Get It Together! 5 Steps to Organizing Your Financial Life

Let's talk about organization. In today's society,the importance of keeping things organized has diminished because it takes time and dedication to make it happen effectively. If you are willing to take the steps, however, you will find that getting your financial house in order isn't quite as bad as it sounds. 
  
Here are five steps to help you on your path to financial organization, and ultimately, freedom from debt. 

• Collect all necessary documentation in a single location. 
• Take a day off each quarter from work, known as a "personal finance day," to gather your account information and place it in organized files. Ideally, there will be files for banking information, credit cards, investments, mortgages, and insurance. 
• If you are not utilizing your bank's online resources, sign up for an account. Many banks provide an array of tools that can also aid in organizing expenses and income. 

  

• Create a written budget, and review it monthly. 
• Once you have gathered all your account information in a safe, central location, create an accurate budget that includes a savings trigger and properly notates your money needs. Adjust spending in key areas such as food and entertainment, and allocate those funds to debt elimination and savings. 
• At the beginning of each month, review your budget. Holidays and special events will give your budget a different look than in other months, and your spending plan should reflect those changes to give you the best idea of where your spending should be for that time.

  

• Set a schedule for paying bills. 
• When creating your monthly budget, write down specific dates to pay various bills. As a rule of thumb, it is best to pay bills in bulk on key days of the month. For example, if Sam & Diane's mortgage is due on the 1st, their phone bill on the 5th, and electric bill on the 7th, it would be ideal to pay all three bills on the 1st. This ensures these bills are satisfied, and eliminates any chance of incurring late fees from the creditor, or overdraft fees from their bank. 

• Write down all one-time expenses for the year
• One stumbling block many face when embarking on budgeting is the occurrence of one-time expenses that pop up throughout the year. These may include license plate renewals, professional dues, or insurance premiums. Divide these costs by 12, so that you can include them in your monthly budgets. By employing this method, you can save towards those costs as they come, rather than losing large amounts of your monthly income in one fell swoop. 

• Shred, shred, shred!!
• If possible, invest in a shredder. In the age of rampant identify theft, it is imperative that you take every available precaution to protect your personal information. Not only will shredding documents keep you safe from possible theft, it also frees your home of tons of unnecessary paper. 

By taking these steps, you are, in a way, deputizing yourself to free yourself from the prison of indebtedness. It all begins with a willingness to say, "Yes, I'll do it." We'll be here to help you along the way. 

With you on the journey, 

Daniel Sims

 
Daniel Sims is the newest member of the Madam Money team. He is the creator & host of Financial Rebirth Live!, a personal finance podcast on BlogTalkRadio.com, and managing partner of RDSF Consulting in Little Rock, Arkansas. We look forward to his insights in the coming months. 

5 Signs You're Ready for Financial Coaching

Have you (or someone you know) ever thought about hiring a Financial Coach to help you create and accomplish your financial goals? Check this out ... 

The sense of frustration has become epidemic with today's economy, challenges are becoming more prevalent with personal financial matters. Building financial stability and wealth can be a confusing and complex huge pill to swallow. So, where is a person supposed to find the time to become a financial expert and learn what is necessary to build the financial stability desired?
  

Are You Ready for ...

  

Hiring a financial coach provides a competitive advantage by leveraging the person's time with specialized financial expertise that cuts through the clutter, confusion and contradictory information by teaching them what is relevant - efficiently and with minimal hassle.
  
Here are 5 Signs that You may be Ready Financial Coaching.

1. You're tired of procrastinating and ready to start building wealth and living your dreams.
2. You want to develop your own personalized action plan for building financial security based on principles that are custom designed to fit your specific situation - not a cookie-cutter or generic plan.
3. You want an accountability partner to help you maintain focus on your financial goals.
4. You're just "not interested" with traditional financial planning where all they want to do is sell you investment products. Instead, you want straightforward advice without all the sales pitches.
5. You realize that "true wealth" is not just about more money ... you want to balance your life while working toward financial freedom so that you don't make the mistake of sacrificing your family, health, or a fulfilling life in pursuit of money.

So, if you're ready to start working with a financial coach, feel free to contact me at Prosperity Now Financial Management Services.

  

Financially True,

  

Tarra Jackson, Making Money Sexy!

Exit Strategies: How to Leave Financially Abusive Relationships

Have you (or someone you know) ever been caught up in a financially abusive relationship and desperately needed an exit strategy? I have.

   

There are many consumers that are in financially abusive relationships with financial institutions that seem to be “not that into” them. They are dealing with ridiculously high loan interest rates, very low deposit rates, too many and extremely high fees, as well as poor customer service.

   

Being in a financially abusive relationship not only angered ME, but it made me feel weak and hopeless because I didn’t know how or if I could escape.  Then one day … I did!  So, here are a few effective Exit Strategies for getting out of a Financially Abusive Relationship.

   

Talk About It

There may be an opportunity of improving the situation by talking with the right person at the financial institution. So, before deciding to break up with the financial institution …

 

Be sure to

1. Share concerns with a Customer Service Representative,
2. Speak with a Branch or Department Manager about concerns for resolution, or
3. Write a letter to the Senior or Executive manager about concerns.

If efforts to resolve the matter are not addressed appropriately or ignored, move to the next strategy.

   

Start Financial Dating

Begin the process of financially dating other financial institutions to find one (or two) that can meet, at least, most of the required financial needs (deposit accounts, loans, internet banking, etc.). In my book Financial Fornication, I share the 5 phases of Financial Dating to avoid financially abusive relationships. These phases should not be skipped.  It is necessary and worth taking the time to get to know financial institutions to ensure they are right for a particular financial situation.

    

So, be sure to

1. Explore financial options (banks vs. credit unions).
2. Investigate the financial institution(s) selected via the internet or word of mouth (research).
3. Experience the Introduction by going to the branch(es) or calling customer service to ask questions.
4. Start slow Courting by using one or two of their financial services (open a savings or checking account), when ready!
5. After all 4 phases have been executed, Commit to the new primary financial institution (PFI) by using more of their products and services. 

   

Once a new financial “main squeeze” is found, it will make it easier to leave an existing financially abusive relationship.

  

Exit Slowly & Deliberately

Whether a new financial “main squeeze” is on standby or not, another Exit Strategy is to slowly stop using the financial institution’s products and services.

  

Be sure to

1. Review bank statements carefully to identify all direct deposit or automatic payments coming out of the accounts.
2. Stop or change automatic payments from the account(s) and update payment information with the new financial account information, if available.
3. Ensure that all accounts are in good standing or current. This will ensure a clean break. The last thing wanted is a reason for the abusive financial institution to remain in contact.
4. If possible or necessary, refinance loans to the new financial “main squeeze.” If this is not possible, keep this in mind … having loans with a financial institution is like having a child(ren) with an estranged spouse or mate.  Leaving the relationship does not diminish the responsibility of the child(ren). Therefore, leaving the financial institutions does not diminish the legal responsibility of the credit obligation.  If refinancing is not an option, continue to make loan payments to the financial institution on time until it is paid in full to avoid collection and credit report drama.
5. Lastly, stop or reduce direct deposit into the account.

 

Once these steps are executed, a clean breakis relatively available.

  

Even though the financial relationship may seem extremely challenging right now, just know that all financial institutions are not alike. There are lots of really good financial institutions out there that value and appreciate their customers.  Once you find them, some of them even provide an easier method of transiting automatic payments and direct deposits to them through what is called Switch Kits.

  

So don’t give up. There is hope. And most importantly, you deserve better!

    

Financially True,

 

Tarra Jackson, Making Money Sexy!

5 Things Asked on a Loan Application Used by Collectors

Have you (or someone you know) ever wonder why certain information is requested on a loan application that may not have anything to do with making the loan decision? I have.

  

When applying for credit, the loan application is not only a tool to acquire necessary information for the lender to make a judgmental credit decision. It is also a source of valuable data that is used to help collectors collect money that is owed to the lender if the borrower does not make their payments on time or at all.

 

Here are 5 Things Asked on a Loan Application Used by Collectors.

 

CURRENT & PREVIOUS ADDRESSES

The current address is not only used to request the applicant’s credit report, but it is also used to mail payment reminder or collections letters and, when necessary, for Skip Tracing.  Skip Tracing is a process of acquiring as much information about a person to find out where they are. Once the person is located, the collector can proceed with collection efforts or take further legal action.  Some skip tracing tools used are credit reports, white pages, a system called “Accurint,” social media, and especially Google.

  

EMPLOYER INFORMATION

The name and address of the applicant’s employer is sometimes used to have the borrower served if the lender chooses to sue the borrower by filing for a default judgment. However, this information is mainly used to file for wage garnishment.

 

PHONE NUMBERS

Home, work and cell phone numbers are used by collectors, of course, to call borrowers to discuss missed or past due loan payments and to acquire, what is called a “Promise To Pay.”  A Promise To Pay, is the borrower’s promise to make the agreed upon payment(s) to bring the loan account back to a current status.  Most collection calls may be friendly reminders. However, the more past due the loan becomes, the more “concerned” the collectors may be when calling.

  

EMAIL ADDRESSES

Most collectors are aware that many people may not answer unknown callers or callers that they do not want to speak to. They are also aware that many people may not read or ignore collection notices in the mail. This is why email addresses are very valuable.  In today’s electronic age, most people may respond faster to their emails than letters and voicemail messages.  This also gives the borrowers time to respond in a less intimidating manner.

  

REFERENCES

The names, addresses and phone numbers of the applicant’s family members and friends are usually requested in a loan application as references. This information is also used for Skip Tracing, when necessary.  Collectors may contact those references to obtain more information about the borrower and their whereabouts to continue collection efforts or further legal action.

  

  

Most first party collectors, which are usually employees of the lender, may be very open to assist borrowers that are dealing with financial hardships with payment plans. They are usually friendly and willing to assist as best as possible. So, please don’t ignore them.

 

Just make sure that you are aware of consumer rights regarding normal collection action, especially when dealing with third party collectors. No collector should verbally abuse or threaten you. That is against the law. The Fair Debt Collection Practices Act governs third party collectors, collection activity, as well as Consumer Rights.

 

Financially True,

   

Tarra Jackson, Making Money Sexy

  

What other application information is used by collectors?

NYT on Sunil Gulati

It is encouraging to see the mainstream media paying attention to FIFA governance and the role of Sunil Gulati in it. A few days ago the NYT did an analytical piece on Gulati's new role. Here is an excerpt:

Gulati, the president of the United States Soccer Federation, was elected to the 25-member executive committee of FIFA, soccer’s governing body, in an 18-17 vote by members of Concacaf, the regional organization consisting of countries from North America, Central America and the Caribbean.

On the surface, this is positive: the United States now has a seat at the table, as Gulati said, in the group that makes most of the important decisions in global soccer, including selecting the dates and sites for major tournaments. That presence is no small development for a country that has problems related to its own professional league. Major League Soccer does not have a promotion-and-relegation system, unlike most of the rest of the world, and it does not play its season in the traditional international window; having FIFA’s approval for these idiosyncrasies, Gulati noted, is important.

So from that perspective, Gulati’s election is encouraging. But it also feels a bit as if a child has put on a crisp white suit just before going out to play beside a giant mud puddle.

Global soccer is, at present, a quagmire of corruption. Bribery, blackmail and cronyism are rampant, and in recent years as many as 10 members of the executive committee have been linked to venalities of varying degrees.

Read the whole piece here.

Grant Wahl Interviews Sunil Gulati: Welcome to the Real World

Sports Illustrated has posted an valuable interview with Sunil Gulati, president of US Soccer and newly elected representative of CONCACAF to the FIFA Executive Committee. In the interview Grant Wahl asked lots of questions about FIFA governance.  Here are some excerpts and my commentary.

It is interesting to learn the amount of information that Gulati did not have. For instance, here are some examples excerpted from the interview:

Wahl: [Which] FIFA committees are you on right now?
Gulati: I don't know yet. That's to be determined

Wahl: You're unpaid in your position as U.S. Soccer president. You will be paid as a member of the FIFA Executive Committee. How much?
Gulati: Formally, I haven't been told that yet. I'm sure I'll find out in the weeks to come and I'll find out the rules and regulations about disclosure.

Wahl: Is there a specific FIFA policy that prohibits disclosure?
Gulati: I've asked that question and I don't know the answer to that.

Wahl: Do you know how much Blatter receives in compensation?
Gulati: No.

Wahl: Should members of the FIFA ExCo know such a thing?
Gulati: I'm sure some members of the FIFA ExCo do. I don't.

Gulati explained what it means to be on the ExCo:

Gulati: What does [the FIFA ExCo spot] mean? It's a seat at the table of essentially the board of directors of the body that governs soccer throughout the world. So whether it's discussions about the long-term growth of the game or changes to the laws of the game, which eventually go to the IFAB, or the use of funds from the World Cup and how those are divvied up, development funds, all those things. It's a normal board of directors, so having a voice there is certainly positive.

A member of a board of directors ought to know many of the things that Gulati does not, so hopefully Wahl or other reporters will follow up with many of these same questions in the fall.

Wahl asked Gulati about the recent CONCACAF Integrity report, and the limited answer provided by Gulati suggests that he was without much information at all about CONCACAF governance in recent years as a member of its Executive Committee:<

Wahl: The CONCACAF Integrity Report came out and there were some staggering examples of improper behavior by former leaders Chuck Blazer and Jack Warner in the report. You served on the CONCACAF Executive Committee during their time in power. Were you aware of their activities in that report?
Gulati: The answer is no.

Wahl: There was good journalism done — admittedly not enough by me, but by others — revealing improper behavior that ended up in that Integrity Report. Do you feel like you should have done more?
Gulati: There are two things. One can always say one should do more in certain situations. But secondly, and more importantly, in the midst of various legal proceedings, I'm not going to talk about this. I'm not involved in any legal proceedings, but I think it would be inappropriate to say very much about that given FIFA proceedings and other potential proceedings.

Wahl: Are we looking at FBI and IRS investigations into Blazer and Warner, as has been reported?
Gulati: Given various proceedings, I'm not going to comment on anything else here.

It is of course fair enough and to be expected that Gulati does not want to discuss the issues associated with corruption in CONCACAF. However, it is remarkable that as a member of the CONCACAF Executive Committee (that organization's "board of directors") Gulati was completely unaware of the finances of the organization -- which as we have learned were often co-mingled with the personal finances of Jack Warner an Chuck Blazer. 

Recall that Blazer and Warner appropriated approximately $88 million of football funds for personal use. How does that go unnoticed by the CONCACAF Board? Should a member of the CONCACAF ExCo have known more? I would expect that Gulati will face -- appropriately so -- further questions about what he did and did not know, from the media and various investigators.

Wahl asked Gulati about his views on the FIFA reform process and the criticisms that former FIFA IGC member Alexandra Wrage made about the process (she ultimately resigned from the committee in April):

Wahl: You just got back from the FIFA congress in Mauritius. How would you grade the FIFA reform process and what it's accomplished so far?

Gulati: Well, since what I do for a living is grade students, I'd say incomplete. What's been done up to now, I think, is a long way toward addressing some of the issues, but I think more needs to be done. So setting up independent chambers on the ethics panel for adjudicating and investigating, that's a big plus. Setting up the external audit and compliance group under Domenico Scala is a great advance. And the people that are in charge of those three groups, from everything I've seen, read and witnessed and talked with them about, are highly qualified and highly professional. That's a big plus.

The rewriting of the ethics code is a big plus. It's pretty clear what's happened the last few years with seven, eight, nine people who've left the ExCo either by their own decision or by formal investigation or some combination of both. That doesn't happen if people are just saying let's forget about the past and move on. Some of those things happened a long time ago. Under the new code of ethics they can be investigated and disciplined for that. Those are all pluses.

There are any number of other things, in terms of the funding of programs, the audit and compliance area, the transparency of funding development projects, external bids within the general area of finance the whole bidding process has changed. I'm not talking about the World Cup bidding process, but the bidding process for contracts with FIFA for business.

The changes are incomplete in my view on the World Cup [host] decision-making. The only formal decision to be made so far is the final decision will be made by 209 countries.

Wahl: Alexandra Wrage resigned from the IGC and had a very public critique of the IGC's work. Do you think her criticism was off the mark?
Gulati: I don't agree with Alexandra's comments. I think much was accomplished in the process and much still needs to be done. To the extent she believes other things still need to be done, that's fine. To the extent she believes the 18 months didn't accomplish anything, I think that's off the mark. Frankly, I think [her criticism] was unfair to the three people that are now in charge of the adjudication, investigation and audit/compliance [bodies], all of whom to me are highly qualified, highly independent and have done from what I've seen so far a commendable job on the issues.

Gulati's optimistic view of the reform process jibes with FIFA's own view, but is hard to square with an objective evaluation.

Finally, one of Gulati's comments was revealing for what it says about how those who govern football view the world. When Wahl asked Gulati about US support for Blatter in the 2011 FIFA election, noting that he was the only one on the ballot. Gulati replied:

Gulati: [F]rankly I'm not sure what world you live in. I live in the real world.

At some point Sunil Gulati will have to choose between the red pill and the blue pill. He is not quite there yet. As Morpheus tells Neo in The Matrix, "Welcome to the real world."

Analysis: A Report Card on FIFA Reform

Over at Play the Game I have a new analysis up focused on a (somewhat) objective evaluation of the FIFA reform process. Here is how it begins:

Last month at the FIFA Congress in Mauritius FIFA President Sepp Blatter declared that the governance reform process that he had initiated two years earlier had come to a close, "We have been through a difficult time. It has been a test for football and those who lead it. As your captain, I can say we have weathered the storm." 

Mark Pieth, a professor at the Basel Institute of Governance and the man hand-picked by Blatter to lead the FIFA Independent Governance Committee to advise the reform process, said of the two-year effort, “In a relatively short space of time, it's quite spectacular so far what has been achieved.” FIFA announced that the process had been a resounding success: “the majority of the reform recommendations by the IGC were implemented.”

Such comments are difficult to reconcile with the perspectives of other close observers. One member of the FIFA IGC, Alexandra Wrage, a governance expert and president of TRACE International, resigned from the committee just over a month before the Congress in Mauritius, explaining, “It’s been the least productive project I’ve ever been involved in. There’s no doubt about that.”

Following the Congress, Guido Tognoni, former FIFA Secretary General, told a Swiss television station that, “Mark Pieth has good intentions but to me he’s like Sepp Blatter’s poodle. He must bark loud but he’s not allowed to bite. He had a promising approach but, of course, he’s banging his head against a block of granite.”

With such claims and counter-claims flying about, colored by interests and personalities, it can be very difficult to get a sense of what was actually accomplished in the FIFA reform process. In order to provide a somewhat more objective basis for evaluating the process, I have undertaken a formal evaluation, with a first look at the results presented here.

To see how the evaluation comes out, both for FIFA and for its IGC, head over here. Comments welcomed here or by email, as this is a work in progress.

5 Things I Wish I was taught "How To Be" when I was a Teenager (to be Financially Better Off)!

Do you, or someone you know, have things you wish someone taught you "how to be" when you were a teenager, to be financially better off?  I do!
  

“If I knew then what I know now.” This has got to be the theme song for most adults, especially when it comes to finances.  There are hundreds of things that I wish I was told, taught or nagged about when I was a teenager.  But, here are my top 5 Things I wish I was taught “how to be” when I was a teenager, to be financially better off.
 

I wish I was taught how to be …

  

A Boss!

No, not Bossy, but A Boss of my own business. Instead of being encouraged to go to school so I can get a good job, I wish I was told and taught to go to school to learn how to make jobs. Or to go get a job to learn what it takes to run a business. Seriously, we are told what to do and what not to do when we are children, only to go to school to get a job for other adults to tell us what to do and what not to do when we become adults.  Seems like a set up to me now.  
  

So teens … go to school and get a job, NOT to just be an employee, but to learn how to become an entrepreneur. Besides, there are not that many jobs out there right now anyway. Create your own business and Be A Boss!

  

A Giver

The first principle of Prosperity is Giving! In order to reap a harvest, a seed must be sown.  Always remember, there is no room to receive in a closed fist.  Whether your giving is spiritually, morally or emotionally based, give gladly and on good ground. Giving is not always about money. Sometimes your old clothes, knowledge, or time may be just as, if not more, valuable.
  

So teens … learn the power and pleasure of giving early to a church, non-profit or worthy organization or individual. You’ll be surprised of the blessings you will receive because of your openness to give.

  

A Saver

Who knew that if I had saved only $100 per month when I got my first job at the age of 14 in a savings account with an interest rate of 0.50% until now (25 years), I would have saved over $32,000? And if I had saved $200 per month, it would be almost $65,000.  The point is, if I really understood the power of saving at a younger age when I could afford it, I would be able to afford almost anything I wanted when I got older.
  

So teens … Start Saving Sooner!!! The younger you are when you start saving, the more you will have when you really need it when you get older. Trust me on this one.

  

Financially Proactive

Enjoy today but Live for Tomorrow!  Tomorrow is your future. Live like you are going to be alive for a long time and you want to be financially comfortable for the rest of your life. True story … If I had planned for the things that I wanted “tomorrow” (in the future); I would nothave borrowed money to get what I wanted “today” that I would have to be paid back “tomorrow” (in the future). Well, it’s tomorrow for me now and I’m still paying for what I borrowed “yesterday” (in the past).  My point is that using credit to get what you want right now will limit what you can afford tomorrow, when you really need it. It’s no fun not being able to afford to buy a home because you owe too much in credit card debt.  Credit is designed to be a leverage to help you acquire real “assets” (read Robert Kiyosaki’s book, Rich Dad Poor Dad) or to be an anchor and drown you deep in debt.
  

So teens … use credit wisely and do not use it until you are mature enough to handle its consequences (read my book, Financial Fornication).

 

Wealthy!

Not rich, but Wealthy! Rich is predicated on how much money you have, but Wealth is determined by how much you are able to do with the money you have. I’ve met hundreds of broke “rich” people, but I’ve never met a broke “wealthy” person.  Also, don’t believe the bling you see on TV! Nine times out of 10, the bling is borrowed! #IJS
 

So teens … follow my Financial Freedom Formula early and be wealthy for the rest of your life!

 

      

Those are my top 5 things I wish I was taught, but believe me there are more. Come to think of it, I was probably told to be a few of them, but I just didn't listen. Typical teenager.  ;-)

   

Best wishes on your journey to Financial Freedom!

   

Financially True,

   

Tarra Jackson, Making Money Sexy!

Further Thoughts on Sepp Blatter's FIFA Salary

A few months ago I offered a guesstimate at Sepp Blatter's FIFA salary of $6 million. I have just read through the 2012 FIFA Financial Report which was released a few weeks ago in Mauritius (here in PDF) and have a few additional thoughts.

In 2012 FIFA had total personnel expenses of $90,649,000 covering 412 employees, for an average of about $220,000 per employee (from p. 73). However, the report also notes that "key personnel" received $33,500,000 in compensation in 2012 (from p. 94). These "key personnel" include members of the FIFA Executive Committee, Finance Committee and management.

If we subtract the compensation of the "key personnel" from the total and also the 38 personnel who fall in that category, we find that the average salary of a non-key FIFA employee is about $153,000.

There are 25 members listed on FIFA's Executive Committee (let's set aside those who are suspended or otherwise outcast) including FIFA President Sepp Blatter. The Finance Committee is comprised of member of the ExCo, but for salary purposes, let's treat them as separate salaries. We do not know how much compensation these 25 receive, we just have a snippet of information from Mohammed bin Hammam in 2011 who revealed the ExCo compensation in 2010 to be 200,000 Euros, or about $280,000.

Since 2010 was a World Cup year FIFA's revenues were high and the pay to the ExCo was apparently high as well:

"We don't get any salaries," Bin Hammam said. "We are only getting bonuses [and FIFA expense reimbursements]." One FIFA source told SI.com that personal bonuses for the executive committee are larger in years when FIFA's profits are higher, as was the case in 2010.

For simplicity sake and to likely err on the over, let's go with $250,000 as the average compensation of the 24 members of the Executive Committee (minus Blatter) including whatever bonuses are received by those 6 ExCo members who put in additional duties on the Finance Committee. That totals $6 million.

If we subtract that total from the $33.5 million that leaves $27.5 million to be allocated across FIFA management, shown in the organization chart below from the FIFA website showing its administration:

That means 13 individuals average annual compensation of $2.12 million each. I see perhaps 5 or 6 organizational levels in the organization chart. Assuming a simple rule that salaries double from one level to the next, and that the lowest "key personnel" makes $400,000 per year implies that Blatter makes >$12 million per year. That seems high. You can play around with the allocation of the $27.5 million in any number of hypothetical ways, of course, and unless FIFA has a somewhat flat salary structure, it is hard to come up with an allocation to Blatter of $6 million or less, which would be 2-3 times the average of the "key personnel." The alternative of course is that the "key personnel" are very handsomely paid.
 
So right now, I'm taking the over on my April guesstimate as a slightly better than 50-50 proposition. I am pretty confident that (let's say 95%) that Blatter's 2012 salary falls into the range of $2.12 million ("key personnel" average) and $12 million (~6 times the "key personnel" average). That's my guesstimate for today.

5 Ways to Avoid Financial STDs (Substantially Tremendous Debt)

Have you or someone you know been infected with Financial STDs? I have…
   

In my book Financial Fornication, I talk about Financial STDs (Substantially Tremendous Debt).  This financial dis-ease is not only financially and emotional painful, but families and cosigners can get infected as well because it can be contagious.

   
Here are 5 ways to avoid Financial STDS.
   
Use Financial Contraception.
Financial Contraception is better known as a budget or spending plan. Create a budget or spending plan that works with your lifestyle. Using a budget is the best protection against acquiring Financial STDs.
    
Avoid being financially promiscuous with multiple credit cards.
Pick a credit card that has the lowest rate and provides bonus points if you must or choose to use a credit card for purchases. Using multiple credit cards may result in excessive spending, which result in Financial STDs.
    
Limit or Avoid Financial One Night Stands.
A financial one night stand is a financial transaction, usually less than $50-$100, that should be paid in cash or paid in full if purchased with credit. If you choose to use credit for these types of transactions, avoid turning those financial one night stands into a long term financial relationship by revolving the balance and not paying it off in full. Vernacularly speaking, “Hit it & Quit it!”
   
Become Financial Abstinent.
When your finances feel like they’re getting out of control, sometimes it’s best to just STOP using credit to get a handle on your finances. Being financially abstinent stops the leaks in finances so a budget can be created to build up immunity against Financial STDs.

 

Get out of Financially AbusiveRelationships.

If you are getting your butt kicked with ridiculously high loan rates, low deposit rates, lots of fees and poor customer service, they’re probably really not that into you, which means that it’s time to plan your exit strategy from that financially abusive relationship.  You don’t have to stay. Date financial institutions to find the best one for you.

 

For more tips, check out my book “Financial Fornication.”

 

Financially True,

 

Tarra Jackson, Making Money Sexy

Analytics Advice for Phil: Putt for Show, Drive for Dough

If you have another look at the title of this post you'll see that it flips on its head conventional wisdom about golf scoring, where it is almost an article of faith that matches and tournaments are won via the short game. Mark Broadie, a professor at Columbia Business School, published a paper in 2011 (here in PDF) which took a look at 8 years of data (2003-2010) on the PGA Tour to rigorously evaluate where the pros gained the most shots.

What he found was surprising:

Many people claim that the short game and putting are the most important determinants of golf scores. For example, Pelz (1999, p.1) writes, “60% to 65% of all golf shots occur inside 100 yards of the hole. More important, about 80% of the shots golfers lose to par occur inside 100 yards.” Several academic studies have reached similar conclusions. In contrast, strokes gained analysis of PGA TOUR data shows that the long game is the most important factor explaining the variability in professional golf scores. . .

The availability of detailed golf shot data makes it possible to create golf measures that allow consistent comparisons between different parts of the game. Using the starting and ending locations of each shot, strokes gained gives the number of strokes a golfer gains or loses relative to an average PGA TOUR tournament field. Analysis of over eight million shots on the PGA TOUR in 2003-2010 shows that the long game (defined as shots starting over 100 yards from the hole) accounts for more than two-thirds of the scoring differences between PGA TOUR golfers.

Of the three components to the game -- long (>100 yards), short, and putting -- the contribution of the long game to shots gained (over the average player) is huge:

Using data from 2003-2010 for golfers with at least 120 rounds, the contributions to total strokes gained are 72%, 11% and 17% for the long game, short game and putting, respectively. By this measure, the long game explains more than two-thirds of the variation in total strokes gained.

So when Justin Rose won the US Open yesterday, what you saw was the consequence driving in the fairway and long irons to the green, just as Broadie's research indicates is most important. Mickelson falling short resulted not from his short game -- though missed putts and a thin sand wedge from the green made for good TV -- but his inability to hit the fairway and the poor position that placed him in for his long approaches.

Based on the data that Broadie provides for individual players we can look at this another way. If Mickelson improves his putting and short game by another 20% (from his 2003-2010 average) he would gain an additional 0.12 strokes per round over his competition. In contrast, were he to improve his long game by 20%, he would gain 0.24 strokes per round - or a stroke per tournament.

The data show that Mickelson was 12th overall in both the long and short game and 95th in putting.  This would suggest that he has the most to gain in improving his putting. However, when looked at in terms of strokes gained, Mickelson was almost a full stroke behind the Tour leader in the long game, 0.22 in the short game and 0.57 in putting.

If these findings hold today (would need updated data to determine) then this suggests that Phil has a lot more room for relative improvement in the long game than in putting and the short game combined.

The BCCI's "Operation Clean Up": Governance not Cheerleaders

The Board of Control for Cricket in India (BCCI) has announced a 12-point plan to address the fixing scandal that threatens the Indian Premier League. First, some background courtesy of the WSJ:

Shoving a towel into their waistbands, fiddling with a necklace, untucking their shirts; these are signals that investigators allege three Indian cricketers used to communicate with bookmakers across India in an attempt to fix parts of matches for illicit financial gain.

Delhi Police said Thursday they had arrested three players from the Rajasthan Royals cricket franchise for allegedly spot-fixing—trying to arrange a predetermined outcome in certain key moments—in the Indian Premier League. The league is a hugely popular annual tournament involving many of the best cricketers from

Spot fixing in cricket occurs when a player deliberately rigs part of the game, for example by bowling a poor delivery from which a batsman can easily score runs. Several high-profile international convictions have tarnished the sport in recent years, which resulted in fines, player bans and even jail time.

The scandal has already led the head of the BCCI, which oversees cricket in India, to step aside. The BCCI 12-point plan is a further response to the scandal.

The 12-point plan is as follows:

1. Removal of sleaze; no cheerleaders, no after-match parties for players and support staff.
2. Strict code of conduct to be followed by players, support staff and franchise owners.
3. Restriction of movement in players’ dug-out and dressing room. The owners from now on will be restricted from entering the dug-out and dressing room during matches.
4. All players and support staff of franchises need to furnish their telephone numbers with the BCCI before the start of the tournament.

5. Adequate number of ACSU officials in the team hotel as well as the ground to supervise the proceedings.
6. Jamming of cell phone towers at the ground during matches.
7. Captains’ meeting to be held in order to get more suggestions and prepare elaborate blueprint.
8. No national selector will be allowed to get associated with any franchise in any capacity.
9. All the players need to disclose every financial transaction they are carrying out with any particular organisation or person.
10. Franchises need to furnish all details of the remunerations and contractual obligations of players and support staff.
11. Players from now on will be prohibited from using ear plugs and microphones.
12. Security control policy will be formulated soon.

These proposals range from the farcical (no cheerleaders as a way of addressing fixing?!) and the just plain dumb ((jamming of cell phone towers?) to the profoundly innovative (player disclosure of financial transactions). Journalists, professors (me included) and politicians routinely have to disclose remuneration which falls outside of their professional contracts. Why not athletes?  In the US the NFL has already adopted a similar set of policies.

Reform is likely going to have to go deeper. In a 2011 submission to an inquiry on governance of the International Cricket Council, Transparency International made recommendations for the harmonization of governance standards across ICC member federations. These were as follows:

30. The ICC should require, as a condition of membership, that domestic boards have in place codes of conduct and procedures that reflect the global best practice that TI recommends ICC itself puts into place.

This would include:

• Tone from the top and ethical leadership
• Code of ethical conduct covering all relevant areas including conflicts of interest
• Risk assessment
• Best-practice policies and procedures and their independent monitoring and review
• Creation of an Anti-corruption Tribunal at domestic level to hold individuals and organisations to account, if existing anti-corruption mechanisms are inadequate.

31. All of the above would need to be underpinned by greater transparency and independence, with the ICC having oversight of each domestic board’s adherence to these requirements. The ICC should be able to review whether domestic boards are adhering to these codes of conduct and procedures, and should have strong sanctions, including financial sanctions, available to it if member countries’ boards or federations are judged to have infringed the rules. For example, ICC should be empowered to exclude a member nation from competing in international matches if fails to adopt and enforce an approved Anti-Corruption Code in its own jurisdiction.

32. This will undoubtedly represent a significant change in the governance of world cricket, and inertia or vested interests may cause there to be opposition. However, TI considers it vital that if a message of zero tolerance for corruption is going to be taken seriously, the managers, administrators and leaders of the game operate to the highest standards of ethics and integrity.

As with FIFA and its various scandals, effective reform will necessarily result from the adoption of standards of good governance and best practices which have been developed in contexts outside of sport. So far, FIFA has been resistant. Perhaps the BCCI and ICC can do better. To do so, however, it is probably best to focus on the governance, not the cheerleaders. 

Financial Fair Play, the English Language and Legal Standing

At Capital.de Stefan Szymanski has a delightful essay on the offense to the English language that is UEFA's Financial Fair Play. Stefan has kindly posted up the original English version at Soccernomics. Here is an excerpt:

Whenever Financial Fair Play is mentioned the names of Roman Abramovitch and Sheikh Mansour are quoted- what they are doing to football, it is alleged, is unfair. Yet in reality they are convenient scapegoats for a political deal that UEFA has stitched up between football’s rich and poor.

The economic reality is that most clubs do not have a sugar daddy and a very large fraction are insolvent. According to UEFA 55% of clubs in Europe’s top divisions reported a net loss in 2011, 38% of clubs reported negative net equity, and 16% of club accounts reviewed contained a qualification expressed by the auditors as to financial viability of the company. This does not make UEFA look like a good housekeeper, so they want to impose tighter regulations. However, since almost all of the insolvent clubs are minnows, it might look as if they were doing the bidding of the big clubs. UEFA would not dare to restrict the freedoms of the established powers and by focusing on sugar daddies they are actually helping them by ensuring that no currently small club will ever pose a serious challenge. Voila, call it Financial Fair Play, and who could disagree?

This was Orwell’s point. The decline of English, he thought, was a political phenomenon. “Political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness”, and if we allow this to go unchallenged we will indeed fall into slovenly thought. UEFA, with the support of many politicians, want us to use warm phrases emptied of their original meaning as camouflage for the pursuit of an agenda which has little to do with fair play and much to do with the exercise of power. But if we listen to Orwell, we need not be fooled. All we have to do is to ask what the words really mean.

It is safe to conclude that Szymanski is not a fan of FFP. Here is the conclusion of a recent academic that Sztmanski collaborated on with Thomas Peeters, which explored the effects of FFP on the EPL via an economic model (Vertical Restraints in Soccer: Financial Fair Play and the English Premier League, here in PDF):

[W]e find that had the Financial Fair Play regulations applied fully in the English Premier League in the 2009/10 season, wage to turnover ratioswould have fallen by as much as 15%, which is in line with the theoretical predictions of Dietl et al (2009). As such, the FFP break-even rule will in many ways resemble a North American salary cap, although the latter applies the same spending cap to all teams. In other words, our paper shows that in this context a vertical restraint may restrict competition in exactly the same way as a horizontal agreement between competing firms. Salary caps have been justified in US courts under the theory that they promote competitive balance among the teams. On top of this, they are agreed upon in a system of collective bargaining with unions representing the players, and such agreements are exempt from antitrust. The break-even rule under FFP has not been negotiated as part of a collective bargaining agreement with unions, and furthermore such agreements are not exempt from competition law in the EU. Therefore, analyzing the impact of FFP on competition in national leagues is important to assess whether it complies with EU competition law.

The rationale advanced by UEFA for its regulation is not the promotion of competitive balance, but “discipline and rationality” in club finances. Considered as a vertical restraint, this might be deemed to have pro-competitive properties if the rules help to preserve the integrity of the competition and the financial stability of the clubs. On the other hand, our results demonstrate that the break-even rule could be construed as a means to raising profitability and therefore an anti-competitive vertical restraint under EU competition law.

The Swiss Ramble recently offered a deep dive into the economics of FFP, and like Szymanski, offers a fairly negative evaluation:

While the majority of clubs are in favour of FFP’s attempts to tackle football’s economic woes, there is a concern that far from making football fairer, all this initiative will achieve is to make permanent the domination of the existing big clubs: survival of the fattest, if you will. The argument goes that those clubs that already enjoy large revenue (like Real Madrid, Barcelona, Manchester United and Bayern Munich) will continue to flourish, while any challengers will no longer be able to spend big in a bid to catch up.

However, more fundamental than the policy effectiveness of FFP is likely to be its legality under European law. The regime has already been challenged, here is The Guardian reporting:

UEFA's financial fair play regulations face a legal challenge in the European courts after a players' agent argued the rules will unfairly restrict the amount of money he can earn. Daniel Striani, an agent registered in Belgium, has lodged a formal complaint with the European commission against the rules, which require clubs in European competitions from 2011 to move towards breaking even financially.

Striani is represented by Jean Louis-Dupont, a lawyer who in 1995 successfully challenged football's contract rules on behalf of a Belgian player, Jean-Marc Bosman, a legal victory which allowed players to move for free at the end of their contracts. Dupont argues that, as in the Bosman case, he will defeat Uefa's FFP rules even though they are supported by the European Commission.

He argues that Uefa's regulations, which prevent clubs making heavy financial losses whether backed by an owner or not, will have five separate consequences he claims are anti-competitive. The first is that they will restrict investment in a club by no longer allowing them to run at a loss.

The second is the key concern being voiced particularly in England, that it will lock in the power of the already rich clubs, whose dominance will no longer be able to be broken by the odd club like Manchester City or Chelsea which has losses supported by a mega-rich owner.

He then argues that the aim of FFP to dampen down players' wage and transfer fee inflation is "anti-competitive", a breach ofEU law. This is because FFP will lead to a "reduction of the number of transfers, of the transfer amounts and of the number of players under contracts per club", and will have a "deflationary effect on the level of players' salaries".

In conclusion, Striani argues that FFP will be "anti-competitive" because it will affect his own ability to earn agents' fees from players' wages and transfer fees.

Stay tuned, more action to come at the lex sportiva frontier!

Top 5 Bad Financial Habits to Break

... Do you or someone you know have any bad financial habits? I do …
  

Most of us have one … or two … or several bad financial habits. From experience, my bad financial habits resulted in some very expensive mistakes. It’s ok! As long as bad financial habits are broken or at least controlled, they will have minimal effect on your financial success. The first step is identifying your bad financial habits.
  
Here are the top 5 bad financial habits to avoid that keep people from getting a positive grip on their finances.
 
Impulse shopping.  Impulse shopping happens unexpectedly sometimes. Think of shopping like alcohol. It should be done “responsibly” and can become addictive, if not careful. Make shopping a planned activity with a list or a budgeted amount.  Unplanned or impulse shopping may sabotage your spending plan / budget.  Also for large ticket items, give yourself 24 to 48 hours to shop for a better deal or to figure out if you really want it and can afford it. You’ll be glad you waited.
   
Retail therapy.  Retail therapy may help you to feel good for a moment but they buyer’s remorse is painful. When you are emotionally down, distraught or highly emotional, avoid shopping or making any large purchases.  The more emotional we are, the less financially objective we become.  Do something that doesn’t cost anything or very little, like go for a walk, spend time with family or friends, etc. Your bank account will thank you when you start to feel better.
  
Overdraft protection.  Overdraft or “Courtesy Pay” is so convenient! However, overdraft protection (a financial oxymoron in my opinion) is relatively designed to allow you to overspend. It allows or approved checks or charges to go through even when you do not have enough in your account for a Fee.  A fee of $27 up to $35 is charged to your account for every overdraft, even if the amount runs $1 or $5 over the amount you have in your account. Generally it is like a very short-term line of credit with a ridiculously high effective interest rate. Now was that cup of coffee really worth $40? Besides, we spend more when we use debit cards. Use cash instead.
  
Savings tampering.  Savings is money set aside for a specific purpose like emergency, down payment of a house or car, school, etc. Avoid using savings for something that is outside of its purpose. The best way to do this is to establish a savings account that is not easily accessible with a certain amount directly deposited every pay period. Savings accounts are supposed to grow, not be chiseled away. 
  
Financial promiscuity. Financial Promiscuity is when multiple credit cards are used for small purchases when cash should be used.  Avoid using credit to purchase that "value meal" or anything less than $50.  This will ensure that Financial STDs (Substantially Tremendous Debt) will not be slowly acquired.
  
By acknowledging our bad financial habits, we can focus on stopping and changing them. Some bad financial habits may be more challenging to quit than others, but it can be done.  Contact a financial coach to help with ideas and techniques of replacing bad financial habits with good financial habits to help you reach your financial goals faster.


Financially True, 
  

Tarra Jackson ... Making Money Sexy