Econ4U.org

Feeling Nosy? New Ways to Find Out What Others Are Making

June 30, 2010 – 1:03 pm by Audrey

Talking salary with your friends and coworkers remains a persistent taboo — and for good reason. Each employee brings a unique set of skills and abilities to his or her job, and will presumably be appropriately compensated based on their respective backgrounds. Sharing salary information without context leads to hurt feelings in most situations.

But what to do if curiosity has gotten the better of you? Or if you’re about to negotiate a starting salary or raise, how do you find out the going rate for your job? Several websites now purport to remove the veil of secrecy surrounding what Americans earn. (Of course, this being the internet, take what you read with a grain of salt, but these resources are your best bet for going into salary negotiations prepared.)

We’ve mentioned NetWorthIQ.com before (see here), a website where anonymous users disclose their income, age, assets, debts, and other financial specifics. However, the income bracket becomes broader as salary goes up, so there’s no telling whether the engineer from Virginia with a B.A. falls at the top or the bottom of the $100,000-$149,999 range. Therefore for top-paying jobs, it may be of limited use.

GlassDoor.com is another anonymous user-submitted salary resource. You first have to become a member (it’s free) and enter your own salary, company, and job title before you can search its database. But it gives an insider’s look at some of the country’s biggest employers in both the public and private sectors, from Hewlett-Packard to the U.S. Postal Service.

Finally, Salary.com is the granddaddy of income research, including specifics about bonuses and benefits. You can narrow down your search by industry, job title, zip code, your education level, and size of the company. You can even order a custom report called “You Vs. Market” for a more detailed analysis of where you fall on the salary bell curve. The only drawback is the site’s popularity, which means you will be bombarded with advertisements for continuing education and job listings, but navigate beyond that and Salary.com can be a pretty candid look at the pay stubs of others.

Posted in Education, Links | Tagged Family Budget, Personal Finance | Comments (0)

Could You Be Denied A Bank Account?

June 25, 2010 – 1:29 pm by Audrey

If you’ve ever overdrawn your bank account, there’s a decent chance that a company called ChexSystems knows about it. Classified as a consumer credit reporting agency, ChexSystems operates a database that member banks can use to report bounced checks and other activity it classifies as “suspicious.” On the record, ChexSystems is a tool that banks and credit unions can use to “assess the risk of opening new accounts” in the names of chronic check-bouncers; an unofficial list of member banks can be found here.

But the biggest drawback for consumers is that it limits banking options for people who make even one mistake. A ChexSystems history functions as a credit report for your checking account, except it only tracks negative information.

For example, if you have a ChexSystems report and you go to open a new deposit account with a bank that uses the company’s database, the bank can deny you the account on the basis of just one infraction. Even if you’re able to open an account and keep it in good standing, the bank can later close it if a ChexSystems report on you comes up.

Of course, smart consumers stay on top of their finances. The good news is that since ChexSystems is a credit reporting agency, consumers are entitled to one free report per year, which you can obtain online. Do they have incorrect information on you? Dispute the entry by following this link.

Posted in Credit, Education | Tagged bank, financial education, overdraft charges, savings accounts, tips | Comments (0)

Tuesday Top 5: Starting Small

June 22, 2010 – 4:45 pm by How-To Hannah

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

The secret to wealth building isn’t necessarily stock-market prescience or a brilliant business idea. Everyone starts somewhere, and it’s often just a small decision that snowballs to big rewards. Take one of the following tips and maybe decades from now you’ll remember the day you decided to invest in yourself.

Set up automatic transfers to save without the sting. No emergency fund? Not for long. Link a savings account to your checking and set it to automatically deposit $20 every payday. If you get paid every two weeks, in less than two years you’ll have saved $1,000 virtually painlessly (even more if it’s an interest-bearing account). Just remember: No touching!
Round up each debt payment. Say today you get a $5,000 car loan at 5 percent, payable over 36 months. Your monthly payment will be $149.85, and you’ll be debt-free in June 2013. Now suppose you round that check up to $200 per month: You’ll get rid of that loan by September 2012 and save more than $100 in interest charges in the process.
Get a better interest rate on savings. If your savings account pays peanuts on your money, consider moving it to an online bank. Switching banks over a 1 percent difference in APY may seem like more trouble than it’s worth, but on a $10,000 balance, that ends up being $100 more in your pocket at the end of a year.
Trim your housing expenses. If you live in a tri-state area like Washington, D.C., or New York City, you have your pick of which state to live in — which can save you money on a monthly basis if you’re savvy about it. Compare the tax and cost-of-living benefits and drawbacks of each area before you settle down somewhere with a skyrocketing COL.
Increase your W-4 allowances. Get a big tax refund this year? Wouldn’t you prefer a fatter paycheck now, rather than waiting until next spring to collect your money back from the government? That’s what we thought. Increase your federal allowances on the W-4 on file at your company and you can put that money to work for you pronto.

Posted in Budgeting, Credit, Education, Personal Finance, Saving Money, Taxes, Tuesday Top 5 | Comments (4)

Could New Banking Rules Spell the End of Free Checking?

June 18, 2010 – 3:34 pm by Audrey

The Wall Street Journal took a fascinating look this week at how new banking regulations that were designed to protect consumers may instead lead to more fees:

Bank of America Corp. and other banks are preparing new fees on basic banking services as they try to replace revenue lost to regulatory rules, in a push that is expected to spell an end to free checking accounts for many Americans.

Free checking accounts, which have been widely available for more than a decade, have been a boon to middle-class consumers and attracted low-income customers to the banking system for the first time.

Customers will likely be required to pay new monthly maintenance fees on the most basic accounts that don’t generate a lot of activity. To avoid a fee, customers will have to maintain certain account balances or frequently use other banking services, such as credit and debit cards, automated teller machines and online accounts.

It’s an important debate and a key lesson in economics. Banks aren’t going to willingly make less money, so if the feds restrict overdraft fees, the affected banks will then kill free checking to make up the difference. But what happens when lenders can’t make it up elsewhere? If, say, there’s a limit on interest rates, lenders will simply stop offering that credit option rather than taking the loss. It’s already happening: Cap interest rates on short-term loans, and the government is effectively taking away the highest-risk consumers’ access to credit.

In an update on the old saying, the road to (financial) hell is paved with good intentions — and unintended consequences.

Posted in Credit, Econ4U, Education, Government Policy | Tagged bank fees, Bank of America, financial education, Government Policy, overdraft fees, savings accounts | Comments (0)

Tuesday Top 5: Live Well and Still Retire Rich

June 15, 2010 – 2:20 pm by How-To Hannah

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

If you’ve ever uncovered “found money” and decided to save most of it, you’re already acquainted with the idea of consumption smoothing. It’s the economic principle that people avoid abrupt swings in their standard of living, and income and saving go through cycles over a long period of time. There are many ways to use this theory to support a lifelong financial strategy:

Sock away about 90 percent of a windfall. Don’t let the extra money go to your head; you probably have some savings goals that could benefit from a boost. Have you maxed out your Roth IRA, assuming you qualify? Are you working on a down payment on a house? Divide the money among your various priorities, and think about which deserves the lion’s share.
Don’t deprive yourself… Especially in the event of an inheritance or work-related bonus, you should enjoy at least part of that money to respect the wishes of close friend or relative or as a reward for a job well done.
…but understand the usefulness of delayed gratification. One reason lottery winners so often go broke is that it feels like money will solve all their problems, and that such a large sum will never run out. However, without sound financial planning, neither assumption will be true in the long run.
Live like a college student for as long as possible. When your income is the lowest it will ever be, also committing to keeping your standard of living low will make it easier to save as you climb the job ladder and rack up raises. The younger you are when you strike the balance between saving and spending, the bigger your nest egg will be to sustain you when you’re older thanks to the power of compound interest.
Yet it’s never too late. Don’t get discouraged if you spent your 20s and 30s paying down college debt and trying to make ends meet for your young family. Income typically peaks around age 50, which puts most households in a great position to play catch-up. Take advantage of this upswing in your financial life-cycle and buckle down on savings when you’re best able to afford it.

Posted in Econ4U, Education, Lottery, Saving Money, Tuesday Top 5 | Tagged Budgeting, Econ4U, financial education | Comments (1)

Tuesday Top 5: Planning for a Big Purchase

June 8, 2010 – 3:20 pm by How-To Hannah

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

If you have a major purchase on the horizon — be it electronics, home furnishings, or a vehicle — now is the time to start considering your options to keep costs low and value high.

Know the best time to buy. July is when prices on home wares and furniture reach their annual lowest, as stores mark down goods to attract wedding gift-givers. Shop for a new car at the end of the model year for the best discounts — or at the end of the month, when salespeople are most motivated to make their quotas. A little research can mean big savings.
Mull it over. Take your time before you spend big to avoid buyer’s remorse. If your garage already looks like an REI, maybe you don’t need that paddleboard as much as you think you do.
Comparison shop to save on taxes. It was news to us that Amazon stocks the full range of laptops and other consumer electronics by all the major brands, from HP to Apple. That could mean more than $100 in savings if you buy online versus going to the mall, where you’d have to pay state sales taxes.
Put it on a rewards credit card (with caveats). Getting 1 or 2 percent cash back on a major purchase seems like a no-brainer — unless you’re expecting to carry a balance. Then the interest rate will exceed any rewards you’ve received. In that case, consider paying with cash or negotiating zero percent financing at the store you’re buying from.
Determine the value of a warranty. Back to cars again: The conventional wisdom says “always buy used,” because of the steep depreciation value on new cars. But when you buy a new automobile, you benefit from the full warranty — something you may pay a few extra thousand for when considering a certified used vehicle. Crunch your own numbers to see what it’s worth to you.

Posted in Budgeting, Credit, Saving Money, Taxes, Tuesday Top 5 | Tagged credit cards, Family Budget, financial advice, tips | Comments (1)

Homeowners Gamble by Not Paying Their Mortgages

June 4, 2010 – 12:22 pm by Audrey

Last summer, we touched on whether refusing to pay your debt at some point becomes a moral issue. In this week’s New York Times, the topic proves timely still.

The article follows the Pemberton family in St. Petersburg, Fla., who have stopped paying their mortgage so they can put their money to more fun use, such as trips to a casino and joyrides in an airboat:

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

Because of the glut of homes in default in Florida, foreclosure proceedings last an average of 518 days. The Pembertons have yet to be evicted — meaning they will continue to live there rent-free until the bank collects its due.

The people interviewed for the article make the case that the banks should pay the price for the naïve decision to grant them mortgages in the first place, but the justification seems to originate from an ethics-free zone.

And it’s a short-sighted game, to say the least. Once the bank gets around to completing its paperwork, not only will these borrowers lose their homes, but their FICO scores will plummet by up to 280 points. And the foreclosure will stay on their credit reports for 7 years —almost as long as a bankruptcy.

Considering what their credit history means for their future job, housing, and credit prospects, these homeowners need to reconsider whether scamming the bank is worth it in the long run.

Posted in Budgeting, Credit, Economy, Financial Illiteracy, Mortgages, Personal Finance | Tagged credit score, financial crisis, homeownership, Mortgages, scams | Comments (0)

Tuesday Top 5: Prioritizing Retirement Saving Now

June 1, 2010 – 2:08 pm by How-To Hannah

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

Making retirement saving a priority is the recognition that it’s easier to go without now (when you’re young and able-bodied) than at the end of your life when your options are fewer. Unfortunately, recent surveys suggest that 57 percent of Americans feel they are behind on their retirement savings. But it’s never too late to turn that ship around.

Learn to delay gratification. Almost any budget has room to trim expenses. Are you paying for a convenient but unnecessary data plan on your smartphone? Getting your money’s worth from your gym membership? Spending a lot on books and music downloads instead of borrowing from the library? All of that adds up to a lot of money spent in the long run — you have to decide whether it’s all worth it.
Start small but start early. The younger you are when you open your first retirement account, the better off you’ll be. If you start your retirement fund when you’re 25, your contributions have a full 40 years to grow. If you put $100 into your account every week, with a modest 6 percent return in the stock market you’ll end up with about $867,000 at retirement. Not bad, considering you’ll only have deposited $208,000 of your earnings.
Don’t count on a pension. Just because you’re a member of a public employee union doesn’t mean you don’t have to save for retirement. Data published by Barron’s show that eight states have enough money to cover only two-thirds of their pension liabilities, and thirteen more are only 80 percent funded. That means millions of Americans will not receive what their unions have promised them. Even non-unionized companies have bankrupted their pension plans in the unstable economy. Take responsibility for your own future and open an IRA right away.
Increase saving by 1 percent. It isn’t such a big increase that your monthly budget will be significantly affected, but over time the magic of compound interest will make your savings grow noticeably faster.
Play catch up. Even if you’re no spring chicken, you still have time to grow a decent nest egg. Experts suggest a baseline savings rate of 6 percent of your gross salary — and build from there as soon as you are able. And once you’re over age 50, the IRS raises your 401(k) and IRA contribution limits, so you can save even more tax-free.

Posted in Education, Personal Finance, Saving Money, Tuesday Top 5 | Tagged Budgeting, investing, Personal Finance, retirement, Saving Money, savings accounts, tips | Comments (0)

Tuesday Top 5: How Not to Use Your Student Loans

May 25, 2010 – 1:57 pm by How-To Hannah

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

Student loans are intended to pay for your education, but I’ve known a few people who took liberties with exactly how they used that money. Here are some of the worst ways you can spend those checks:

Getting a degree in the arts or humanities. This is the sad truth: More than 23 percent of humanities students owe more than $30,000 in student loans, but hiring in that sector is down 40 percent since 2008. Make sure that you can find work that utilizes your degree, or else those student loans will be with you for a long, long time.
Paying your mortgage. Student loans include stipends to cover your living expenses, but renting is preferable to buying a house and using the student loan to pay your mortgage. If you plan on moving away from the area after school, houses tend to be poor short-term investments. Maintenance costs may pop up unexpectedly, leaving you short. And in general, it’s a bad idea to take on new debt to pay down old.
Funding your discretionary purchases. This one almost goes without saying, mostly because it’s illegal to misuse federal loans. Look into part-time work to buy clothes, dine out, or go on vacation. The reason is simple: Stafford loans carry an interest rate of up to 8.25 percent, and private loans can be even steeper. You’d be better off putting such purchases on a low-interest credit card or taking out a personal loan, rather than assuming more education debt than you need.
Paying off credit cards. Speaking of consumer debt, should you ever declare bankruptcy, credit-card debt would be forgiven but you’d on the hook for those student loans until death do you part. Don’t exchange unsecured debt for a loan that is with you for life.
Not learning how to budget. While you’re getting your degree, you’re also presented with a great opportunity to learn to budget your money on a fixed income. It is a valuable lesson that will serve you long after you leave the ivory tower.

To end on a happy note, congratulations to all the recent grads!

Posted in Credit, Education, Personal Finance, Students, Tuesday Top 5 | Tagged Budgeting, credit cards, loans, Mortgages, student loans, tips | Comments (0)

Financial Website Find of the Week: NetWorthIQ.com

May 21, 2010 – 12:21 pm by Audrey

This article in last weekend’s New York Times Magazine led me to NetWorthIQ, a website where users can anonymously log their assets, income, and debts to illustrate a complete net-worth picture. Members can update their holdings monthly to automatically produce graphs and compile data that track the trajectory of their net worth over time.

The benefits of using the site are many (and not just for financial Peeping Toms). For starters, the anonymity takes away the taboo of talking about money, leading to a vibrant tips section. Got questions? The community has answers. You can instantly compare your net worth to others with similar education levels or salaries, and also by state, industry, or age range. (Though take this with a grain of salt: You’re stacking yourself against a self-selective group of people who are really into personal finance, so it’s not the same as comparing your numbers to the nation at large.)

Contrary to what you might assume, the website is not just full of financial whizzes whose stocks are going gangbusters; there are plenty of users who are very much in the red and are using the site to climb out of debt. And on the other end of the spectrum, it’s easy enough to find a cadre of candid self-made millionaires who are willing to share how they got to where they are today.

Some people have been updating their profiles for years. I only just started this week, but I can already see myself becoming a regular. (And if nothing else, it’s an educational way to kill a Friday afternoon.)

Posted in Budgeting, Education, Entrepreneurs, Personal Finance, Saving Money | Tagged debt, financial advice, Personal Finance, Saving Money, tips | Comments (1)

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Feeling Nosy? New Ways to Find Out What Others Are Making

Could You Be Denied A Bank Account?

Tuesday Top 5: Starting Small

Could New Banking Rules Spell the End of Free Checking?

Tuesday Top 5: Live Well and Still Retire Rich

Tuesday Top 5: Planning for a Big Purchase

Homeowners Gamble by Not Paying Their Mortgages

Tuesday Top 5: Prioritizing Retirement Saving Now

Tuesday Top 5: How Not to Use Your Student Loans

Financial Website Find of the Week: NetWorthIQ.com

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