True story:

A 39 year old woman falls on hard times. She ends up in debt over her head, has no job, and even spends a brief amount of time in a homeless shelter. Her half brother pays for an apartment for a month, gets her a very inexpensive and old car (Blue Book trade-in value - $100), she gets a job and looks like she might be able to start working her way out of the hole.

Then one night, someone tries to steal her car and ends up breaking something off in her ignition. When that happens to a car worth $100, it’s totaled. READ the rest of this entry »

What it is:

Movement of a tax-deferred retirement plan from one custodian to another without the beneficial owner taking possession.

What it means: 

If you leave a company and want to move your retirement balance either to a self-directed IRA or to a new company’s retirement plan, the best way to do so without incurring any tax penalties or required tax withholding is by direct rollover. READ the rest of this entry »

Most of the media buzz you hear about health insurance is about the “uninsured,” but the number of “underinsured” is rising quickly as well:

More than 25 million working-age Americans were underinsured last year, up 60% from the 16 million who had inadequate coverage in 2003, according to a report from the Commonwealth Fund, a private foundation in New York. The rate of underinsurance nearly tripled among middle- and higher-income families, those with at least $40,000 in family income.

Being underinsured is not simply a matter of choice, of course. It’s a rational response to rising premiums and the odds:

Premiums for family coverage have jumped 78% since 2001, while wages have risen 19% and general inflation has gone up 17% in that time, according to the Kaiser Family Foundation.

People who are self-employed are more likely to be underinsured - even if they don’t know it.  The complexity of individual (versus group, which is what you would have if you worked for a large company) plans makes their customers easy marks for scammers (article from 2004): READ the rest of this entry »

I got a little chuckle out of this news story:

One of the more ambitious ideas he is considering, according to a campaign spokeswoman, would be to restore government regulation of credit card interest rates. The government has not been involved in interest rate regulation for 30 years, after a Supreme Court ruling blocked states from effectively engaging in the practice.

Obama would “examine ways to more strictly regulate interest rates, and believes such regulation should be done carefully to ensure that we do not harm consumers with unintended consequences,” Obama spokeswoman Jen Psaki told ABC News.

I have no problem with this, in theory, and no doubt that he is sincere in his desire to do exactly what he says he wants to do.  I just look forward to seeing the fight.  Credit card companies (and lots of legislators) would go on a full on assault about about he hates Americans and hates the economy because if lenders have to keep their interest rates within a certain range, they’d have to drastically cut how many millions of dollars they offered in credit to the good people (with bad credit) out there who need high-def televisions the size of recreational vehicles and SUV’s big enough to bring them home.  Obama would be trampling on the free market, which is only free (in this sense) inasmuch as the credit card companies are free to take you for as much as they can get, but still, the word “FREE” is in there and without “FREE”dom, what is America, what is he - COMMUNIST?

It’s about time.

Federal officials are seeking more than $200 million in fines and restitution from CompuCredit Corp. and two banks that allegedly engaged in deceptive credit cardmarketing practices.

The Federal Trade Commission and Federal Deposit Insurance Corp. on Tuesday said CompuCredit and the banks failed to adequately disclose up-front fees and other conditions when marketing cards under the Aspire, FreedomCard, Tribute and other brand names.

The cards were largely marketed to individuals with weak credit histories, also known as the subprime market, regulators said.

These losers are straight up predators.  They go after people with bad or no credit and bury their fees in even teenier letters than regular companies use.  This particular company offered a card with a $300 limit, but they didn’t clearly disclose that immediate fees would eat up most of that limit almost immediately. Fees that companies like this charge might include a “program fee” (I have no idea), an “account set-up fee,” a monthly fee AND an annual fee - plus an outrageous interest rate.  In the case of Compucredit, it was just a $29 set-up fee and a $150 (!!!) annual fee.  Customers who are not aware of all of the fees charged by “fee-harvesting” companies can easily go over their credit limit without even knowing it, triggering over-the-limit fees and late fees.  

They’ve been getting away with this for years, which is shameful but also typical - after all, who speaks up for the poor? 

Here’s some excellent news about the foods we’re feeding (or not feeding) our children: 

Parents are beginning to clean up their nutrition acts when it comes to the snacks they serve their children, new data show.

Fruit is the most common snack for children under 6, and cookies are second. In 1987, cookies ruled and fruit ranked second, according to findings from the NPD Group, a market research firm. And kids today:

• Are less likely to consume carbonated soft drinks, ice cream, candy, cake and fruit juice as snacks than kids the same age did 20 years ago.

• Are more likely to have fruit rolls and gummy pieces, yogurt, crackers, granola bars and bottled water.

Now, this study was based on food journals kept for 14 days by participating mothers so there is definitely a chance (a pretty good one, in my opinion) that there was some fibbing going on here and there or some changes in behavior triggered by participation in the study. Still, this survey coupled with recent news that obesity rates in children seem to be leveling out - definitely encouraging! 

If you carry a large amount of debt and are having trouble making the payments, the odds are that you’ve looked into different strategies for reducing your interest charges, your monthly payments, or your entire debt load. The internet is full of advertisements for all of these “strategies” and your options can seem overwhelming.

If you need to reduce your debt load, you have lots of options -

• Tighten your belt, stop frivolous spending, and pay off your loans.
• Transfer high rate balances to lower rate cards.
• Take out an equity loan against your home.
• Get a second (or third) job.
• Sell unnecessary items, like a second car or old items that have been in storage forever.

For some people, though, doing all of the above would not be enough to stop collection calls, and that desperation has spawned a new scam - debt settlement programs. These people will contact you and say that they can knock out a considerable chunk of your debt and have everything paid off in months instead of years, simple as that. Sounds good, right? I’ll tell you how it works, since it’s almost impossible to find any decent information on the debt consolidation websites.

Ready? Here’s the big secret:

You stop paying your bills.

Whoa! Won’t that trigger late fees and collection notices? Absolutely. But here’s the beauty of it - instead of sending money to the credit card companies, you send it to an escrow account for the debt consolidation company. After a few months of you receiving harrassing calls, the debt consolidation rep calls one of the card companies and says, “Hey, this person can’t pay her bills, and here is what you’re going to need to do to get any of your money - knock down her rate, stop the late fees, and accept this lump sum that equals maybe half of the outstanding debt. We’ll call it even, you write off the rest. Sound like a deal? Great.”

You do this over and over until your debt is gone.

What’s wrong with this arrangement? Several things.

1. If you have the money to pay your debt, you’re going to be holding it in escrow for months while your credit rating plummets instead of just sending in the payments. The debt consolidation people will tell you that it’s better than filing bankruptcy, but won’t tell you exactly why. Ask, you’ll see - no good answers. If you are at all able to keep up with minimum payments, it is difficult to think of a situation where “debt settlement” would be beneficial compared to other options.
2. If you really don’t have the money to pay off your credit cards and are already late, you don’t need these people. Make the call yourself and negotiate a rate reduction, balance reduction, whatever. Credit card companies do not want to have to sell bad debts to a collection agency because they will only get pennies on the dollar for it. If you are uncomfortable making the call yourself, have a friend or family member on the line with you.
3. The fees you’ll pay to the debt consolidation companies are outrageous and they take it out of the money you set aside to pay your bills, which reduces how much you can pay off. If you have debilitating debt, a bankruptcy attorney will probably cost you less than these guys will. Do a Google search in your area for flat rate bankruptcy filing services, do your due diligence to find someone who will work with you, and file. It’s really a toss-up as to whether bankruptcy is any better or worse for your credit rating than the debt settlement companies.
4. It’s unethical to not pay your bills. You did the spending, now it’s time for you to pay up. If you have the money to send to the debt consolidation people then you have the money to send to your credit card company, plain and simple.

That last one may sound somewhat harsh, but the reality of the situation is that for most of those in stressful debt situations, the fault lies firmly with the debtor. If you are a sucker for advertisements that make you feel like you “deserve” to buy this or that or if you feel like you need to keep up with the Joneses (who are in debt too), you need to get honest with yourself. Tighten your belt, stop eating out, ditch the cable, learn how to cook, shop at consignment stores, do whatever you need to do to get out of a bad situation and learn from it. Spending more money to “settle” a debt doesn’t really teach you anything about the wise use of money or credit, it’s just another “too good to be true” solution.

What it is:

The process of increasing returns by reinvesting interest or dividends on an investment.

What it means:

The best way to explain compounding is with a (hopefully) simple example where we will assume no taxes or inflation. I know I’m risking some glazed eyes with this one, but it’s important so stay with me.

Zoe has $10,000 in a bank account earning 5% interest. Every year on December 31st, she takes the $500 she made that year and puts it into her safe deposit box.

At the same bank, Dorothy also has $10,000 in a bank account earning 5% interest. Every year on December 31st, she glances as her statement and leaves her $500 in the bank.

Both women continue their strategies for 30 years. READ the rest of this entry »

Note: I wrote this in early 2007 when my toddler was more of an infant. Slightly edited for past tense.

So, I was thinking.

It was 12:30 AM, I was in my baby’s room feeding him, and I was thinking. Couldn’t do much of anything else, really, as I stood over a crib feeding the little guy and hoping that he would actually fall back to sleep so that I could sleep more as well. I was thinking about how there was nothing on his walls, no mirrored activity set on his crib. He had a couple of bright toys in his crib that I got from someone in our Freecycle group, but he wasn’t quite big enough to play with them yet. His favorite activity was to knead and chew on his spit up rags (cloth diapers - they folded around easily, weren’t too big for his hands to grab, and it didn’t really matter where he grabbed them - always worked). But as for things to look at in his room, he didn’t really have anything except a sage wall and white ceiling. READ the rest of this entry »

How about some good news for a change?  

For the first time, U.S. life expectancy has surpassed 78 years, the government reported Wednesday, although the United States continues to lag behind about 30 other countries in estimated life span.

The increase is due mainly to falling mortality rates in almost all the leading causes of death, federal health officials said. The average life expectancy for babies born in 2006 was about four months greater than for children born in 2005.

I know, I know - we could talk about the increasing stress that living longer puts on Social Security and Medicare, plus the general health insurance disaster we’re facing, but dammit, I just want to think about living longer to see more of my children and their children.  I’ll take every month I can get.