New Credit Card Website

As a consumer, it pays to be smart when choosing and using a credit card.

 

The Federal Reserve Board, whose goal it is to protect the credit rights of consumers, has launched a new website at

 

http://www.federalreserve.gov/creditcard/

to help consumers better understand the new credit card protections that took effect in February and provide general, unbiased information about credit cards, credit scores and credit laws.

 Important features of the website include:

 

·         Basic facts about common credit card options, interest rates, and fees

·         Interactive features that  allow consumers to learn more about credit card offers and the new features of their monthly statements

·         An online credit card repayment calculator that provides estimates of how long it will take to pay off a credit card balance and help consumers develop a plan for paying off their balance sooner (English & Spanish)

·         A glossary of common credit card terms for quick reference

·         A list of federal credit protection laws

·         Links to resources for consumers who are experiencing problems with their accounts

·         Printable PDFs of 3 consumer publications

§  What You Need to Know: New Credit Card Rules

§  5 Tips for Getting the Most from Your Credit Card (English & Spanish)

§  5 Tips for Improving Your Credit Score (English & Spanish)

·         Articles about a variety of topics including:

§  Interest rates

§  Fees

§  Lost or stolen cards

§  Billing errors

§  Managing credit

§  And more

 

We encourage you to spend some time on the site learning more about credit cards and your consumer rights.

Ryan H. Law, M.S., AFC

Department of Personal Financial Planning

Office for Financial Success Director

University of Missouri Center on Economic Education Director

 

239E Stanley Hall

University of Missouri

Columbia, MO 65211

 

573.882.9211 (office)

 

China: A Snapshot

Wednesday was our Personal Finance Symposium: “Your Financial World Begins at Home”.  I think it was a great success and I missed seeing some of you.  The group was quite diverse, ranging in age from an 11 year-old, home-schooled child to an elderly, well-respected resident and owner of a local insurance company.  (I think he is elderly, only because it is publicly recorded that he watched a Buster Keaton film at the opening of Columbia’s lovely Missouri Theater in 1928.  You’d never know it by his love of life and knowledge.)

 

I presented an overview of what we know about Chinese households, while both the Chair of the Finance Department and the Dean of the Business School of Renmin University in Beijing gave an overview of how and why the Chinese make the decisions they make.  It was fun.

 

So, in case you weren’t in the audience, here is a quick overview.  You should know that these data are from 2,095 households in tier one and tier two cities in China, representing the more affluent Chinese. The data were collected in 2008.

 

ASSET OWNERSHIP:

 

The above is based on an average level of assets of $81,010 (US Dollars), with $22,630 of those assets in financial assets.  The key points that I find of interest are:

·         A higher proportion of Chinese own individual stocks (27.84%) compared to mutual funds (16.43%).  This is as a result of a relatively new mutual fund industry that has performed poorly and where trust in the firms has yet to develop.  Moreover, the Chinese population is quite independent, as well as analytical, resulting in more “stock picking” and less diversification.

·         Only 7.48% own bonds, a lower risk asset. 

·         Over 50% have cash-value life insurance.  The growth in the life insurance industry in Asia has been phenomenal over recent years.

·         Only 15.59% own an automobile!  I will admit that when I was in Beijing it seemed like everyone had a car.  Yet, with a population of over 17 million – there are a lot of cars!

·         85.29% own a home.  This is greater than the rate of homeownership in US cities.  While many of these homes are passed from generation to generation, there is a lot of speculation occurring in the urban Chinese housing market.  Everyone is trying to buy a home.  For more information check out this article, China must end property bubble; even if painful.

 

DEBT:

 

 

What more can I say that is not said in the above picture?

·         Only 8.78% of the households hold a mortgage, while over 85% own a home.

·         Less than 1% of the households have automobile loans, while 15.59% own a car.

·         Less than 1% have consumer loans, while 100% are consumers.

 

I don’t think I need to say anything more.  I do hope, however, that this makes you think about your choices and our future for financial success.

 

 

Reflections on Prior Tax Seasons

Today is April 16th, the day after tax day. For most people, this day is just another day, just like April 17th, 18th, 19th, etc... But for me, April 16th is when I breathe a bit easier. I coordinate the free tax assistance site on the MU campus, and I support several other free tax prep sites around the state. So April 16th represents the walk down from the summit of April 15th. So on this special day, I decided to reflect on some lessons my tax clients taught me from prior tax seasons. 

First, when you sell something, it is very important to know how much you paid for it. 

 

The financial services industry has made it incredibly simple and cheap to buy stocks, bonds, and other financial instruments. You can go online and buy securities with the aid of a discount broker, or you can walk into a brick and mortar store and sit down with a financial advisor. It is also relatively easy to sell securities. The problem comes with connecting the two transactions at tax time. 

 

Years ago I had a client who had sold some shares of stock that his father had bought him in the 1950s. Not only were the initial shares bought several decades ago, the dividends from the stock had been faithfully reinvested every quarter so that the client had doubled the number of shares in his stock. Of the two transactions, the sales price was easy. His broker had sent him a trade confirmation that listed the date sold and the proceeds of the sale. The trouble began when I asked him, "So what did you pay for the stock?" The client looked at me and said, "I have no idea. My father bought it for me when I was a boy." I then had to explain that if he didn't have the cost basis on the return, the IRS would most likely tax him on all of the gross proceeds from the sale. He went home and spent several days reconstructing the past. Luckily, he was able to piece together the history of purchases and reinvested dividends, and we were able to enter in a cost basis for his shares. 

 

Fortunately, Congress and former President Bush helped fix this problem. The Emergency Economic Stabilization Act of 2008 requires financial companies to start tracking cost basis information on January 1, 2011. They must deliver this information to the IRS at the end of every year with your 1099s. Also, transferring accounts between financial institutions will not cause a problem as cost basis information will now be transferred as well. 

 

While this is great news for taxpayers who will sell stocks that will be bought after January 1, 2011, this law will not help you if you already have stocks. You will still need to track and be aware of your cost basis in stocks, i.e. what you paid for them. This is especially important for taxpayers who have been gifted stock. We have seen college students come to the tax site who have sold some stock their grandparents had given them. Unfortunately, when the grandparents gifted the shares of stocks, they also passed along their cost basis. The main exception to this rule is when securities are received through an inheritance; generally, the cost basis is "stepped up" to the fair market value on the date of death.

 

Second, before you put money into a ‘special’ account, be sure you know how to get the money out. 

We have so many different 'special' accounts that Congress has written laws for: Health Savings Accounts (HSA), Flexible Spending Accounts (FSA), Roth Individual Retirement Accounts (Roth IRA), Traditional IRA, Educational Savings Accounts (ESA), and the list goes on. Each special account offers favored tax treatment and limitations on the use of the funds. Before you place your money in an account with limitations, be sure to fully understand what you're agreeing to. Can you take the money out if you are disabled? Can you take the money out if you lose your job or want to buy a house? Can creditors come after the money? What happens to the funds after you die? All of these questions should be answered before you fund these accounts. The worst time to ask is after you have pulled the money out. Also, do not be afraid to ask a tax expert in addition to your financial planner.

If you would like to email me with comments or questions, feel free to do so at ZumwaltA@missouri.edu

 

Resources:

 

Publication 17, best tax resource for general questions: www.irs.gov/pub/irs-pdf/p17.pdf

 

Publication 551, best tax resource for cost basis questions: http://www.irs.gov/pub/irs-pdf/p551.pdf

 

 

Andrew Zumwalt, M.S.

Director of the MoTax Education Initiative

162 Stanley Hall

University of Missouri

Columbia MO 65211

 

Your Financial World Begins at Home

The week after spring break can be a killer.  I don’t know about you but, when I take a week off, I generally spend the first couple of days thinking I should have stayed home and worked.  Then, I spend the rest of the week thinking of ways I could support myself on this little island and never go back to work.  In this case, the little island was Isla Mujeres, off the coast of Mexico.  I truly recommend visiting the “Isle of Women”, but that is not the point of this week’s tip.  The point of this week’s tip is to encourage you to attend this year’s Personal Finance Symposium.  Below are the details for the Symposium.  I hope you agree that this year’s line-up of speakers is outstanding.  The focus of the Symposium, like the theme  that runs through our financial tips, is that what we do in our financial household creates the financial world we either enjoy or fear.  In 2010, it serves us well to consider our financial lives, in the context of the world we share. 

 

Personal Finance Symposium II

“Your Financial World Begins at Home”

April 21, 2010

9:30 a.m. – 3:30 p.m.

Reynolds Alumni Center, University of Missouri

Columbia, MO

 

Welcome to MU:

Robert O. Weagley, Ph.D., CFP®, Chair Personal Financial Planning, University of Missouri

Ken Dean, Deputy Provost, University of Missouri

10:00 a.m. “The Macroeconomic View, The Case of Oil”

Michael Owyang, Federal Reserve Bank, St. Louis, Missouri

11:00 a.m. “The 21^st Century Investment World”

Michael Avery, President and Chief Investment Officer, Waddell & Reed, Shawnee Mission, Kansas

12:00 noon Lunch

1:00 “Chinese Household Finance: What We Know”

Moderator: Robert O. Weagley, Chair Personal Financial Planning, University of Missouri

Dr. Yan Li, Chair Finance Department, Renmin University, Beijing, China

Dr. Yi Zhihong, Dean, College of Business, Renmin University , Beijing, China

Dayong Yang, Senior Vice-President, Sino Credit Corporation , Beijing, China

2:00 Behavioral Finance and Goal Priorities

Jim Barnash, Former President of the Financial Planners Association & Senior Partner, Stride

 Consulting, Inc., Chicago, Illinois

3:00 Reception and Student Recognition

 

Registration:      $25/person, includes lunch

$50/per person with four hours of CFP® continuing education credit

$10/student, includes lunch

 

For more information or to make your reservation, please contact Amy Sanders at (573) 884-5958 or sandersal@missouri.edu or mail your check (payable to University of Missouri) to her at 14 Gwynn Hall, Columbia, MO 65211.

 

I encourage you to attend the symposium and, yes, we are charging a small fee to recoup some of our costs of providing travel and lodging to our speakers.  If, however, you have a class of students that would like to come and they don’t want to eat the $10 lunch, please contact Amy Sanders (sanderal@missouri.edu) with a list of their names and we’ll let them come for free.  Frankly, we lose money on the Symposium but can one really claim to have financial success, if they can’t give things away?    

 

Event Sponsors:               Personal Financial Planning Department, University of Missouri

Financial Planning Students Association

Office for Financial Success

                                                College of Human Environmental Sciences

Missouri Council on Economic Education

Mid-Missouri Estate Planning Council, Columbia, MO

Society of Financial Service Professionals, Columbia, MO

National Association of Insurance and Financial  Advisors, Columbia,

                MO

Waddell & Reed

Bank of Missouri

Missouri Credit Union Association

Missouri Cooperative Extension

Steamboat Financial

American Century Investments

Smith Moore and Company

State Farm Insurance

Shelter Insurance

 

 

 

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

Identity Theft

Today we are going to discuss a problem that has affected millions of Americans, including Oprah Winfrey, Bill Gates, Tiger Woods and even Federal Reserve Chairman Ben Bernanke.  

The problem is identity theft. 

Identity theft occurs when someone steals your personal information (such as your credit card or Social Security number) and uses it fraudulently.  If you are a victim it can cost you time and money and ruin your credit rating and good name.

Identity theft can happen in a number of different ways.  For example, a thief may:

·         Go through your trash or “dumpster dive”

·         Steal your wallet or purse

·         Steal your mail or submit a change of address form for your mail

·         Use “phishing” or fake emails to get you to provide personal information

·         Steal personnel records from their employers

 

While there are no ways to absolutely guarantee you’ll never be a victim of identity theft, there are ways to minimize your risk. By following the “3 D’s” of identity protection, you can make it more difficult for thieves to walk away with your identity.  

The “3 D’s” are Deter, Detect, and Defend.

DETER: The old adage “an ounce of prevention is worth a pound of cure” is certainly true in regards to identity theft.  Here are some steps you can take to deter identity theft:

·         Shred paperwork with personal information and financial documents before you discard them.  However, not just any shredder will do.  You need to make sure you are using a cross-cut or diamond-cut shredder instead of a single-line straight-cut shredder.  Identity thieves have been known to piece together items such as a shredded credit card application; tape it together and mail it in.  The thief won’t be able to tape back together small pieces from a cross-cut or diamond-cut shredder, though.

·         Don’t carry your Social Security card in your wallet or write your Social Security number on a check. Give it out only if absolutely necessary.  Thieves actually only need this one piece of information to steal your identity, so keep your social security cards in a safe place at home or in a safety deposit box.

·         Don’t give out personal information on the phone, through the mail, or over the Internet unless you are sure who you are dealing with.

·         Never click on links sent in unsolicited emails; instead, type in a web address you know. 

·         Don’t use obvious passwords such as your mother’s maiden name or the last four digits of your Social Security number.

·         Keep your personal information in a secure place at home, especially if you have roommates, employ outside help, or are having work done in your house.

DETECT: Detect suspicious activity by routinely monitoring your financial accounts and billing statements.

·         Know when your bills and statements normally arrive so you can follow up if you don’t get them.  Inspect them carefully when they do come to make sure there are no errors.

·         Check your credit report on a regular basis.  Credit reports contain information about you, including what accounts you have and your bill paying history.  There are three major nationwide consumer reporting companies (Equifax, Experian, and TransUnion) and the law requires each of them to give you a free copy of your credit report each year if you ask for it.  To obtain that free copy go to www.AnnualCreditReport.com.  A great strategy to monitor your report on a regular basis is to pull one report from each company every four months.  That way you should be able to find fraudulent information sooner.

 

DEFEND:  If you suspect a problem you need to take action immediately.  Here are the steps to take:

·         Place a “Fraud Alert” on your credit reports by calling any one of the three nationwide credit reporting companies.  Placing a fraud alert on your credit reports tells creditors to follow certain procedures before they open new accounts in your name or make certain changes to your existing accounts.  A call to one company is sufficient – that company will pass the information on to the other two.

·         Close accounts that have been tampered with or opened fraudulently. To close your accounts, call the security or fraud departments of each company where an account was opened or changed without your okay. Follow up in writing, with copies of supporting documents.  You can use the ID Theft Affidavit at http://ftc.gov/idtheft to support your written statement.  Ask for written verification that the disputed account has been closed and the fraudulent debts discharged.

·         File a police report.

·         Contact the Federal Trade Commission. The FTC is the federal consumer protection agency that helps law enforcement officials in their investigations.

 

NOTE: The majority of this article is from information on the FTC website.  To visit that site and learn more go to http://www.ftc.gov/idtheft.