Budgeting in a Spending Season

Thanksgiving is over and the giving season has just begun. Today's unofficial holiday, Black Friday, kicks off the holiday shopping season with a wide variety of retailers offering huge savings on high ticket items. Unlike the tamer Thanksgiving week traditions, such as the Macys Thanksgiving day parade or the traditional Thanksgiving feast, Black Friday is marked by epic lines at local stores and chaotic masses of shoppers, many of whom are willing to wake up before dawn for doorbuster deals and prime access to the soon to be out-of-stock sale items.

It's hard to remember anything when you're rolling out of bed at 5am, still drowsy from last night's turkey paired with a lack of shut-eye. But it's especially hard to remember your budget. Maybe that budget amnesia accounts for these poll results: according to the Washington Post, half of the respondents to a poll early last year said they would carry their holiday credit card debt into spring. And this was before the current economic slump. So how do you stop yourself from overspending this holiday season? Why not give yourself a few gifts before you start shopping for everyone else:

Gift 1: A Budget
I know, it's scary. When there are people to shop for, holidays parties to attend, even holiday parties to throw, you may not want to have your financial reality mapped out in front of you when you could have a piece of pie and a healthy slice of ignorance instead. But soon enough it will be January, the month of New Years resolutions and no more holiday splurge excuses. So why not get a head start and make a budget now? Include holiday gifts and get a better idea of how much you can spend this holiday season. You can use WISER's budget worksheet to get you started. For help on keeping track of your spending, check out WISER's "Keep Track of Your Spending" Fact Sheet.

Gift 2: A Low-Interest Credit Card
Look for low-rate and no annual fee credit cards. You can get a list of credit cards, interest rates and fees: send $5 to RAM Research’s CardTrak, P.O. Box 1916, Frederick, MD 21702, or for free on the Internet at http://www.ramresearch.com/. See also the http://www.cardtrack.com/ website .

Gift 3:A Free Credit Report
Get a better idea of your credit situation, for free! As of September 2005, all US Citizens are eligible for one free credit report from each credit agency per year. To receive your free annual credit report visit www.annualcreditreport.com or call 1-877-322-8228. This can help you improve your credit and set some long term financial goals.

Gift Trapped? [Washington Post]
Tips for Reining in Holiday Giving [Washington Post]

Happy Thanksgiving from WISER!

Looking for a gift idea you can feel good about? Well look no further than I Savings Bonds. One thing to be thankful for today is the new and improved interest rate on I Savings Bonds. While I Savings Bonds were earning 4.28% this time last year, the interest rate has increased to a whopping 5.64% through April 30, 2009. I Savings Bonds are government-issued bonds that earn interest each month, and the interest is compounded every six months. The I Bond is currently providing a higher return than the EE Bond. Since becoming available, the I Bond has been very popular; sales of over $3.2 billion were reported in the first year.

Here are a few things you should know about the I Bond:

• You can buy I Bonds at face value; for example, you would pay $50 for a $50 bond.
• Earnings are exempt from state and local income taxes
• Federal income taxes can be deferred for up to 30 years, or until you cash them in, whichever comes first.
• You can earn interest on them for up to 30 years and can cash them out after 5 years without losing interest (You will lose three months' interest if you cash them in sooner.)
• You can now buy savings bonds with automatic deductions from your checking or savings account on a regular basis through the Easy Saver plan, or on the Internet.
  

I Bonds are a great gift for kids! You can show them how to calculate the value of their savings bonds every year. For more information on I Bonds, go to www.savingsbonds.gov or call 800-487-2663.

The "Sandwich" Dilemma: Caregiving Concerns Facing Female Baby Boomers

Thanksgiving has nearly arrived, bringing with it a much needed, calorie-laden respite for all. As you, your friends and your family count the things you can be thankful for (e.g. the thriving economy…), do not forget to include America’s caregivers. After all, November marked National Family Caregivers’ month, a celebration of the 34 million caregivers who provide $375 billion in unpaid help to friends and family.

According to Kelly Greene of the Wall Street Journal, the typical caregiver in the United States is a “46-year-old woman who works outside the home and spends more than 20 hours a week providing unpaid care to her mother.” Not only are these women not paid for the care they administer, but they also face “opportunity costs” such as lost wages and subsequent loss of employer-sponsored health insurance and retirement benefits. Some even pay out of pocket during the course of their caregiving; in 2007, caregivers spent an average of $5,531 of their own money when caring for those over the age of 50.

The current group of caregiving women is mainly baby boomer women born between ages 45 and 59, according to Tom Riekse, Jr., a managing principal at a brokerage general agency. This demographic often finds itself caring for their parents and their children. This “sandwich effect” has begun to cause women to start thinking about how to prepare themselves for the time when they may require long-term care.

There are many avenues to consider when thinking about financing one’s future circumstances. Medicare and Medicaid are examples of public resources that are in place to assist those requiring long-term care. Visiting www.longtermcare.gov, a website created by the Department of Health and Human Services, will provide you with information on financing care publicly. While these government options can prove invaluable, Rieske recommends that his clients also research private long-term care insurance…..and the sooner, the better.

There are a number of reasons why purchasing long term care coverage in advance can be a smart decision. For one, long-term care insurance is medically unwritten. As such, healthier clients obtain better rates. According to Rieske, while those ages 40 to 49 qualify for “good health discounts” 63.2% of the time, only 51.5% of those ages 50 to 59 qualify. Also in respect to age, the premiums and benefits change depending on how old you are. In this way, the premiums you pay over a longer period of time may can end up being less than what you will be paying if you choose to purchase an insurance plan later on.

There are many routes to consider when thinking ahead about long-term care. Whatever path you choose, it is important to seek out all available information on both public and private options. You may want to consider consulting with a financial advisor, especially if you choose to purchase long-term care insurance and are unsure which plan is right for you. Visit the WISER website and click the “Caregiving” where you can find more information.

Want to Work for WISER?

WISER is hiring an intern for the Spring 2009 Semester. We're looking for an excellent writer with research skills and an interest in retirement and financial planning. This is a paid internship that will give you the opportunity to participate in conferences, meetings on the Hill, DC events as well as write for WISER's newsletter, collection of Fact Sheets and this blog! To apply, send your resume, cover letter and writing sample to info@wiserwomen.org

Financial Planners vs. Psychics

Looking for a new career? Facing pay cuts or, worse, pink slips? Wondering where the money is these days? Well it may be time to polish that crystal ball and peer into a new profession. As a vast number of industries experience the sharp blow of our weakened economy, one industry appears to be thriving: the divination arts. That's right: in a time of dwindling business, psychics are enjoying a lucrative wave of popularity.

While previous visits to the psychic may have involved questions about a spouse's fidelity or on the future of your love life, psychics are noticing an increase in economy-related shop talk, along with a significant increase in business. According to Ryan Singel at WIRED magazine, "internet psychics across the board saw a spike in traffic in the days following the initial market crash." Psychics are now fielding questions that may have previously been directed at a financial planner or job counselor: What should I do with my money? How do I avoid getting laid off? Ruth la Ferla at the New York Times says "These days, [psychics] are besieged with questions about whether a pink slip is in the cards, whether a condo will sell, or whether a company will continue to prosper."

If you're interested in receiving assistance on money matters, but don't want your advice to come from a pack of tarot cards, consider hiring a financial planner. Here are the top 3 questions to ask a financial planner, from the Certified Financial Planner Board of Standards:

1. What Experience Do You Have?
Find out how long the planner has been in practice and the number and types of companies with which she has been associated. Ask the planner to briefly describe her work experience and how it relates to her current practice. Choose a financial planner who has experience counseling individuals on their financial needs.

2. What are Your Qualifications?
The term "financial planner" is used by many financial professionals. Ask the planner what qualifies her to offer financial planning advice and whether she is recognized as a CERTIFIED FINANCIAL PLANNER™ professional or CFPR practitioner, a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Determine what steps the planner takes to stay current with changes and developments in the financial planning field. If the planner holds a financial planning designation or certification, check on her background with CFP Board or other relevant professional organizations.

3. What Services Do You Offer?
The services a financial planner offers depend on a number of factors including credentials, licenses and areas of expertise. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with state or Federal authorities. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or on tax matters.

Check out the rest of the CFP's "10 Questions to Ask When Choosing a Financial Planner" list here.

"In Troubling Economic Times, Consumers Flock to Online Psychics" [WIRED]
"Love, Jobs and 401(k)s" [The New York Times]

Laid Off: How to Stay Insured

The holiday season is upon us. With Thanksgiving around the corner and the winter holidays just weeks away, many American workers are receiving an unexpected (and unwanted) gift from their employers: pink slips. According to the Wall Street Journal, 1.2 million workers have been laid off this year. Lay-offs are occurring across the board and impacting a wide range of industries. Tinseltown legends Harvey and Bob Weinstein laid off 11% of their employees at Weinstein Co. on Friday, while publishing powerhouse Conde Nast has begun cutting their staffs by 5%, a move that bloggers have begun referring to as "Empty Nast syndrome." The unstable economy is causing stress for many workers, who wonder if their jobs may be the next to go. "I put all this time and effort into my education," says New York based graphic designer Ashley Jones. "Now I'm hoping it wasn't all in vain." But as major magazines fold daily, Jones says "I'm feeling uncertain about my future and I just hope I can support myself."

Every Thanksgiving, at tables across America, families lift their glasses and wish for good health for themselves and their loved ones. But how do you take care of your health if losing your job also means losing your health insurance? For the newly-unemployed, the animal of the season may no longer be the turkey: it may be time to embrace the COBRA. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a law that provides continued group healthcare coverage for uninsured former employees. COBRA allows you to keep the insurance plan you used at your former place of employment for an additional cost, though this cost is usually less than the cost of opening an individual insurance policy. On the other hand, there are affordable individual insurance policies as well as government programs for those who qualify. Explore your options and make sure you and your loved ones remain insured during this holiday season.

• "Newly Out of a Job? Here's how to replace the health benefits" by Anna Wilde Mathews at the Wall Street Journal: Mathews offers information and tips on using COBRA coverage, finding an individual insurance plan, and qualifying for government coverage.
  
• The Healthier and WISER series: The "Healthier and Wiser" series addressed some of the main health care coverage issues women encounter at different stages of their lives. It offers a variety of resources and information on how to stay insured.
  
• FAQs About COBRA: This FAQ from the U.S. Department of Labor offers extensive information on COBRA coverage.

Job Security and Young Professionals: Staying Smart During an Economic Downturn

Millenials, persons born between those of Generation X and those of Generation Y, are starting to trickle out of the university arena and into the workforce. Unfortunately for this demographic, which amounts to about 76 million adults, today’s work force is currently bearing the brunt of an economic crisis. According to a survey by Accenture Limited, 46% of U.S. middle managers said that, because of the current state of the economy, “switching employers in the current environment is risky.” Figures such as these have begun to reach the ears of millenials, causing many of them to become reluctant to change job positions.

According to David Smith, the managing director of talent and organization performance at Accenture, a global consulting company, “It’s unclear whether a different employer will be able to provide sufficient job security, training, advancement opportunities, and other benefits” given the current economic climate. Young professionals who know that lay-offs often abide by a “last in, first out” policy and have become less inclined to seek new positions.

If you are a young professional considering joining a new company or firm, there are a number of ways in which you can guard yourself against less than lucrative job opportunities. Following the steps below may help you face career transitions proactively.

1. Ask questions. When you receive a job offer from a prospective employer, make sure that you employ the interrogation method. Some examples of questions that you may want to consider asking include: 1) How is your company’s turnover rate?, and 2) What criteria do you use when making layoffs?

2. Do research. While you may ask questions of your prospective employer, there is some information that may be omitted via direct questioning. As such, you may benefit from researching articles on the Web or in newspapers that may shed light on the company’s financial history. Public companies are required to make their 10-L filings, documents that offer figures on the performance of a company, publicly available. These filings can be found with the Securities and Exchange Commission.

3. Start saving. Because of the precarious state of the economy and the workforce, it is imperative that you start safeguarding your finances as soon as possible. In the event that you find your job transition is not running as smoothly as you wished, it helps to have some money saved up that you can rely on. For tips on saving and investing, browse through WISER's "Saving & Money Management Basics" fact sheets.

Professional millenials, in the infancy of their careers, should carefully weigh the pros and cons of job transitions during the current economic crisis. If you do decide to accept a position with a new employer, adhering to the steps above may help you make the smartest maneuver possible.

National Caregivers Month: Helpful Hints

In the past month, Metlife Mature Market Institute, in collaboration with the National Alliance on Caregiving, has released six "Helpful Hints" publications, aimed at providing useful information to caregivers. These brief bulletins offer tips on common issues for caregivers, ranging from how to select an assisted living facility to how to advocate for a loved one in a healthcare situation.

Helpful Hints: Choosing an Assisted Living Facility: As a caregiver, you may be interested in exploring assisted living facilities as an option for your loved one instead of using in-home care. Assisted living facilities can provide your loved one with 24 hour medical care and a wide variety of social activities. Metlife offers 8 key considerations to take into account when you are selecting an assisted living facility as well as a variety of outside resources to help you with your decision.

Helpful Hints: If Care is Needed at Home: Paid care is another option for family caregivers who want to supplement the in-home care they are providing and offer their loved one the option of remaining in his or her home. This bulletin has advice on how to select an in-home caregiver as well as ways to monitor care and intervene if a problem arises.

Helpful Hints: Caregiving from a Distance: As a caregiver, you may not always be able to provide care directly in the home, or even directly in the same state as your loved one. That's why Metlife and NAC have come up with these tips and resources for caregivers who provide care from a distance. Their list of eight key considerations includes advice on how to develop an emergency response system, a list of important documents you may need, and several resources to help you develop a care plan.

Helpful Hints: Caregiving and Alzheimers Disease: Alzheimers introduces a host of new challenges for caregivers. This publication highlights ways you can improve your communication as a caregiver if you are providing care for a loved one with alzheimers. Tips include ways to communicate with your loved one as well as ways to improve communication with the other members of your caregiving team.

Helpful Hints: Advocating for a Family Member in a Healthcare Situation: Acting as an advocate for your loved one during healthcare situations can be a particularly frustrating, but profoundly important, component of being a caregiver. Metlife offers 10 tips for caregivers to help them become more effective and communicative advocates for their loved ones.

Helpful Hints: Choosing an Adult Day Center: You may want a long term care plan for your loved one that offers a middle ground between in home care and assisted living. One alternative is an adult day center. Adult day centers can provide your loved one with social stimulation as well as healthcare services while offering you daily time away from your caregiving responsibilities. This publication offers information on the different varieties of adult day centers as well as advice on how to choose one that will work best for you and your loved one.

"Safety School" Takes on a Whole New Meaning During Economic Downturn

Applying to college, albeit stressful, is often an exhilarating time in a young person’s life. Once you’ve successfully maneuvered the grueling process of gathering letters of recommendation and writing seemingly endless amounts of essays, the possibilities college can offer emerge from the shroud of paperwork. Postsecondary eagerness is piqued by the thought of new people, new places and the idea of finally acquiring that oh-so-coveted notion of independence. You may also find the frequency of your mailbox trips increasing by the day.

College applicants are often especially anxious to find out whether or not they have been granted admission to their “dream schools.” The possibility of rejection from such schools necessitates the need for the “safety school,” a college (or two) which will be there for you if (knock on wood!) you do not make it into one of your top choices.

Amidst rising costs of tuition and the current financial concerns facing Americans, the generic “safety school” for many young adults has become one based on financial practicality rather than mere preference. According to Shelly Banjo of the Wall Street Journal, “While many parents and students have long emphasized getting into a top school over financial considerations, families in recent months have seen the value of their homes decline, their investments dramatically shrink and sometimes monthly income lost due to layoffs.”

In order to ease the burden of the cost of college, many families have begun to encourage their high school seniors to apply to less costly universities. Students whose families have been adversely effected by the financial crisis have also begun to think about attending colleges that are close to home to save on housing and transportation costs. Some have even broached the topic of attending a community college for the first half of their college career.

The above claims are not mere media hearsay; according to MeritAid.com, a scholarship website, a survey of 2,500 high school seniors found that “57% of prospective college students say they are ‘now considering a less prestigious college due to affordability.’” The survey also found that 16% of these students are even “now putting their college searches on hold because they don’t think their families will be able to pay for college.”

While many families will inevitably endure the financial crunch of an economic downturn, college hopefuls should not consider the possibility of attending their dream university a lost cause. According to Banjo, “While the sticker price might be high, a favorable aid package could make some private colleges cost-competitive with a public institution.” At Dartmouth, students of families who earn less than $75,000 are not charged tuition.

It is always disappointing to feel as if the door of your dream college has been slammed shut before you’ve even applied because of financial considerations beyond your control. However, being both knowledgeable and aggressive in respect to financial aid and scholarship opportunities can bring to light various possibilities. Filing the FAFSA will determine if you qualify for federal aid and is also used by some colleges to determine your award package. The FAFSA is available at fafsa.ed.gov and is to be filed no earlier than January 1 of the year you will be attending. It is important to remember to file every year.

The CSS Profile Application is another resource utilized by colleges to determine need, as it "gives financial aid administrators a broader set of data from which to derive your eligibility for institutional need-based assistance." The CSS Profile Application is available at collegeboard.org. For more information on applying for aid (including the process by which the Department of Education determines your need, scholarship search services and other options such as work-study programs, visit the Financial Aid Resource Center at http://www.theoldschool.org/

Quick Quiz: Your Money Market IQ

Before the recent credit crisis, money market funds seemed about as interesting as that guy your Aunt Judy has been trying to set you up with. You know the type: dull, safe, easy to ignore. But suddenly the money market fund is a hot topic as these previously safe investment have been swept up in the recent economic chaos. This morning's Wall Street Journal points out that you can't take these funds for granted anymore (but feel free to keep ignoring that guy), and has a handy quiz full of facts and tips to help you get savvy about money market accounts.


From How Well Do You Know...Money-Market Funds?
by Leslie Scism
http://online.wsj.com/article/SB122529246328680389.html?mod=yahoo_hs&ru=yahoo

1) When were the first money-market mutual funds for small investors launched?

A. 1950s
B. 1960s
C. 1970s

ANSWER: C. The funds "were born of a Black Swan moment -- the explosive inflation of the 1970s," when investors were craving higher rates than were then possible in bank accounts, says Paul Schott Stevens, president of trade group Investment Company Institute.

By most accounts, the first fund was offered by Reserve Management Co. -- the New York firm whose fund in September broke the buck.

2) Fidelity Investments was one of the first big mutual-fund firms to launch a money-market fund. What perk came with its new fund?

A. A matching contribution of up to $100
B. Check-writing privileges
C. A toaster

ANSWER: B. Because few investors were buying stocks in the bear market of the 1970s, Fidelity searched for another way to bring in business. In 1974 it introduced Fidelity Daily Income Trust, and to distinguish it from other money-market funds, the president of the firm, Ned Johnson, added check writing.

"He reasoned that if it was easy for investors to get money out, they'd be more likely to put money in," a Fidelity history brochure reads. "The idea worked, and assets poured into the fund."

3) Fidelity says the launch of Fidelity Daily Income Trust led directly to another key innovation at the Boston firm. Which is it?

A. A toll-free telephone line through which individuals could make fund purchases directly
B. A computerized telephone system to provide yield quotes 24 hours a day
C. A discount brokerage service to sell funds as well as stocks, allowing small investors to bypass pricey Wall Street brokers

ANSWER: A. At the time, Fidelity sold its funds through brokers. But Fidelity couldn't pay brokers to sell the money fund without losing its yield advantage, the history reads. So Fidelity set up a dedicated phone line and ran a few ads. The move proved popular, and by 1979 Fidelity removed the 8% sales charge from almost all its funds to sell directly to the public. Later came the firm's computerized phone system and discount brokerage.

4) Before the Reserve fund's problems, there was just one prior occasion when a fund broke the buck. When was that?

A. 1974
B. 1987
C. 1994
D. 1998

ANSWER: C, when tiny Community Bankers U.S. Government Money Market Fund incurred losses in financial "derivatives." There have been many other close calls over the years, but fund companies have stepped in on all those other occasions to bail out their funds. That is, the fund company either bought out the debt at par value or took other steps to back up the fund so that the shares stayed at $1. The Community Bankers fund was aimed at institutions, and no small investors lost money in it.

5) Which of the following was true of money funds as of this past June?

A. They held almost one-fifth of municipal securities outstanding.
B. They held one-fifth of marketable Treasury bills.
C. They held more than 40% of the outstanding short-term borrowings of U.S. corporations known as commercial paper.
D. All of the above.

ANSWER: D, according to the ICI. Assets in money funds quadrupled from 1984 to 1987, when they reached $1 trillion, and they tripled again, to $3 trillion, by 2007.

Securities and Exchange Commission rules, known as the quality, maturity and diversity standards, govern what money-market mutual funds can hold. What this translates to, in general, is a very wide range of highly rated securities that mature in 90 days or less.

6) What investment got the Reserve fund in trouble?

A. Russian debt
B. Lehman Brothers debt
C. Fannie Mae preferred stock
D. CDs from failed IndyMac Bancorp

ANSWER: B. The Reserve fund, which stood at $65 billion in early September, held $785 million of Lehman debt when the investment bank filed for bankruptcy on Sept. 15. The fund said it would write the debt down to zero, reducing the fund's net asset value to 97 cents a share.

7) True or false: The Reserve is the only money-market fund that has had large-scale soured investments since the subprime-mortgage crisis erupted in 2007.

ANSWER: False. At least 20 fund companies have stepped in this year to support their money funds or to prevent them from breaking the buck, according to Peter Crane, president of Crane Data, which tracks money-market activity. They bought out the money-losing debt at face value, or took other steps to make the fund whole.

Fund firms do this to prevent devastating runs. "It's like fixing your roof," he says. "You either fix your roof or the whole house ultimately will be destroyed." Fund operators repairing the roof, so to speak, include Bank of America Corp., Northern Trust Corp. and Wells Fargo & Co. And this leads to some advice from fund analysts: Invest where there is a well-capitalized company committed to the fund business.

8) True or false: The U.S. Treasury's new money-market guaranty program has caps on the amount covered identical to those at bank accounts covered by the Federal Deposit Insurance Corp.

ANSWER: False. The program, in place for three months with the possibility of extension, covers whatever sum investors had in their money-market mutual funds as of Sept. 19. FDIC coverage for consumers' bank deposits, by contrast, was recently raised to $250,000 from $100,000.

Officials at first weren't going to put any limits on the money-market guarantee, but community bankers complained that the change would fuel a flight of money out of their vaults into higher-yielding funds. So the Treasury on Sept. 21 clarified that the program applied to amounts in accounts as of Sept. 19, the date the program was announced.

9) What was the average 12-month yield as of Sept. 30 of a consumer-oriented, taxable money-market mutual fund?

A. 1.65%
B. 2.65%
C. 3.65%
D. 4.65%

ANSWER: B, according to Money Fund Report. And beware: Yield-chasing can get you into trouble. The Reserve Primary Fund's 12-month yield as of Aug. 31 was 4.04%, the highest of more than 2,100 money-market funds tracked by Morningstar Inc. The average at the time: 2.75%. A fund yielding more than others may be charting a risky course to deliver the extra income.

10) What is the average annual expense ratio of a money-market fund?

A. 0.08%
B. 0.28%
C. 0.58%
D. 0.98%

ANSWER: C, according to Morningstar. While the average of all money-market funds is 0.58% of assets, the average for the 25 largest is 0.24%. Take note: The funds with the lowest costs have the least need to take on risk to deliver a competitive yield.