find that perfect job, the future employer will run their credit.  If the credit score comes back as low, their chances for getting the job are damaged.  It is a vicious cycle.

Here’s how particular events could affect a person with a 780 credit score and someone with a 680 credit score:

Initial score 780 680
Maxed credit card 735-755 650-670
30-day delinquency 670-690 600-620
Settled a credit card for less than what’s owed 655-675 615-635
Foreclosure 620-640 575-595
Bankruptcy 540-560 530-550

Source: MyFICO.com

The Arizona Republic reported today that The Society of Human Resources Management showed: 60% of employers conducted credit checks on job applicants in 2010.  Of this figure, 47% have done so only for candidates for select jobs and 13% have done so for all job candidates. 

What can you do to avoid having your credit score drop?   Jahna Berry stated the following in today’s Arizona Republic:  “If you’re headed for financial problems, carefully consider how missed mortgage payments, overdue bills or a bankruptcy filing could affect your credit report and your future job prospects, several employment experts said. Seek out help and look for options that will protect your credit.”

New Businesses Not Getting Loan Approval

A survey by the Federal Reserve Bank of New York shows that small businesses in the area are not getting the loans they are applying for this year.  Businessweek.com reported, “Of the 59 percent of businesses responding to the poll that applied for credit in the first half of 2010, only half got any loan approval at all, and three quarters said their full borrowing needs were not met. (The PDF of the report is available here.)”

In the entrepreneurial courses I teach, my students discuss the issues a new start-up must face.  Raising capital may be one of the most difficult hurdles right now.  Part of the problem stems from not having collateral to secure the loans.  If this is the case, it may be possible to obtain a loan through merchant services. Credit cards with cash advances may be an option.   

Articlebase.com suggests there are other things you can do to qualify for a loan.  “First you need to identify which among the many types of small business loans you need. Small business loans ranging from $5,000.00 to $35,000.00 are called micro loans. For larger needs, such as for the acquisition of land, buildings and other major fixed assets, development financing is what you should find. There are also import export loans as well as franchise financing. Do your research to find out if you are qualified for small business loans guaranteed by the U.S. Small Business Administration or SBA.” 

There is some positive news.  According to Finance.yahoo.com, “Federal Reserve Chairman Ben Bernanke said in a speech on Friday that there have been some “positive signs” in the credit conditions for small businesses. “In particular, banks are no longer tightening lending standards and terms and are reportedly becoming more proactive in seeking out creditworthy borrowers,” he said.”

How Much Is Your Favorite Celebrity’s Net Worth? Fun Site Gives You An Idea

Celebrity Net Worth

Have you ever wondered how much an actor, musician, politican, businessman, athlete, rapper or someone else famous was worth?  Perhaps you wondered if Bruce Willis was worth more or less than Demi Moore.  There is a site called CelebrityNetWorth that can answer some of these questions for you.  The site is pretty easy to navigate.  You can ask questions like:  What rapper makes the most money?  Or . . . .Who are the richest people in the world?  You can even ask it how much a plumber makes . . .And  you can get some answers.  You can also input celebrity names and find out how much money they have.  I looked up a few that interested me but here are some of the most popular searches:

Some other names I noticed on their site included, Dr. Phil, Suze Orman ( worth $35 million), Huge Hufner, Mark  Zuckerberg (worth $6.9 billion) according to that site, and many more.  What I thought was interesting was there was a random celebrity button that, when pushed, would pull up random people that you may or may not have thought of in your quest for financial knowledge.

How reliable is the data?  According to their site, “All information presented on CelebrityNetWorth.com is gathered from sources which are thought to be reliable, but the viewer should not assume that such information is up to date or completely accurate or final. CelebrityNetWorth does not assume responsibility for any errors in the information it presents on this site.   All information on this site is based solely on public information and is subject to change without notice.”

If you are interested in finding out more about celebrity personalities like Chris Rock, Dwight Shrute, Ari Gold and more, click here

For more about celebrity net worth being knocked off line, click here.

For more information about increasing your own net worth, click here:  How to Reinvent Your Career.

What is Google Checkout? How Does it Compare to PayPal?

According to their site, Google Checkout allows you to:

Stop creating multiple accounts and passwords. With Google Checkout™ you can quickly and easily buy from stores across the web and track all your orders and shipping in one place.

Shop with confidence. Our fraud protection policy covers you against unauthorized purchases made through Google Checkout, and we don’t share your purchase history or full credit card number with sellers.

Control commercial spam. You can keep your email address confidential, and easily turn off unwanted emails from stores where you use Google Checkout.

If you want to hear testimonials from Google Checkout customers, click here.

Some of the things they are saying about Google Checkout is that it is:

  • Fast and Easy
  • Safe and Secure
  • Protects Personal Information
  • Helps Buyers Resolve Issues
  • Allowing Shopping With Confidence

If you would like to take a tour of or see a short video about Google Checkout, click here.

Once you sign up, they offer a deals page where you can find discounts from many different stores.

How does Google Checkout compare to Paypal?

Check out this excerpt article from an article on bestshoppingcartreviews.com:

Basic overview of Google Checkout vs. PayPal

There are some areas that can be used to determine which payment processor is best for you. This is a comparison of how they stack up in Google Checkout vs. PayPal:

  • How customers can make payments. With Google Checkout, customers can only use the credit or debit card. It is possible for customers to store this information in order to avoid entering it every time. PayPal, on the other hand, allows for credit card payment or deduction from a bank account. eCheck capability is also available. In this way, PayPal is more diverse.
  • Rate merchant reliability. For many online shoppers, it is important to know that you are reputable. Both Google Checkout and PayPal rate merchants.
  • International shopping. PayPal has a definite edge in this area. Google Checkout is only available for U.S. purchases. PayPal, on the otherhand, is accepted in 55 countries. In addition to the U.S. dollar, PayPal also accepts the euro, the pound, the Canadian dollar, the yen and the Australian dollar. Currency exchange is also available (for a fee).
  • Security. Both Google Checkout and PayPal offer SSL security on the same level that banks do.
  • Fraud protection. PayPal only offers fraud protection for sales of more than $50. Google offers 100% refund, but you must report within 60 days. There have been complaints about PayPal’s payment resolution process as well.
  • Fees for accepting payments on your business Web site. Depending on the level of you account with PayPal, you pay 1.9 percent to 2.9 percent of your sales, and sometimes you pay 30 cents per transaction. Google Checkout is 2% of sales, plus 20 cents per transaction. However, with Google, you can use your AdWords account to reduce the cost of your transaction fees. This arrangement does not exist with PayPal.
  • Customer service. It is worth noting that PayPal offers a customer service line with live people (you can call a phone number). It can be difficult to contact Google Checkout customer service in any way besides the forum provided or email.

One of the main advantages that Google Checkout has is its integration with AdWords. This means that you can get preferred pricing on a number of services – and even automatically pay transaction fees with earnings from your AdWord account. Additionally, when your ad is displayed on other Web pages and in search engine results, a shopping cart icon appears so that it is easy to see that you accept Google Checkout, offering a possible way to increase sales.

With PayPal business merchant account, a great many of the advantages come in the fact that more people use PayPal, and that there is a range of services and features available that include invoicing, statements, shipping and tax calculations and customer options.

You should carefully consider your needs before deciding on whether or not to go with Google Checkout or PayPal. How you run your business, and the kinds of features and services you want should be factors in which payment processor you use.

Cities Where Women Earn More Than Men

Median Wages for Women vs. Male Peers

Metro Area    Wage Ratio   
Atlanta, GA 121%
Memphis, TN-AR-MS 119%
New York City-Northeastern NJ 117%
Sacramento, CA 116%
San Diego, CA 115%
Miami-Hialeah, FL 114%
Charlotte-Gastonia-Rock Hill, NC-SC 114%
Raleigh-Durham, NC 114%
Los Angeles-Long Beach, CA 112%
Phoenix, AZ 112%
Richmond-Petersburg, VA 112%
San Francisco-Oakland-Vallejo, CA 111%
Cincinnati-Middletown, OH-KY-IN 111%
Oklahoma City, OK 110%
Riverside-San Bernardino, CA 109%
Salt Lake City, UT 109%
Dallas-Fort Worth, TX 108%
St. Louis, MO-IL 108%
Kansas City, MO-KS 108%
Columbus, OH 107%
Washington, DC-MD-VA 106%
San Antonio, TX 106%
Milwaukee, WI 106%
Jacksonville, FL 106%
San Jose, CA 105%
Houston-Brazoria, TX 104%
Tampa-St. Petersburg-Clearwater, FL 104%
Portland, OR-WA 104%
Cleveland, OH 104%
Orlando, FL 104%
Las Vegas, NV 104%
Austin, TX 104%
Providence-Fall River-Pawtucket, MA-RI 104%
Nashville, TN 104%
Louisville, KY-IN 104%
Birmingham, AL 104%
Chicago, IL 103%
Norfolk-VA Beach-Newport News, VA 102%
Philadelphia, PA-NJ 101%
Boston, MA-NH 100%
Detroit, MI 100%
Minneapolis-St. Paul, MN 100%
Baltimore, MD 100%
Denver-Boulder, CO 100%
Pittsburgh, PA 100%
Indianapolis, IN 100%
Hartford-Bristol-Middleton-New Britain, CT 100%
Seattle-Everett, WA 96%
New Orleans, LA 93%
Buffalo-Niagara Falls, NY 92%

 

Our Kids’ Financial Futures Are At Stake

The sky is falling. We hear about it every day. The stock market is plunging, the housing bubble has exploded, and the list of doom and gloom goes on and on. How did we get here? We consider ourselves a bright nation. Why then, didn’t we see this coming? Did we get too greedy? Did we lose our common sense? Perhaps it was a little of both. What is important is what we have learned from our mistakes and the knowledge we pass down to our children to help them avoid a similar fate.

Unfortunately our children may end up sinking in our same boat. Even if they go to college, the personal finance education they will receive will be slim to none. While in college, our children are finding themselves more in debt than any past generations. Think about some of the financial statistics for our youth:

  • 76% of undergraduate students have credit cards, while carrying a balance of over $2000, according to Nellie Mae. 28% percent of students roll over their debt each month.
  • College graduates are finding that they are over $20,000 in debt, according to Creditcards.com.
  • Charles Schwab reported in a 2007 survey that 45% of teens have credit cards but only 26% know how to understand how their fees and interest payments.

Whether we are looking at Generation Y, Echo Boomers, Millenials or any of the other names given to those born after 1982, it is important to understand that they have been raised to expect immediate gratification. Sixty Minutes did a recent feature discussing how companies are even bending over backwards to meet the demands of this high-expectation generation.

If everybody is bending over backward to meet their needs, what is going to happen when they have to be financially responsible for themselves? Why aren’t we bending over backwards to help them learn to be financially independent? We have seen that past generations (their parents) have been poorly educated and are apparently in no position to teach them. If it is not to be taught by parents who are uneducated themselves, where will they get this knowledge?

Currently many colleges and universities are rethinking their position in including personal finance education. Unfortunately these classes are mostly electives or only required by business majors. It costs upward of $6000/year average to pay for a child’s college tuition. What are they getting out of that to prepare them for their adult life?

What can be done?

  • Colleges can create more course offerings to include personal finance education. Within the courses, texts need to be appropriate for all majors. Many colleges offer texts for these courses that are math-intensive, which can turn off the student who is not a math genius.
  • As parents we can help our children by sharing our mistakes and explaining what we ourselves have learned in the process.
  • K-12 Guidelines can be updated to include more specifics as to amount of “time” devoted to the financial literacy information our schools are supposed to be teaching.
  • Personal finance books for younger students could be created in a story-telling format that would allow for them to relate the importance of what they are learning to their own lives.

If future generations are not taught to become financially responsible, who is going to bail them out? Are we going to have to just keep relying on the government to come to the rescue? It certainly isn’t going to be their parents, as they have lost their retirement nest eggs. In fact, their parents may be looking at this generation to take care of them.

Guest post by Diane Hamilton, who has a BS, MA and Ph.D. in Business Management. Her experience includes working in several industries including pharmaceuticals, banking and real estate. She has trained corporations in areas such as time management, emotional intelligence and Myers Briggs. She currently works as an online professor, working for 5 different universities. She teaches mostly business-related courses to bachelor, master and doctoral level students as well as mentors doctoral learners. She is in the process of writing a personal finance book for the young adult. Diane can be reached through www.drdianehamilton.com

Students Using Social Media for School Shopping

Marketing school products has taken a virtual direction with sites like Facebook, My Space, Twitter and others focusing their messages on young shoppers.  Advertising on cell phones and social networking sites is becoming more common.  Students can now see virtual dressing rooms right on their phones.  Apps, or applications, are the big thing now.  With them, companies can set up pages on Facebook and other sites to show off their product line. 

In a recent article in the Arizona Republic, Staples Inc. spokeswoman Karen Pevenstein stated that virtual retailing is big business. “It’s the best way to reach teens.”  This same article cited that “Young shoppers are expected to spend more than $200 billion of their own and parents’ money this year, making them one of the retailers’ most sought-after demographic groups.”

According to ABC News, the latest trend is to post haul videos.  “A new phenomenon called haul videos means they can show off their purchases to the whole world. There are more than 110,000 haul videos currently on YouTube, and some videos are racking up tens of millions of views. Hauls are short product review videos. The “vlogger,” or video blogger, shows off her goods, gushing about everything from lip gloss to flip flops and gives her opinion on the quality of the products. Haul videos are the perfect marriage of two of Generation Y’s favorite things: technology and shopping”

It is not just teens and tweens students that have the retailer’s focus.  This year it is anticipated that $34 billion of the estimated $55 billion in back-to-school spending will collected from college students and their parents.  The Arizona Republic reported, “To reach that market, retailer Target Corp. has added a “college” tab to its Facebook page with coupons, supplies, checklists and sharable cellphone apps to help students determine how to furnish their dorm rooms or apartments and manage shared bills and chores with roommates.

FHA Calculator

 

It is easier than ever to know the loan amounts that FHA offers. If you are in the mortgage business, you can get the widget for your website showing loan limits for your state at: http://www.fha.com/fha_loan_limits_widgetcode.cfm.

The amounts shown in the picture above are the actual loan limits right now for FHA loans in Maricopa County, Arizona.

Ask Dr. Diane: Do You Have A Question?

I have dedicated  a section of my blog to answering questions about the topics I cover in my books.  If you have a question about online learning, personalities in the workforce, how to get a job or reinvent your career, personal finance, social media or any of the other topics I cover here, please  email me at diane@drdianehamilton.com and I’ll be happy to post it here with my response.

Ask Dr. Diane: Starting Over In Life – How to Catch Up Financially

Today’s Question Is:    I am pursuing my Masters. I am divorced, 49 and just starting over in my life.  I now have a 30 year mortgage on a home (I look at it as an investment).  I really am worried about my future and how well off I will be financially.  Starting over has cost me a fortune but personally I am extremely happy, until I think about my future, and then severe anxiety.  Not to mention paying student loans.  Anyway do you have any resources for women like me?  I feel happy that I am an RN and am actually working but I want to be better off financially.

Answer:  Thanks for the question.  Having a masters can only help you in the long run.  It opens doors for you in terms of work possibilities.  You said you like being an RN.  Are you interested in teaching as well?  I like the site http://higheredjobs.com. They list teaching jobs for people with a master or doctoral degree.  I think teaching online could be a good part time way to get extra money and also set you up for a possible full time job in the future should you want to stay home, not be in nursing any more and/or not be worried about your age being a factor in finding new career opportunities.  I am almost 48 … and realistically we are not at our most marketable age.  I write about this in my book How to Reinvent Your Career.  It will be available on Amazon in about a month or so.  You can find out more here on my website and on my blog at www.drdianehamilton.wordpress.com or on Facebook.
 
Be sure you are putting the maximum amount away in your 401k or your IRA if you don’t have a 401k. After you turn 50, you can put an additional $5500/year away in your 401k to catch up if you are behind. Many people are working past the retirement age of 65.  If you have your masters and have some online teaching experience that you could be developing now, you will be able to supplement income nicely and not have to work a full 8-hour day.  The extra income could also help you pay off those student loans. 
To hear more financial advice, listen to my recent interview with Dean Voelker by clicking here.

Dr. Diane Hamilton is Interviewed by Dean Voelker

Click the date link to hear the audio file. Please be patient for the file to load in your media player.

  • 07/31/2010 – Dr. Diane Hamilton (Current Show)
  •       click this link to hear the show

    Dr. Diane Hamilton

    Click on the above link and go about five minutes into the show to listen to Financial Talk Show Host and Author, Dean Voelker, interview Dr. Diane Hamilton about young adults, money, online learning, careers, and even Lady Gaga. . . Stay tuned until the end to hear more about Diane’s books: The Online Student’s User Manual, How to Reinvent Your Career and Ten Things The Young Adult Needs to Know to Be Financially Savvy.

    Dean Voelker Interviews Dr. Diane Hamilton

    WHME-FM Radio Show

    Listen to Dean on WHME 103.3 FM for Improving Your Financial Health “Improving Your Financial Health”
    Listen to this Radio Program
    with Dean Voelker, AAMS
    on WHME-FM in South Bend, IN
    Saturdays at 9:00am EST
    Click Here: 2010 Archived Shows

    Upcoming Show – “Improving Your Financial Health”

  • –>07/31/2010 – Dr. Diane Hamilton (Upcoming Show)
    My guest this week is Dr. Diane Hamilton – www.drdianehamilton.com. Diane has a Doctorate in Business Management and currently teaches business courses for six online universities. Along with her teaching experience, she has more than 25 years of business and management experience. Dr. Hamilton has also written several books and articles which focus on understanding online education, and personal finance for young adults. Her most recent book, Ten Things Young Adults Need to Know to be Financially Savvy is designed to teach young adults basic principles of personal finance. The unique and innovative style of the book engages young readers to learn about money management, home-buying and other areas of personal finance in an entertaining and personal way that is far from the typical dull text available on the subject. Please join me for a lively discussion with Dr. Diane Hamilton as we talk about how to keep young people better informed.
  • Dr. Diane Hamilton

    My interview with Dean will be on Saturday’s show and you can also check back on Dean’s site at www.helpmy401k.us for the actual interview file if you miss it.

    How to Form an LLC With Rental Property | eHow.com

    Many investors use rental property to create “passive income.” Investors can buy apartments, commercial property or even single homes to then rent out to tenants. While these properties can produce cash flow, they can also leave the owner with personal liability for the business. Putting your rental properties into an LLC will limit your personal liability with a very small initial setup cost. You can even form an LLC online for a fraction of the price of meeting an attorney in person.

    Difficulty: Easy
    Instructions
    1. Step 1

      Choose an available LLC name in your state. When forming an LLC, you need to pick a unique name that no other company is using as this name will appear on all of your documents and banking information.

    2. Step 2

      Find an online LLC vendor or contact an attorney. You can work with an attorney one-on-one or form your LLC online by yourself. You’ll need to supply some basic information such as business address and the names and contact information of the owners.

    3. Step 3

      Pick your statutory agent and pay your filing fees. Every LLC needs a registered agent on file with the state, who will be the person to receive legal correspondence on behalf of the company. When applying for an LLC, most states charge a fee that must be paid at the time of filing.

    4. Step 4

      Start operating your rental property under the LLC. The next time you take on a tenant, change all of your rental property forms and contracts to the name of your LLC instead of your personal name. Henceforward, the LLC will be liable for those contracts and you personally will have limited liability.

    5. Step 5

      Start a bank account for your LLC. Your LLC is its own entity, so it can open a business checking account to receive the rental income, pay the rental property expenses and debt service and pay profits to you as the owner.

    I had someone ask me today about using an LLC for their rental property. I personally use Keyt Law in Arizona http://www.keytlaw.com/ – I think they do a nice job.

    I use LLCs to protect me financially. Here is a great link to FAQs about why you should use an LLC to purchase real estate: http://www.incorporate.com/real_estate_faqs.html

    Improve Your Karma With Microlending

    If you haven’t heard of microlending yet, you are not alone. Although it is primarily something that has been found in third world countries, the U.S. is also in the microlending market. What makes microlending unusual is that it can be done by just about anyone and the amounts that you lend can be quite small. Some of the proponents of microlending even suggest that these loans could help to end poverty.

     

    What Is It?
    Microlending occurs when loans are made are small and/or are unconventionally secured, if at all. They are a means for people who could normally not receive credit to be able to obtain a loan. The idea is to spur entrepreneurship. Many people, often times women, in traditionally poor areas may come up with an idea for a business but may be unable to obtain financing. Originally starting in developing countries about 30 years ago, these loans were intended to build wealth and, with hope, end poverty. (Learn more about emerging markets in Evaluating Country Risk For International Investing.)There are two types of microlenders: For-profit and not-for-profit. eBay’s subsidiary, Microplace, is an example of a for-profit dealer. Those wanting to donate to an individual borrower can use their Paypal accounts to transfer money. Kiva, a well-known not-for-profit lending organization, doesn’t receive any interest on its loans, but the field partners through which loans are managed do charge borrowers interest. Kiva has some interesting statistics regarding its loans:

    Total value of all loans made through Kiva: $105,084,510
    Number of Kiva Lenders: 601,646
    Number of countries represented by Kiva Lenders: 188
    Number of entrepreneurs that have received a loan through Kiva: 261,312
    Number of loans that have been funded through Kiva: 149,794
    Percentage of Kiva loans which have been made to women entrepreneurs: 82.55%
    Number of Kiva Field Partners (microfinance institutions Kiva partners with): 106
    Number of countries Kiva Field Partners are located in: 49
    Current repayment rate (all partners): 98.04%
    Average loan size (This is the average amount loaned to an individual Kiva Entrepreneur. Some loans – group loans – are divided between a group of borrowers.): $402.88
    Average total amount loaned per Kiva Lender (includes reloaned funds): $174.98
    Average number of loans per Kiva Lender: 5.03
    Data as of 11/27/2009 from Kiva.org

    Kiva and other organizations advertise the appeal of lending being a safe investment and a socially conscious thing to do. Developing countries have many people who are in great need of assistance, and the hope is that by donating to these people, the economies of their countries will benefit.

    These loans are not only being made available overseas. U.S. entrepreneurs can also take advantage of this financing. In fact, small and private businesses make up more than 87% of all businesses in the United States – accounting for 900,000 newly-created jobs every year. And funding for these companies often comes from lending firms.

    Criticism
    It has been suggested that excessive interest rates have been charged in the microlending game. This is because there are no legal limits – and little government involvement – in this field.

    Researchers at MIT recently have worked on two papers that suggested microlending may not be as impactful as originally hoped. The research found that many microcredit clients actually use the monies they receive through lending on household items – debt, car payments and luxury items – rather than the businesses for which it was designated.

    Becoming a Microlender
    One of the first decisions you must make is whether to donate interest-free or not. In addition to lending through third party organizations, you can also become a lender on your own. If you do so, it is important to confirm that your client is reputable and has the intention of abiding by timelines, late payment policies and interest rates, as it relates to repayment of the loan.

    Conclusion
    Microloans can become a valuable part of your charitable gift giving. Although these loans have no guarantee that they will be repaid – as is the case with any loan – you may be helping those in need as well as helping a depressed economy. Financial interest returns may be small or non-existent, but the money invested may be a charitable way to help out those in need.
    For related reading, check out Microfinance Has Major Impact and Using Social Finance To Produce A Better World.

    by Diane Hamilton, Ph.D (Contact Author | Biography)

    Diane Hamilton’s formal education includes a Bachelor of Science, a Master of Arts and a Doctorate degree in Business Management. She has an Arizona real estate license as well as certifications in the areas of medical representative, Myers-Briggs and emotional intelligence. With more than 25 years of business and management-related experience, her background includes working in many industries, including computers, software, pharmaceuticals, corporate training, mortgage/lending and real estate. She currently teaches business-related subjects for six online universities and is in the process of writing a book on personal finance for young adults. She can be reached through www.drdianehamilton.com.

    Compare Your Rental Rate

    Paying too much for rent?
    Charging too little?

    Rentometer is the easy way to compare your rent with other local properties.

    Everyone wants to save money in this tough economy.   I think this rentometer.com site has an interesting tool that lets you know how much rental rates are in certain areas. If you are looking to rent a place or looking to have your own place rented, you should check it out.

    Need a Loan? Find Out What The Loan Officer is Thinking

    Lending From A Loan Officer’s Perspective

    by Diane Hamilton, Ph.D

    It is awfully nice of lenders to be offering free loans. At least, that’s what it sounds like they’re doing. Think of all of the radio and television ads you have heard where the lender claims to be offering loans with no out-of-pocket costs. Have you ever wondered how they can do this? If they are not charging you, the money has to come from somewhere. It helps to clear things up when you understand how a loan officer makes their money. 

    Pay Now or Pay Later
    Loan officers get paid in a way that they call “on the front” and/or “on the back.” If a loan officer makes money on the front, that means they are charging for things that you can see. This money is either out-of-pocket or is incorporated into the loan when you sign the papers. These are things like processing fees and other miscellaneous charges that are charged for processing your loan. If a loan officer makes money on the back, that means money is being received from the bank as a sort of commission for filing the loan. This is the money you do not see. (To learn more about loan expenses, read our related article How To Read Loan And Credit Card Agreements.)

    When lenders claim to be giving you a “no out-of-pocket” or “no-fee” loan, they are still making money, but they are charging it on “the back.” Although the bank is paying the loan officer this money now, it is really coming from you the borrower in the form of a higher interest rate. Lenders that are not charging fees on the front can be charging a higher rate to make up for lost fees. In fact, the bank could be making a lot more money this way as they are getting a higher rate of interest for possibly 30 years or more. (Learn how interest rates affect change in the housing market, and how you can keep up, in How Will Your Mortgage Rate?)Comparing Loans
    How do you compare loans to be sure which deal is the best for you? You need to understand something called the annual percentage rate (APR). When you apply for a loan, the loan officer must give you a good faith estimate. On that estimate, you can find the APR. The APR shows the entire cost of the loan to you on a yearly basis. It factors in what the fees cost as well as the interest rate. By comparing good faith estimates and their APRs, you can get a better idea of what they are charging you.

    So is that loan really free? As they say, there is no such thing as a free lunch. You might not be paying money out-of-pocket right now, but either you pay now or your pay later. Many times it is a better deal to pay the fees now to get a lower rate instead of paying a higher rate over 30 years.

    What the Loan Officer is Thinking
    Remember, loan officers are sales people; they get paid by selling you something. In this case, they are selling you the loan. If they are telling you it is a good time to refinance, you need to figure out how much that loan is going to cost you. To do this, you must consider how many out-of-pocket fees you will be paying, if the loan interest rate is less and if you’ll be in the loan long enough to recoup these expenses. If you are getting a lower interest rate and not paying fees, it could be a better deal than what you have now. In that case, the no-fee loan could be a good idea. (Read The True Economics Of Refinancing A Mortgage to learn more about this concept.)

    Be careful of the loan officer who wants to keep selling you adjustable rate mortgage (ARM) after ARM after ARM for the same property. ARMs are a good loan choice for certain people, especially those who know they won’t be in their home or loan for very long. If you are planning to stay in your home a long time, an ARM may not be a very good choice. Loan officers receive money for every loan they make. Therefore, it behooves them to make as many loans as possible. One way to do this is to get people into ARMs that need to be refinanced often. (To learn more about the dangers of adjustable rate mortgages, read This ARM Has Teeth.)

    Broker or Bank?
    Not everyone agrees on this. Having worked for both, I can tell you that there are good and bad brokers, and bankers. The advantage of using a broker is that they can shop around at the different banks for the lowest rates. The advantage of using a bank directly is that they don’t have to pay the broker. If the broker can find a lower rate, charge the broker fee, and still offer the lowest total rate, then that may be your best choice. You will have to do your homework and compare good faith estimates to be sure. Remember, the loan officer decides how much money they want to make to some extent; they may have some negotiating room. Don’t always expect that brokers are giving you the best rate that they can. They may not be telling you the lowest rate they can offer because by offering the rate they quoted, they may be getting more commission on the back. (Read Score A Cheap Mortgage to learn more about getting the best rate.)

    Do Your Homework
    Though many loans given by loan officers/banks during the subprime meltdown of 2007/08 ended in foreclosure, you don’t need to be that concerned, not if you do your homework. One of the biggest problems came with letting the lending requirements get too lax. Banks were granting loans to people that they used to deny. Something called the stated loan became more common. People were able to “state” how much money they made instead of having to prove it. Many people stated more than they actually made. Also, underwriters were under pressure to approve loans that may not have made sense because they were in competition with other banks that were approving these loans. Remember, it is all sales in the end.

    Conclusion
    How do you protect yourself? Do your homework. Shop around. Do not accept the first good faith estimate. Get several estimates. Compare the APR on each one. Go to both brokers and bankers to see what they offer. Be wary of the loan officer that doesn’t ask you how long you will be living in your home. If they don’t ask you questions, they don’t know which loan fits you the best. If you are planning to only be in your home a short time, you might consider an ARM. If you are going to be there for a long time, consider a 30-year loan. Even better, if the day comes and you can afford it, pay extra each month on your 30-year loan and pay it off in 15 years!

    by Diane Hamilton, Ph.D