It’s back to school across the nation and I want to give credit where credit is due.  Well intended parents are sending their kids off to college usually with a credit card.  I want to help you be sure they steer clear of some common credit card mistakes.

The average consumer has nine credit cards.  Don’t let your student get caught in the crosshairs of potential debt.  Collecting too many credit cards is absolutely not a good thing.  Even if the cards have zero balances, multiple open accounts mean the account holder is ripe for the potential temptation to max out on all the plastic.  So school them well before they get to school and are confronted with all those offers of free giveaways if they just sign up for yet another piece of plastic.

The credit card introductory rate isn’t forever.  But how many young consumers remember that?  If they do their homework, they’ll know that once that (usually) six month teaser, introductory rate is over it’s not unusual for the rate to jump to 18 or 20%.  That is an ugly and unexpected surprise for the uninformed.

A big lesson to be learned about credit cards is the importance of reading the fine print.  That’s where the (devil and) details of the offer are printed in tiny but all inclusive explanations.  Most credit cards have limitations about balance transfer fees, amounts and new purchases.  Your student should be well-schooled about the importance of knowing those tiny details.

Be sure to choose a credit card for the right reasons.  By this I mean, don’t let your student choose a card just because it has other attractions such as a rebate or rewards program or is offered by a well known icon or celebrity.  Remind your student that credit card granters aren’t their friend.  It is a business that wants to earn as much money as it can.  So make it your student’s business to shop for the card that has the best interest rate rather than the most interesting look.

Regardless the credit card that’s chosen as being the right one for your student – make sure they understand that even with the right credit card comes ongoing responsibilities:

• Credit card bills should be paid off at the end of every month.  Making a minimum payment only will get them in trouble for a very long time.  For example, if your student has a $1000 balance with a 17% APR and pays the minimum $25 monthly amount, it will take them 57 months to pay off that debt and cost $452 in interest charges. 
• Always pay on time, every month.  Be sure your student knows to check their account statement for the due date and pay at least 3-5 business days ahead of time

It’s vital that your student assume responsibility for their own money management.  Yes, it is time for them to understand it’s their financial thumbprint from now on.  It gives new understanding for them when they’re told:  It’s your money so take it personally ™ .

 A text message to me from a 40-year old female physician declared:  “See text below.  (The text she referred to read:  “Need $100 to cover me until the end of the month.  If you can’t do that, at least send enough for your nephew to get his hair cut for graduation this weekend.  Thanks.” )  Yet another demand from my sister that I give her money!  I can’t keep dealing with this.  It’s not right but I don’t know how to extricate myself.  Help!  Laura.” 

I followed up and spoke to Laura by phone.  She vented for about 10 minutes.  She told me that she regularly gave her sister money to buy food for herself and her two children; that she paid her mother’s car note and insurance premium; that she “had to come up with an immediate $600 last month” to cover the nursing home costs for her grandmother that were in arrears because her grandfather hadn’t kept up with payments which should have come from disability checks but used the money instead “for other things”.  Laura then returned to details about her sister and said while her sister makes $50,000 a year she is $40,000 in debt!  “What really upsets me,” Laura said angrily, “is that I feel guilty not giving her money when she asks for it!” 

Laura is a successful woman, a well-respected doctor, single and without children.  She asked that I help her get a mind over money matters mentality because her family just expected her to always cover expenses/needs/wants that they couldn’t.  “I’ve done well,” she told me again.  “I make a lot of money and I save it so that I can take care of myself.  My family reminds me of that each time there’s a money need in their lives that they want me to fill.  They’re not malicious about it – just unrelenting.  I can’t deal with this anymore!” 

The reality is Laura cannot afford to rescue everyone she loves.  The first suggestion I made is that she get clear about whether she was feeling guilt or obligation.  It was clearly the latter.  Because Laura is successful and her sister (by her own declaration) isn’t – Laura feels obligated to hand over money whenever her sister or other family member puts their hand out. 

Based on her sense of obligation which at least for now she feels she must fulfill, I made some basic, straightforward suggestions.  First and foremost, Laura should determine how much money a month she is going to budget/set aside for her family.  Determining the amount of this line item will help her feel more in control of the randomness with which she’s asked to provide money.  Have a serious conversation with her sister and insist on being given an accounting of anticipated monthly expenses and perhaps consider arranging direct payments for certain recurring bills for her sister (within the budget amount set aside for family) as well as for her grandmother’s nursing home care. 

The reality for Laura and others like her is that unless she establishes protocols and most importantly limits for family money requests – she will continue to be in the guilt game and paying the price.   I, of course, told her:  “Laura, It’s your money so take it personally ™.“   Laura says she understands the first step towards achieving this – begins with her.  Instead of getting angry about expected handouts she needs to get a plan and pay herself the compliment of being willing to help when she chooses without being made to feel guilty.  And her actions will underscore the importance of every member of the family who asks for her financial assistance – being expected to get educated about money skills and management as part of her requirements.   

Here’s to your health and wealth.

TAGS: financial planning, Women and Money

As a guest personal money expert for my former employer CNN and HLN – I answer questions on financial issues that come to the network’s Help Desk . 

Dave from Pennsylvania, a 30 year old professional who wants to go back to school to get an education degree wanted to know how to make that economically feasible. 

My suggestion – start in his own backyard with his current employer.  Check to see if his company will pay for his education in part or in full.  Many companies offer tuition reimbursement for course work.  I also recommend that he consider virtual universities.  They’re a way to accomplish his back to school goal without interrupting his day job and income. 

For 30-somethings like Dave – this third decade of life is an ideal time to seek the services of a good certified financial planner.  In your 30s, life is becoming clearer – and more complicated – as returning to school for an enhanced degree or getting married or starting a family or buying a home – are your reality. 

To further help Dave and anyone who’s trying to make a decision that involves managing their money – if you don’t have a budget, it’s important to make one.   A budget is  just a spending plan that will give you real numbers about your ability to pay for what you need or determine what you want to do.  

A budget pie of how much of income should go to various expenses suggests:

• Housing  30%
• Transportation  18%
• Food 14%
• Debt 10%
• Savings 10%
• Everything else 11% 

It’s your money so take it personally ™.  

Here’s to your health and wealth.

Last Tuesday night I attended a dinner hosted by the Atlantic Media Company in Washington, DC, to discuss the results of the brand new Allstate-National JournalHeartland Monitor Poll, which offers a look at the economic experience of the Millennial generation.

There were about 20 of us at the table, including representatives from government, think tanks, media outlets and labor unions.  The discussion was moderated by Ron Brownstein, who is not only a well-respected journalist and father of a Millennial, but, I learned, is also a fellow fan of Lost. (Yes, he was careful to end the dinner before Tuesday night’s episode.)

Here are some of my main takeaways from the discussion and the poll:

Job security is trendy. One of the more surprising findings of the poll is that 55% of Millennials say their goal is long-term employment with a single employer. And, when asked to rank their most important workplace priorities, job security was number one (with money a close number two). Personally, I believe this will change as the economy improves. I just don’t see Gen Y-ers sticking with traditional career paths with all of the options and portable benefits available in the new economy. In fact, many of the dinner attendees joked that they don’t even want to work for their current employers for the rest of their careers.

The current recession will have lasting effects. This is seriously concerning (and was also the topic ofBusinessWeek’s cover story, “The Lost Generation”). Recent research has shown that young people who graduate in recession years are at a disadvantage for a very long time. According to the National Journal, Yale economist Lisa Kahn has found that even at midcareer, people who graduated in tough economic times are more likely to work in low-pay, low-status positions. However, at the dinner we discussed a possible upside — that recession-era graduates might become more entrepreneurial given that they have little to lose by starting their own businesses.

Millennials believe in themselves. Despite the recession, the Allstate-National Journal Heartland Monitor Pollfound that 62% of Millennials believe that their own actions (more than events outside their control) are responsible for the their economic well-being. This reminds me of other research findings I hear often: that American students trail many other countries in academic achievement, but lead in one area: confidence. The question is: does reality match Millennials’ confidence? Hmm.

Parents’ basements are crowded. According to the poll, 52% of post-high school Millennials receive financial support from their parents to meet their daily needs, and one-third of 20-something Millennials live at home. This is not surprising, considering the average Gen Y-er carrying debt owes over $37,000, mostly in school loans.  What are the consequences of this debt? Here’s one: I spoke with a man from the National Association of Homebuilders who told me that in the future we’ll likely see more multigenerational households, which means more new houses will feature multiple master bedroom suites for the different generations.

Higher education is in trouble. As with most discussions about Millennials in the workplace, our conversation ended up on questions about education: Should everyone go to college? Does college adequately prepare young people for the real world? Is college loan debt worth it? One of the more disappointing findings of the poll is that 51% of Millennials believe they could perform their job responsibilities just as well without a college education. This may not be all that surprising given the fact that economists say the break-even point for a college education occurs around age 33. Of course, as one dinner guest pointed out, college is about more than job preparation. But should we be concerned that college doesn’t feel all that relevant to many young people? For more on this topic, I highly recommend the new book DIY U by Anya Kamenetz.

As with many good discussions, I left the dinner with more questions than answers. But it’s gratifying to know that many smart, thoughtful people are working on these big issues.

I’d love to hear your thoughts on all of these topics. Check out the Allstate-National Journal Heartland Monitor Polland the National Journal’s special report, and share your thoughts in the Comments section!

Note: This post originally appeared on the Lindsey Pollak Blog.

TAGS: Generation Y, Millennials, recession

From my quiet desert town of Tucson, Arizona – what a storm! 

Earlier this week, a professor of law at the University of Arizona just minutes down the road from me wrote an academic paper about the shame of the upside-down loan circumstances in which many American homeowners are drowning.  Shame on the nation’s banks was his point. 

Professor Brent White says these over-extended homeowners (estimated to be about 15 million Americans) would be better off financially if they walked away from their upside down mortgages.  He says they don’t because their moral compass won’t allow it; that it makes them ashamed to do it. 

Professor White respects that moral value but says many people are ashamed to walk away from their mortgage because they/we live a double standard.  A double standard that expects moral norms for Main Street and accepts market norms for Wall Street.  Banks operate to maximize profits.  Banks think about their interest(s) and look out for themselves.  Banks do this often at Main Street’s expense.  Professor White believes this double standard is what scares American homeowners into meeting to the market norm mentality that puts them in this upside-down home, negative equity situation.

I think he’s got a point.  And to me, the point is:  think about what’s in your best interest. 

Professor White isn’t advocating anyone walk away from their mortgage unless they feel its right for them.  White is saying American homeowners must act on economic self interest and determine what financial decision given their circumstances – is right for them.  And, he concludes, since shame doesn’t work for banks, it shouldn’t work for homeowners who are considering walking away from their homes.

This is a mind over money matters decision.  This is one of those situations where your mind over your money – matters.  If you choose to do this, know that there will be consequences.  Mortgage lenders are outraged and say it’s unethical.  They remind you – correctly – that this decision to walk away from your mortgage will stay on your credit report for 5 to 7 years. 

But advocates of this option say – your credit is already battered, you’ll have to take the steps to rebuild it anyway.  What you pay, the bank will solely benefit because you can’t keep up with the growing debt.  And to get in front of it now – is impossible.  Why throw money at a market mentality that is morally irreverent? 

It’s your money – take it personally.  Everyone’s situation is different.  There are 15 million Americans facing this right now.  It might be ok for you (or any one of them) to walk away from an upside down mortgage if it’s in your (their) best interest. 

Here’s to your health and wealth.

TAGS: default or walk away from homes, Upside down mortgages

There are small money savings that can be habit forming and profitable.  Take directory assistance for example.  Do you use it?  We all have at some point and know it can be pricey to get that information.

Well, here’s a number worth putting in your mobile phone or on your home phone speed dial:  1-800-GOOG-411.  Instant gratification!  You get free assistance with any phone number you need and the automated operator will even connect you. 

The service has been around for a while – but like all good things – not everyone knows about it.  And all of us could certainly benefit from using it.  If you dial 411 from your mobile phone for telephone directory information, it can cost you $1.49 or more per call (some carriers allow you to get up to three phone listings for that price). 

 1-800-GOOG-411 (which translates to 1-800-466-4411) is a totally free service that’s especially great when you’re on the road.  Let’s say you’re heading to a meeting at an unfamiliar location and – even if you have your GPS guiding you – you don’t have the phone number.  Program 1-800-GOOG-411 into your phone’s speed dial, hit the button, say where and what you’re looking for and GOOG-411 will connect you. 

Did I mention that it’s free?  Yes.  But let me say it again.  These days services that cost you nothing are too good not to know about and use.

 Here’s precisely how it works.  You’ll hear a voice at the other end saying:  “City and State?”  You respond.  The voice then says:  “Business, name or type of service?”  You respond.  The voice on the other end says:  “Connecting” and the location you requested answers the phone.  That’s it.  It’s nationwide and – did I already say it’s free! 

You don’t need a computer, an Internet connection or even the keypad on your phone or mobile device to use GOOG-411 because it’s voice activated.  So you can access it from any phone – mobile or landline – in any location at any time.  All for – free.  And if you’re calling from a mobile device GOOG-411 can even send you a text message with more details and a map.  Simply say “text message” or “map it”. 

Just a reminder – you should not use GOOG-411 if you need emergency help since the service isn’t able to provide your location information to emergency providers.  As always, if you have an emergency, dial 9-1-1. 

Here’s to your health and wealth

TAGS: directory assistance, Free information, GOOGLE 411

Are debt collectors calling?  Are their threatening letters jamming your mailbox?  Are you being harrassed into just paying whatever it is they say you owe because the collection notices and tactics are wearing you out?

If you get a notice of debt collection in the mail don’t rush to pay it!  If you pay the bill too soon, you could actually lower your credit score because when you pay a debt to a collections agency it becomes “updated activity”.   That debt can then be reported to the credit bureaus, which can, in turn, knock down your credit score.

Another reason not to rush to pay it:  the collection notice could be illegitimate.

One of my favorite financial services resources is Greg McBride, senior analyst at Bankrate.com ( www.bankrate.com ).  He says if you get a collection notice, the first thing you should do is pull up your credit report from all three credit bureaus to see if the alleged debt was reported.

The three credit reporting bureaus are:

• Equifax P.O. Box 740241, Atlanta, GA 30374    1-800-685-1111  
• Experian P.O. Box 2002, Allen, TX 75013    1-888-397-3742  
• TransUnion P.O. Box 1000, Chester, PA 19022    1-800-8884213  

If you find the debt listed on any of your three credit reports and know or believe it’s not yours, you should dispute it through those agencies.  It’s never a good idea to dispute directly with the actual creditor or collections agency.

Once you’ve sumitted a dispute or request, the credit bureau will contact the creditor or collections agency and they have 30 days to validate what they’re reporting about you.  If it is not validated or if there is no response, the debt will be removed from your credit report.

If after receiving a collections notice, you don’t find it on any of your credit reports, you should request that the collections agency proves you actually owe this debt.  According to the Fair Debt Collection Practices Act (FDCPA), you have the right to dispute a debt notice and to request proof that the obligation is legitimate.

You can request:

• the name and address of the original creditor
• verification of the original debt amount
• to be told whether the collections agency was assigned the debt or if they own it (in many cases, if the collections agency does not own the debt they cannot prove that you owe it to them)

If the collections agency can’t furnish proof – according to the FDCPA – they must  cease collection of the debt until they provide you the proper verification.

Proving validity of a debt could be a complicated process, and many consumers dig themselves into a deeper credit hole by trying to handle collection agencies on their own.  If faced with this dilemma, you could use the services of an accredited credit repair agency to help get creditors off your back.  An excellent resource for what you need to know about finding one, is The Privacy Rights Clearinghouse (www.privacyrights.org/fs/fs27-debtcoll.htm) which says while there is no federal license or registration required for collections agencies, in some states debt collectors must register or apply for a state license. 

 Here’s to your health and wealth.

TAGS: collection notices, credit bureaus, Debt collectors