Spend It!

I rarely advise people to spend money. I like to see people save money. Yesterday, however, at our Symposium someone asked the question, “Yes, I know I’m supposed to save but some economists are telling me to spend my money to help pull us out of this recession. What should I be doing?”

Let’s assume you decide to spend. If so, consider the benefits of spending in the areas below.

Money saving products – It can make sense to replace appliances, windows, doors, insulation, etc. with newer, more energy efficient models. The savings in energy costs could amount to several hundred dollars a year. Click here, to read an informative booklet on appliances from the US Department of Energy.

Relaxation expenditures – Stress can kill us, ruin our marriage, and reduce our productivity at work. These are very costly outcomes that can be reduced, if not eliminated, by reducing our level of stress. A membership at a health club – that is used – might be worth much more than the costs. For example, our family pays $400 per year to our local community center, allowing us access to an indoor track, swimming pool, and exercise equipment. (And, yes, my wife and I use it three times a week!) For you, however, it may be the case that the best expenditure is to take a course in pottery, painting, to join the Audubon society, or to take up target shooting. Whatever it is that takes you to your special place and helps you maintain your best self should be considered.

Health Expenditures – Do not scrimp on maintaining your health. Missing work costs you money that you need, as well as increasing your rate of absenteeism. Missing work could cost you your job. (OUCH!) Take preventative measures to protect your health and quickly address medical issues so that they do not sideline you for an extended period of time.

Projects around the house – During sour economic times we can often purchase materials and workmanship at prices much below what they can be purchased during boom periods. All those young people that were building those new homes are now looking for remodeling projects. This may be the perfect time to remodel your bathroom, kitchen, or to purchase another home improvement. Be careful to assess the relationship between the costs of what you do in relation to how it adds value to your home. In this process, do not neglect the added consumption value you may receive from the improvement, while you live in the home. (We love our remodeled bathrooms!)

Food – Better quality, more nutritious food may cost you more but poor quality, junk food is mostly wasted calories with little nutritional value. This may be a good time to increase the quality of your food intake. Consider buying more locally grown food, as a way to improve your nutrition and to increase your local economy.

Maintenance – Spend some money on the maintenance of items you have around your home; such as cars, lawn mowers, air conditioners, furnaces, and etc. Proper maintenance can extend the useful life of many consumer durables, thus lowering the lifetime cost for things that are not discretionary.

I am sure you can think of other ways where you could spend money in ways that are actually “investments” toward your financial success. If you have some specific ideas you’d like to share, send them to me at my gmail account ( rweagley@gmail.com ).


- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211

Move from NJ because of taxes? Were it that easy...

Next Wednesday, April 29, is Tax Freedom Day in New Jersey. That's the day state residents have earned enough money to pay their total tax bill for the year.

Forgive M and me if we don’t celebrate.

Several times in the past, we’ve discussed getting out of New Jersey because of the tax burden—the biggest in the country. According to the Tax Foundation, Garden State taxpayers give an estimated 11.8% of income, $6,610 per person, to state and local governments.

Stiff price for a back yard
For us, high taxes hit home—literally. We’ve been looking for a while to move up from our three-bedroom townhouse to a four-bedroom, single-family house (“with a back yard,” as my 4-year-old son likes to point out). Higher property taxes mean less house that we can comfortably afford.

Obviously, we’re not alone in our frustration. On Tax Day this year, pseudo-“Boston tea parties” were reportedly held in all 50 states, with participants criticizing the federal government’s proposed tax increases and rash of recent spending. Emotions ran high enough that, at some gatherings, the word “secession” was facetiously hinted at.

Our home, for better or worse
M and I would love to “secede” on a more personal level by moving to lower-tax neighbor Pennsylvania (where I commute to and from for two hours each day). But in reality, we’re not going anywhere soon. New Jersey, whether we like it or not, is home.

The first and foremost reason is that we’re surrounded by family. My stepdaughter’s father lives and works within an easy drive of our house. My parents are five minutes away, M’s father and stepmother perhaps 10 minutes. My brother moved in literally down the street, after spending several years in Boston. Life is (most days) better and easier with family close by.

Second, M worked as a teacher for more than a decade in the New Jersey public school system. In a few years, she’ll go back to work and eventually be eligible for a nice state pension (paid for by those state taxes, and as long as it still exists). Since our only other source of retirement security is a 401(k) plan—which has been slammed in the past several months like everyone else’s—that’s a big incentive to stay put.

Accept what you can't control
We’ve talked round and round about other options, such as moving to one of the Pennsylvania towns just across the Delaware River. In the end, though, we always come back to the same conclusion: The best option is where we are.

It’s easy to get worked up over things you can’t control, like high taxes or the direction of the stock market. But after weighing the pros and cons, both financial and non-financial, you may find you’ve already made the right decision. The next step is to accept it, and move on.

Better Living

Most of you know that on Wednesday, April 22, we’re having a Symposium at the University of Missouri entitled Financial Success in a Challenging Environment . I have attached a copy of the agenda to this email, if you’d like a reminder of the content and speakers. We’re excited about what we have prepared for you and we expect around 200 professionals and others to attend. Since we’ve been very focused on the last-minute details of our Symposium, it has been a very busy week. As a result, this week’s tip is going to be short.

One of the ways we improve our chances for financial success is to make the most of what we have, without sacrificing and, perhaps, enhancing our quality of life. MU Extension has published Solutions for Better Living in These Tough Economic Times to provide everyone with ideas on what they can do to reduce life’s costs, while enhancing life’s qualities. The topics covered are Money Matters, Aging, Housing, Food and Fitness, Health, and Relationships. It is a great resource for families, as well as a teaching resource for educators, as many youth only know the practices of their families and not those employed by others. I think the points within each article could lead to great family and classroom discussions.

Click on the title above, or redirect your browser to: http://missourifamilies.org/toughtimes/index.htm , if you’d like to see what University of Missouri Extension has prepared for you. As always, please forward this email to others that may benefit from its contents.

I hope to see you at our Symposium.

- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211

Career Success

We talk a lot about financial success, as that is part of the name for our Office for Financial Success (OFS). At the OFS, we provide free peer financial counseling to students, both live and through emails; campus and community financial workshops; financial counseling for the public (a small fee that is reduced for lower-income households); and tax preparation for moderate-income households through our nationally recognized MOTax program. Often, when counseling students, while it is a financial issue that brings them to us, it becomes apparent that there are some critical areas that they need to address to improve their trek through life (career). Some of the ones that come to mind are below.

Ethics – We probably don’t need to remind you of the importance of ethics in one’s professional life. Today, while the antonym of “ethics” is “Madoff”, we need to ask ourselves what ethics means to us on a daily basis. As a start, carefully observe the people that you hold in high regard and ask yourself if you are similar to them in your ethics. Take note of their honesty, values, and work-ethic and, if possible, try to emulate them. Yes, finding that person whose compass always points to “true north” can be very valuable, as you work through life. Importantly, the world does not stand still but, if we have a sound ethical base, we will make decisions that mold that world in a positive direction. For you old Boy Scouts out there, think about how the world would be different if everyone followed the Scout Law. While Boy Scouts aren’t perfect, I recently read a piece by a mediator on how he employs the Scout Law in his work. (Regardless of your occupation, you might find it interesting: http://karpmediation.com/resources/ScoutLawforMediators.pdf .)

Solutions – Problems follow us, wherever we go, and being able to work toward solutions is an extremely valuable skill. At work, we often find repetitive processes that “have always been done that way” and could be improved if we adopted a new technology, changed the management of our workflow, and recognized the impediments that keep our business from fully achieving her goals. Try to stop blaming others for problems. Instead try to imagine what can be done to prevent the problem from happening and ask yourself how you can demonstrate leadership in making that a reality.

Technology – The future is now. Every day it seems like there is some new process being employed by the university that requires me to learn something new. Graduate students find out about our program on the computer, apply on-line, and may take our courses via the internet. We may never see them face-to-face. We need to keep in contact with all of our students and we find that they respond to text-messaging much faster than they do a phone call or e-mail. For you that are younger (which is most of you) this probably sounds a little corny but, trust me, there will be more, many more, changes in technology. I ask you to embrace all that is good about these changes and to keep your distance from the rest. (How you make that decision is why I put Ethics at the top of this list.)

Sales – You have to be able to sell yourself and win over others to your point of view, in order to achieve financial success. You cannot have too much practice in communication skills. Take more courses that require you to talk to others. Practice speaking in front of large groups. Listen carefully to those you consider to be great speakers and “steal” a practice from them to use in your own communications. The main thing is to not be afraid to try to improve in this arena. John Ford, the film director, once said, “You can speak well if your tongue can deliver the message of your heart”…..seems we’re back to Ethics, again.

- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211

What is Predatory Lending?

Recently, the economy has shown a tendency toward treating all of us as if we were prey. This environment has encouraged legislators to take a harder look at most lenders. If you listen, you’ll hear some of these lenders called “predatory lenders”. Predatory lending is the practice of charging excessive fees for consumer loans or payment agreements that are damaging to the consumer’s financial interests. Moreover, predatory lenders often use aggressive tactics and false claims to target unsuspecting, often low-income, households. What are the signs you may be dealing with a predatory lender?

Twelve Signs You May be Dealing with a Predatory Lender

1. The deal sounds too good to be true.

2. The lender pressures you to accept his offer or ignores your questions about the loan or payment agreement terms.

3. You are approved for a loan that is greater than you wanted, and you know you cannot make the higher payments.

4. There are fees in the loan or rental papers that the lender did not tell you about, and the lending agent keeps trying to add costs, such as credit insurance.

5. The loan or payment agreement takes away your right to take legal action if something goes wrong.

6. The interest rate is extremely high, or there is a hefty penalty if you pay off the loan early.

7. The lending agent asks you to sign blank papers to be filled in later.

8. You were promised your monthly payments would be lower in the future, but instead they are higher.

9. A lender focuses on low weekly or monthly payments - not the loan‘s total cost or the Annual Percentage Rate of interest.

10. You receive a call or letter from a lender pressuring you to refinance your loan several times a year even though this is not something you requested.

11. You pay up-front fees before you make application or sign any kind of agreement. Fees for a consumer loan should not be greater than 1% of the loan. Often with predatory loans fees can exceed 5%.

12. A lending agent tells you to provide information that is not true on the loan application, enabling you to be approved.

While these may sound far-fetched and ludicrous to you, it is estimated by the National Association of Consumer Advocates that predatory lending costs the unsuspecting among us over $9 billion per year (http://www.naca.net/predatory-lending-practices/). While this number may seem small, in light of recent federal stimulus legislation, to the unsuspecting, often trusting, consumers who are the targeted-prey of these lenders, these loans greatly impede those individuals’ ability to reach financial success. In fact, I have personally had a low-income, single mother tell me that she used one of these loan sources, a payday lender, as she thought it was a way for her to increase her credit score. Trust me, it does not.

In closing, you know I am not a fan of borrowing money for anything that does not have the chance to appreciate in value; an education, a home, a business, or other investment. My best advice to you, however, if you must borrow money, is to first discuss it with your bank or credit union. If they won’t loan you the money, the odds are better than 50/50 that you shouldn’t be borrowing the money. If you are very financially pressed, perhaps financially depressed, I would suggest you call a local credit counseling agency. Not-for-profit credit counselors can be found through the following website: http://www.cccsstl.org/?referrer=google&consumer&credit&counseling&gclid=CKHLy_yPzpkCFQMQswod9muAvA .

With, Brenda Procter, State Specialist & Instructor, MU Personal Financial Planning Extension

- Robert O. Weagley, Ph.D., CFP(r)

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211