Personal Finance Blog

Five months ago, I began this blog with the intention of providing a user-friendly and enjoyable read for people to learn about personal finance.  I think that I’ve succeeded in that mission, and that anyone who has been a regular reader is definitely more knowledgeable than she was before my missives hit the Internet in this form.  Unfortunately, my ministry didn’t reach enough people for the column’s producers to justify its continued existence, so I’m sadly announcing that this column will be the last one in this current format.

However, I wanted to follow-up on some of the issues that I brought to light before this column finds itself in the Internet’s vast wasteland. So here goes.

Time may heal all wounds, but it hasn’t fixed the subprime mortgage crisis since I let out my subprimal scream last August.  The crisis has worsened, so now the government’s getting into the act.  There are various measures being tossed about in Congress to stop the bleeding.  No matter what occurs, you can bet that it will be harder to get mortgages in the near future.

Since injustice in our society irks me, I try to write about the little guy whenever possible.  In October, I told the story of Mary Bach and her lawsuit against Kmart for charging an illegal sales tax.  Mary was kind enough to post an update to the blog.  She writes:   “Thanks Barbara for your understanding of both my motivation in suing and in the principles of the case. I will add that K-Mart offered me more than I sued for to settle, but the confidentiality agreement they insisted upon would have not permitted me to address the public with the story. I speak frequently on PA sales tax and on retail scanner issues. I am Vice President of the PA Scanner Certification Advisory Board. Thanks for your support and insight.”  I’m thrilled that Mary received a good settlement and is still an active voice for fairness.

Back in August, I wrote a column about Suze Orman, because so many people asked me what I thought of her.  I see that Suze has turned her focus away from the little guy (or gal, as the case may be), and is focusing on high-paying corporate gigs (suzeorman.com). These days, I find more people asking me if I’m “like” Suze Orman when I tell them that I write about personal finance and investing.  I generally say, “Yes…but without the big bucks.”

A few weeks ago, I wrote about my encounter with fraudulent expenses on my AT&T Wireless bill. Even though they assured me that they would contact me the following week with the results of their investigation, I haven’t heard a peep.  I just received my new bill, and guess what?  There’s still a charge for equipment insurance, which was one of the complaints that I had made. Maybe when I call to complain, yet again, they’ll give me an update on their investigation.  But I won’t hold my breath.

My second blog was about the problems with my water system and the agony I endured trying to solve the problem.  This story has a happy ending, as it turned out that I didn’t need a new system after all.  All I needed was a new filter.  Unfortunately, I had to endure several sales pitches for high-priced new systems until I found the relatively inexpensive solution.  Caveat emptor.

And finally, I want to give you an update on my article about lost luggage. Although I didn’t bore you with the details, this column was inspired when U.S. Airways lost my husband’s suitcase on a trip from Raleigh, North Carolina to Albany, New York.  When they did discover it, it was too damaged for them to return it, so they returned the clothing and promised to send us a comparable suitcase.  Several months later, we received a suitcase, but it was not as sturdy, and significantly smaller than the one they’d destroyed.  Several months and phone calls later, we finally received a relatively comparable suitcase.  Whether it’s as high quality as the one that they mutilated will be determined on our next trip.

To all my loyal readers, thank you for your support.  I hope you’ve enjoyed these columns and learned a lot.  Keep your eyes open, because my voice will most likely not be silenced for long.  I’m sure I’ll be back, a little wiser, and hopefully, a little less harried.

In the 21 years that I’ve been married, I’ve never heard my husband utter four of my favorite words:  “Honey…let’s go shopping.”  It’s not like he doesn’t like stylish new clothing or the latest tech gadgetry—he does—but for him, spending time meandering through the mall ranks right up there alongside going for a dental check-up. (And the harried husband is one of those guys who actually enjoys shopping.  If he didn’t, I would’ve had to use a root canal for my dental analogy.)

Guys will be guys, and dolls will be dolls.  Or, as John Grey more aptly put it, men will be from Mars, and women will be from—you know where.  It therefore should come as no surprise that researchers at the Wharton School recently discovered that men and women react differently to the retail shopping experience.  According to the study, women generally enjoy the entire outing, and thrive on personal interaction with sales associates.  Men, on the other hand, want to park close to the store they’re visiting, locate the item they need expeditiously, and get the heck out of there as quickly as possible.  It’s just like intimacy—women enjoy the emotional commitment, while for men, it’s just another instance of wham-bam-thank-you-ma’am.

Perhaps that’s why, when it comes to investing, men tend to trade more often, while women tend to hold their investments long-term.  According to research by business professors Terrance Odean and Brad Barber, “men trade 45 percent more actively than women.”  (Yet another nod to the wham-bam theory.)  This may be because women are generally considered to be more patient, tenacious, and pragmatic then their y-chromosome counterparts.  (And I thought hormones only controlled mood swings.)  Women understand long-term commitments, which makes them excellent long-term investors.  They know that for any relationship to succeed—including one with their money—there will be ups and downs along the way.  They’re willing to overlook short-term bumps and pullbacks in favor of focusing on the long-term reward—a stable financial retirement.

Men have often been slapped with that “fear-of-commitment” label.  This holds true in investing, as well, as women are more likely to seek the aid of financial advisors.  If the stereotypical man won’t ask for directions when lost in a strange place, why would he ask another man for advice about stocks?  Men prefer to use the Internet for investing information.  According to a study by Iowa State University (“ISU”), men surveyed felt that financial advisors exerted too much pressure and charged way too much for their services.  And, not surprisingly, men are more willing to take investing risks with their money.

Personality differences don’t stop there.  In the ISU study, more men than women found investing exciting, whereas a majority of women found it stressful.  And, many fewer women than men described themselves as being knowledgeable and confident about their financial futures.

In reality, it doesn’t matter if you’re a man or a woman—unless you’re at a dance or in a locker room.  What matters is that you take control of your financial life and your retirement planning.  If you don’t have a thorough understanding of your investments, there’s no time like now to get educated.  Women, especially, need to take an active role in their financial futures, since they tend to live longer and earn less than men do during their working years.

In closing, I’ll leave you with two thoughts from the Wharton study.  One woman interviewed said, “I love shopping. I love shopping even when I have a deadline. I just love shopping,” while a man in the same age group said, “We’re going to this store and we buy it and we leave because we want to do something else.”  Clearly, women and men should take control of their financial lives, but always shop separately—she to the Venus Designer Outlet for three hours, and he to the Mars Hunting and Fishing Store for three minutes.

Several years ago, when my mother retired from a lifetime of working, I agreed to handle her finances.  We discussed a variety of strategies for fixed-income investments that would sustain her comfortable lifestyle for as long as she lived.  But then, she turned to me and said, “There’s one more thing that I’d really like…to make a killing in the stock market!”

A killing in the market?

All I could say was, “Oy!”

My mother’s not alone in that desire.  I think that everyone wants to find gold in the market, or at least have the good fortune and foresight to buy Google or Microsoft at the IPO, and then watch it rise meteorically to a stratosphere of unparalleled riches. Unfortunately, the road to success isn’t paved with a direct arrow upward, and there are lots of bumps and downturns.  It takes a stomach of steel to ride through some of those danger zones without selling.  That’s necessary if you want to experience the joys of long-term profits, because, if you sell too soon, you’ll miss out on the growing pot of gold at the end of the rainbow.

In last Sunday’s New York Times, Peter S. Goodman wrote:

“You need not be a Wall Street chieftain to feel the anxiety that has wrapped its arms around the American economy.  The stock market seems locked in a downward spiral as one bank after another suffers its day of reckoning with bad mortgages.”

And as the market spirals downward, investors panic and start selling.  On November 6th, Google reached an all-time high of 741.79.  But 10 days later, it had dropped to 633.63.  Obviously, plenty of people were dumping their stock.  Are you the type of person that could handle a drop of more than100 points and not sell? You’d have to be if you want long-term success.

American investors are always chasing the latest trend or hottest sector.  It was tech stocks in the late ‘90s, which were averaging returns in excess of 18 percent per year.  When that bubble burst, a great deal of investor money moved into real estate.  The plan was to gobble up properties with the intention of flipping them for great deals, or sucking the inflated equity out of homes by turning it into cash.  People seemed to forget that at some point, that unsustainable pace would fall down and make a boom of a different nature.

Since 1926, the average annual return of the stock market has been10.4 percent.   That’s a pretty impressive return on investments.  However, that’s an average return, which means that some years were significantly higher, and yes, some were drastically lower.  In order to reap the benefits of the average return, you need to leave your money invested through good times and bad.  Trying to time the market by jumping on the bandwagon for the next hot sector will work some of the time; but since you’re not a psychic, you’re bound to pull out too early or too late much of the time.  The only way to play the averages is to keep your money invested through thick and thin.

My mother has been doing well with her fixed-income investments.  They’ve been performing predictably and comfortably, and we’ve even added a stock mutual fund to the mix.  As for my portfolio, I stay diversified, and keep my money committed as long as the fundamentals of my companies remain strong.  Sometimes, I lose money in the short term. But I believe that if my holdings look strong, it will all work out in my favor in the long term.  I may not be making a killing, but I’m beating the averages.  And that’s something worth living for.

How do you define rude?  In my world, it’s a ringing phone at 4 or 5 in the morning. There’s only a 25 percent chance that it could be good news.  It’s either (1) notification of someone you love’s unexpected death; (2) a wrong number; (3) a call from an overseas friend who miscalculated the time difference; or (4) a fax spammer.  Numbers (1) and (2) are forgivable, and number (3) is acceptable, with a reprimand to get with the time zone program.  But it’s number 4—the fax spammer—who fills me simultaneously with rage and helplessness.

I was involved in a relationship with a fax spammer for about a year.  His advances were unwanted and unpredictable. I would receive faxes in the middle of the night offering me reduced mortgages, or—(oh the irony!)—advertisements for successful fax marketing.  Sometimes, my machine would be off, so the fax line would ring and ring, waking me from a deep sleep.  I would jump up, search for the phone in the dark and, after bumping my knee and knocking over a lamp, I’d hear that unwelcome tone of a fax machine seeking a partner. Then, I couldn’t fall back to sleep because I felt so violated and angry.

I decided to take action, especially since I was on the “do not call” list.  First, I needed to capture the violator’s missive, and politely ask to be removed from the list.  Night after night, I left the fax machine on.  Nothing.  Then, finally, at 5 A.M. one day, the phone rang and there it was—“FAX ADVERTISING WORKS!” it said, “We Produce Prospects Who are Ready to Buy.”  Ready to buy what?  A one-way ticket to a sanitarium?  The bottom fine print read: “To remove fax number call 877-***-****.  Whew, I thought, this would be simple.  I called the number, and guess what?  “The number you have reached is not in service.”  All I could say was “%*&%&#*)#!”

My next line of attack was simple.  Since they were sending me a form inviting me to get information, I’d send a note back to the “fax completed form to” number that said, “Remove my fax number or I’m calling an attorney.”  I felt a bit of release for venting my rage.  However, within the next week or so, I still kept getting the faxes.

Since my plan didn’t work, I turned to the Federal Communications Commission’s complaint department and filled out a form. I was finally gonna get these guys!  Within a few weeks, I received a letter from them informing me, “Although the FCC does not adjudicate individual complaints of this type, we do closely monitor such complaints to determine whether independent enforcement action is warranted.”   I took this to mean that they weren’t going to do anything—but if enough complaints against this offender came in, then maybe something would happen.  Another dead end.  Later in the letter, it said, “consumers may bring a private lawsuit in a state court to recover damages.”  I spent time searching the Internet for attorneys, and printed out relevant material.  Then guess what?  Shortly after I filed my complaint, the faxes stopped coming.  Coincidence?  Probably.  Or maybe it was the note I sent back threatening to hire an attorney.

Federal regulators have actively been pursuing violators of the Do Not Call Registry.  A few weeks ago, they announced settlements with a variety of abusers to the tune of $7.7 million.  Violators included Craftmatic Industries, ADT Security Services, Ameriquest Mortgage, and Guardian Communications, to name a few. Hopefully, this will put enough of a scare into these thoughtless marketers to reduce the numbers of unwanted telephone sales calls and fax spammers.

To protect yourself, make sure you enroll in the “Do Not Call Registry.”  You can do this online at www.donotcall.gov, or by calling 1-888-382-1222.  And you must re-register every five years.

I’m no longer awakened at unreasonable hours.  All my friends and family have promised to live forever, and my overseas friends have gotten their math down and finally get it right.  Now, if I could only clear my mind of the daily harried housewife worries and distractions, I might be able to get a good night’s sleep!

When you’re happily married, you unconsciously (or consciously) put out an “I’m unavailable” vibe to ward off potential suitors.  Once human seducers are nullified, however, there are still a variety of other temptations, including money and food.  The most intense seducer of them all may be the credit card—more specifically, the 0 percent kind.  Be it a balance transfer or purchase offer, the lure of available money for a period of time with no interest often seems as delectable as a certain apple in the Garden of Eden.

I confess—I’ve taken quite a few bites of that no-interest apple.  Let’s roll the clocks back to see why.  I have a home equity line of credit (HELOC) that began at a very low interest rate about three years ago.  For uninitiated readers, a HELOC functions a lot like a credit card.  As a borrower, I’m offered a specific line of credit, based on the equity in my home, and I can withdraw funds against it whenever I want, as long as I stay below the credit limit.   I pay interest only on the money that I borrow, and once the funds are replenished, I can borrow them all over again.  The HELOC is attractive because you can borrow with no closing costs.  But it’s not perfect—it’s an adjustable-rate mortgage (ARM), and in this climate of rising rates, that means my interest rate keep going up.

Since reducing debt is a passion of mine, I like to pay off as much principal each month as possible.  Enter the zero percent balance transfer.  By moving my HELOC balance to a no-interest card for a year, I can funnel all those potential interest payments directly to principal, and reduce my indebtedness more quickly.  As long as I don’t miss payments and remain disciplined, it’s a clever way to reduce what I owe. The operative word, of course, is disciplined.

Recently, temptation led me to have a relationship with a “0 percent on purchases for a year” credit card.  Because I pay my balances in full each month, I generally don’t have a need for such an instrument.  But with some large expenses looming on the horizon, I broke down and accepted one, with a well-crafted plan to pay off the balance before the introductory offered expired.

But seductresses aren’t nicknamed “home-wreckers” for nothing.  Even though I’m very disciplined about my credit, I found, in that offer, the snake slithering around in the fine print.  After I used it for my initial large expense (the lower pre-payment for my oil bill), my car needed some significant (and surprising) work.  “Put it on your 0 percent card!” I thought, because spreading out the payments would make it easier on my monthly budget.  Then, the yearly dues for my tennis club became due.  “Put it on your 0 percent card!” I thought, because spreading out the payments would make it easier on my monthly budget.  Sound repetitive?  Yes!  And it’s exactly this type of repetition that has the potential of turning me from a responsible debtor, to a troubled debtor paying a ridiculously high interest rate.

If you can use zero percent cards in a disciplined manner, they can be a financial lifesaver.  You need, however, to understand their drawbacks.  First, there’s that problem of control.  If you’re not careful, you can too easily abuse it.  Then, in balance transfer cards, there’s that “balance transfer fee” to watch out for.  Some offers waive them, but most have a fee that can be as little as $25 or as high as 3 percent of the total amount transferred.  That’s the way the banks make their money…you really didn’t think that they’d let you have their money for nothing, did you?