Financially Stressed Frosh

This week, I was preparing a document supporting the need for a faculty position in our department. In the process, an administrator pointed me in the direction of the 2009 National Freshman Attitudes Report, conducted by Noel-Levitz (2009). The full report may be found at Noel-Levitz report.

Here are some bulleted highlights that I believe are worthy of thoughtful consideration:

• Less than half of incoming freshmen (46.4%) report having adequate financial resources to finish college.
  • 
    Yet, fully 95.0% have a “very strong desire to continue my education and I am quite determined to finish a degree”.
  • 
    Also, 90.0% “are deeply committed to my educational goals…prepared to make the effort and sacrifices needed to attain them”.


• While students are committed to “make the effort and sacrifices” in order to graduate, they are more interested in seeking scholarships (64.6%) than getting a part-time job (47.3%) or getting a loan (31.5%). (There is good news in this bite!)


• Overall, 56.8% of all freshmen students expect to work over 10 hours per week to help finance their college education, while only 22.4% have no plans to work.


• Financial challenges were reported to be “very distracting and troublesome” to 29.3% of the sample of college freshmen.


• A greater proportion of first-generation college freshmen (38.3%) report greater levels of financial stress than non-first-generation college freshmen (25.5%).


• Finally, students would like to receive assistance from their institution with respect to taking exams (74.8%), selecting courses to prepare them for a job (67.6%), getting a summer job (44.3%), or to receive tutoring (41.4%).

What should we take away from this glimpse into the Noel-Levitz survey? First, students are worried about their finances and it is a “teachable moment”. Universities/colleges are in a unique situation to improve the financial literacy of their student body, if they are willing to devote resources to the task. It is clear that the financial success of alumni is a direct reflection of the quality of their education, as well as their skills in the management of their financial resources. (Successful alumni can make coveted donors!) Moreover, students are challenged in areas other than financial and they admit to needing help. As a faculty member at a large public university I have often told students to go talk with professors - their own as well as those that they find interesting. (Trust me, with 30,000+ students on campus, faculty don’t go looking for students!) In my twenty-five years of being a faculty member, I know of only one professor who has ever refused to meet with a student, or to refer them to someone else, if they ask to talk. You never know, asking a professor for some ideas on a term-paper or for career advice might lead directly to your future life. It did for me and, frankly, I remain grateful to Dr. Gordon Bivens for that hour on that spring day many, many days ago.

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

Losing the American Dream

Rebecca J. Travnichek, Ph.D., AFC[i]
Robert O. Weagley, Ph.D., CFP®

The last thing a homeowner wants to think about is losing their home, particularly following foreclosure. Focusing on the foreclosure process, however, allows us to help you recognize actions you can take every day, in order to address potential problems – even if those problems seem as remote as the Arctic Circle.

What is foreclosure?
Foreclosure is “a legal action that ends ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage” (Freddie Mac Glossary 2008). In the contract signed by the homeowner with the mortgage lender, the borrower agrees to make house payments to repay the loan. If they do not pay the monthly mortgage payment, the mortgage is in default and, while state laws may vary, any loan secured by real estate that is delinquent - as little as one day - can be considered for foreclosure, in order to transfer ownership to the lender. When foreclosure is complete, the lender can sell the property and keep the proceeds to pay off the mortgage, as well as all legal costs.

Warning signs of foreclosure
Unexpected life changes often contribute to foreclosure (and bankruptcy) — especially those that impact your finances including:

• Loss of employment or reduction of hours


• Major illness or injury


• Divorce or separation


• Death of a spouse
  

There may be financial signals to potential troubles with your mortgage. You may have a difficult time managing your finances. Financial difficulties in one area can, and often do, spill over to other areas. Talk to a housing or financial counselor immediately if you see any of the signs below. Signs to watch for include:

• Maxing out credit cards
  
• Using credit cards to pay for day-to-day expenses, like groceries and utilities
  
• Being unable to pay your bills in full and on time
  
• Paying only the minimum amount on credit card accounts
  
• Applying for new credit cards after maxing out existing ones
  
• Having to choose which bills to pay each month
  

Steps to prevent foreclosure, as well as other financial tragedies
Over the years, the Financial Tip of the Week has focused on behaviors designed to prevent financial casualties. As a reminder:

• Save money - Build an emergency fund of three to six months of household expenses.


• Reduce expenses - Reducing your expenses, perhaps to only necessities, allows you to save money — every little bit helps.
  
• Make a budget - Think about the changes you can make if you find yourself facing financial difficulties. Think about the changes you can make to ensure that financial difficulties never arrive!
  
• Call your lender - Lenders want borrowers, not properties. They prefer that you keep your home. Most will work with you while you get back on your feet.
  
• Be honest - Each situation is handled on a case-by-case basis and it’s important for the lender to have all the facts for each case. Honesty truly is the best policy.


• Know who and what you owe - Do you know exactly how much principal you owe on your mortgage and other debts? You need to know what you owe on all of your debts and make your mortgage the priority if you have to make choices and you want to keep your home.
  
• Talk to a housing or financial counselor - A housing counseling or consumer credit counseling agency may be able to help you restructure your bills so it’s easier to pay them. To find an agency or counselor that is approved by the U.S. Department of Housing and Urban Development, go here.


• Contact a nonprofit housing group - A housing nonprofit group can provide valuable advice. A toll-free telephone hot line (888-995-HOPE) funded by the Homeownership Preservation Foundation provides free foreclosure prevention information and counseling in both English y Español.
  

Do not wait until you are in financial trouble to assess your options. The time to develop a plan is now, when things are going well and you can prepare for the unexpected. Do not wait until you’re thrown overboard to learn how to swim! If, however, you realize you are having trouble with your credit, in particular your mortgage, take steps to prevent foreclosure and to keep on your path toward financial success.

References

FindLaw. 2008. Foreclosure by Judicial Sale. http://realestate.findlaw.com/foreclosure/foreclosure-by-judicial-sale.html .

Freddie Mac. 2008. Avoiding Foreclosure. http://www.freddiemac.com/corporate/buyown/english/avoiding_foreclosure/ .

Freddie Mac. 2008. Full glossary of housing and credit terms. http://freddiemac.com/corporate/buyown/english/calcs_tools/glossary.html

The Office of the Comptroller of the Currency. 2008. OCC Consumer Tips for Avoiding Mortgage Modification Scams and Foreclosure Rescue Scams. http://www.occ.treas.gov/ftp/ADVISORY/2008-1.html.

U.S. Department of Housing and Urban Development. 2008. Tips for Avoiding Foreclosure. http://www.hud.gov/foreclosure/foreclosuretips.cfm

Personal Interviews with local bankers in Savannah and St. Joseph, Mo.

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

Safeguard Your Savings – Summer 2009

Our Family Financial Education Extension Specialists have teamed with both the Office of the Missouri Secretary of State and the Investor Protection Trust to present investor education workshops entitled, “Safeguard Your Savings”. The programs are designed to be introductory and attempt to take some of the mystique out of investing, while helping people avoid some of the common pitfalls. Of course, no presentation on investing would be complete without some time being spent on recognizing scams and rip-offs that exist in this market – especially during times when people are desperate to recoup the losses of the past year.

If there is a Family Financial Extension Specialists in your region of the state, there is probably a program for you to attend. The schedule is posted below or you can always find updates on this and other extension programs on the Human Environmental Sciences Extension website. Take some time this summer to invest in yourself. Learning always has a positive return for your family’s success, in addition to your finances.

Marshall

Safeguard Your Savings

Open to the public

Date: October 27, 2009

Time: 8:00 AM - 10:00 AM

Location: Saline County Extension Center

For more information, contact: Cynthia Crawford at 660-886-6908 or crawfordc@missouri.edu.

Jefferson City

Safeguard Your Savings

Held for Osher Lifelong Learning Center

Date: 4 sessions, Mondays, June 8 - June 29, 2009

Time: 10:00 AM - 11:30 AM

Location: Older Americans Klub (OAK)

For more information, contact: Jamie Thompson at the Cole County Extension Center, 573-634-2824.

Houston

Safeguard Your Savings

Held for South Central Region FNEP

Date: June 11, 2009

Time: To be determined

Location:

For more information, contact: Chantae Alfred at 573-458-6260 or alfredc@missouri.edu.

Mt. Vernon

Safeguard Your Savings

Held for Southwest Missouri Region faculty

Date: August 18, 2009

Time: To be determined

Location: Southwest Research Center (tentative)

For more information, contact: Janet LaFon at 417-358-2158 or lafonj@missouri.edu or Annette FitzGerald at 417-546-4431 or fitzgeralda@missouri.edu.

Savannah

Safeguard Your Savings

Held for Northwest Missouri Region faculty/staff

Date: August 18, 2009

Time: To be determined

Location: To be determined

For more information, contact: Dr. Rebecca J. Travnichek at 816-324-3147 or travnichekr@missouri.edu.

Safeguard Your Savings

Open to the public

Date: August 25, 2009

Time: 7:00 PM - 8:30 PM

Location: Andrew County Courthouse Basement

For more information, contact: Dr. Rebecca J. Travnichek at 816-324-3147 or travnichekr@missouri.edu.

Sedalia

Held for Center for Human Services staff

Date: August 21, 2009

Time: 1:00 PM - 3:30 PM

Location: Center for Human Services

For more information, contact: Cynthia Crawford at 660-886-6908 or crawfordc@missouri.edu.

Jefferson County

Safeguard Your Savings

Open to the public

Date: August 22, 2009

Time: 9:30 AM

Location:

For more information, contact: Michael Ravenscraft at 636-797-5391 or ravenscraftmr@missouri.edu or Suzanne Gellman at 636-970-3000 or gellmans@missouri.edu.

St. Charles

Safeguard Your Savings

Open to the public

Date: September 26, 2009

Time: 9:00 AM

Location: St. Charles Extension Center

For more information, contact: Michael Ravenscraft at 636-797-5391 or ravenscraftmr@missouri.edu or Suzanne Gellman at 636-970-3000 or gellmans@missouri.edu.

Monett

Safeguard Your Savings

Open to the public

Date: October 12, 2009

Time: 1:30 PM - 2:30 PM

Location: Barry-Lawrence Regional Library

For more information, contact: Janet LaFon at 417-358-2158 or lafonj@missouri.edu.

Harrisonville

Safeguard Your Savings

Held for Adult & Continuing Education class

Date: October 13, 2009

Time: 6:30 PM - 8:30 PM

Location: Cass Career Center

For more information, contact: Carole Bozworth at 816-482-5850 or bozworthc@missouri.edu.

Safeguard Your Savings

Held for Adult & Continuing Education class

Date: October 20, 2009

Time: 6:30 PM - 8:30 PM

Location: Cass Career Center

For more information, contact: Carole Bozworth at 816-482-5850 or bozworthc@missouri.edu.

St. Louis County

Safeguard Your Savings

Open to the public

Date: November 7, 2009

Time: 9:30 AM

Location:

For more information, contact: Michael Ravenscraft at 636-797-5391 or ravenscraftmr@missouri.edu or Suzanne Gellman at 636-970-3000 or gellmans@missouri.edu.

Other programs of interest, incorporating much of Safeguard Your Savings:

How to Beat the High Cost of Living

Open to the public

Date: June 30, 2009

Time: 7:30 AM - 10:00 AM

Location: Saline County Extension Center

For more information, contact: Cynthia Crawford at 660-886-6908 or crawfordc@missouri.edu.


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

Credit, Congress, and You

This week, the US Senate passed (by a vote of 90 to 5) sweeping credit reform legislation that will alter consumer credit markets. As I am writing this on Wednesday, the US House just passed the bill (by a vote of 361-64) and President Obama is fully expected to sign the bill into law. What is in the law and what does it mean to you?

The Law:

· Promotional rates of interest must last for six months and increases in the rate charged for new purchases cannot occur until after the contract has existed for a year. Rates can, however, still be increased and credit lines can be withheld from consumers deemed to represent excessive risks.

· Interest rates cannot be raised on existing balances, unless the borrower is at least 60 days delinquent on the account.

· If you are under-21 years old, you will either need you parent’s signature to obtain a credit card, thus making your parents responsible for the payments, or prove that you are able to repay the credit on your own.

· Over limit fees are not allowed, unless the borrower has signed a contract to allow such fees.

· The credit card companies will be required to allow 21 days of notification of the payment due date. Also, the credit card statement must tell the consumer how long it will take to repay the loan and the total interest to be paid, if the consumer only makes the minimum payment. (We always pay more than the minimum, don’t we?)

· If the consumer pays above the minimum payment, the excess payment must first be applied to the balance with the highest interest rate.

What it means to you:

· If you carry a credit card balance – Credit card issuers will be unable to raise the interest rate on your existing balances, unless payments are more than 60 days late. They may, however, raise rates on your future purchases.

· If you don’t carry a credit card balance – Expect annual fees to rise and promotions/rewards to be less valuable, as companies attempt to balance risk and profitability.

· If you don’t have a credit card – It will likely be harder to get a credit card, as standards are tightened as a result of the new law. You’ll also need to be 21, unless you have your parents cosign the contract.

· If you care – Banks and other credit card issuers will be much more transparent in their practices and people will be better able to understand the costs of their credit use. If Congress is making the correct move, financial success should be more easily attainable, as the act should both reduce consumer indebtedness and the abusive practices of lenders.

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211