Boxing Day, December 26

When I was a young professional, I spent two years teaching at Mount Saint Vincent University in Halifax, Nova Scotia, Canada. My first Christmas in Canada, I discovered that much of the British Commonwealth of Nations celebrates Boxing Day. When I first heard it, I thought it referred to the fact that we have a lot of boxes following Christmas that we have to dispose of or the fact that we box things up and return them to the stores. For, as you no doubt know, the day after Christmas is one of America’s cherished “shopping holidays”.

The origin of Boxing Day in England, however, is a day to celebrate St. Stephen’s Day. Those of you with Christian origins might remember that St. Stephen was stoned to death, apparently with the approval of Saint Paul, as a result his being tried and convicted of blasphemy. Near death, he is said to have seen God.

Historically, Boxing Day is neither a day of shopping, a day to mourn, or a day to look to the heavens. Rather, Boxing Day is a day that refers to a tradition of giving gifts to the less fortunate members of the community. Although we’re in the midst of a recession, this Holiday Season we all have something for which we can be thankful. Perhaps, yesterday, in a moment of reflection, after we cleaned up the mess of our gifting and before we drifted off to sleep after our holiday feast, we had a glimpse of our good fortune. In the grand scheme of things, it was not that long ago when our ancestors were poor, persecuted, or enslaved. Today, many of us know people that are out of work, spending down their savings, or “enslaved” by habits that are counterproductive. Others are trying to stick with their plans, while confronted with the uncertainty and fear of not knowing who or what to trust. The bottom line is that we need each other.

So, on Boxing Day, regardless of your faith, I ask you to remember St. Stephen. Take some time or money and make a small statement about your confidence in your future, by making someone’s present just a little brighter. I’m willing to bet that by sharing your financial success, your generosity will come back to you ten-fold.

ps: If you have a New Year’s resolution that speaks to changes you’re making in your financial management, let me know. I’d love to provide a list of what our readers plan for the New Year and share it next week. (Please send your ideas to me at rweagley@gmail.com.)

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

The Benefits of Saving Money

The Benefits of Saving Money

Barbara O’Neill, Rutgers Cooperative Extension

oneill@aesop.rutgers.edu

One of the best ways to take charge of your finances in today’s uncertain economy is to accumulate a healthy savings account. Nobody wants to feel the stress of knowing that they are only a paycheck or two away from financial disaster because they lack money to fall back on when “stuff happens.” Specific examples include job loss, disability, a car breakdown, a sick child or pet, and other types of financial emergencies. Saving provides a financial “backstop” for life’s uncertainties and increases feelings of security and peace of mind. Once an adequate emergency fund is established, savings can also provide the “seed money” for higher-yielding investments such as stocks, bonds, and mutual funds.

There is also evidence from a recent study by the Northwestern Mutual insurance company that savings is linked to increased happiness. Actually, what the study found was that people who are “planners” and do future-oriented things such as setting goals and taking steps (e.g., saving money) to achieve those goals feel happier, and better about their lives, than those who don’t make plans. On a related note, the Consumer Federation of America found a strong relationship between having spending and saving plans and maintaining emergency funds. Particularly for low-income individuals, those with a spending plan with goals were far more likely to have saved money for emergencies than were those without a plan.

Economists and psychologists attribute findings like these to the sense of control that people have when they plan ahead and know what they need to do to get from where they are now to where they want to be. It is well established by research that people who feel a sense of control over life events are often happier, cope better, and are more resilient in times of stress than others. Conversely, people are especially unhappy in situations where they perceive themselves to have a lack of control. It is, therefore, no surprise that commuting ranks high on the list of things that make people most unhappy. Commuters never know from day to day what traffic gridlock, accidents, and weather-related hassles they’ll encounter.

Encouraging people to develop and implement a personal saving plan is the central focus of the America Saves program. The motto of America Saves (see www.americasaves.org) is “Build Wealth, Not Debt.” 2009 also marks the third year of America Saves Week (see www.americasavesweek.org), an annual event that focuses attention on the benefits of saving. Throughout the country, there will be information and events designed to promote saving and to help individual savers develop a personal action plan. The dates for America Saves Week 2009 are February 22 to March 1.

America Saves is an example of a “social marketing campaign.” This means that the messages associated with this program are designed to change people’s behavior rather than to sell them a product or service, as is typical with most marketing messages. Just like the “Buckle Up for Safety” campaign several decades ago that got many people in the habit of wearing seat belts, America Saves seeks to get more Americans into the savings habit to improve their future financial security and that of the country.

The America Saves Week Web site has a wealth of resources to help you get started on the path to financial security. Included are monthly savings messages written by financial experts, success stories from individual savers, a savings knowledge quiz, and tools to assess your financial progress. You can also register online as an American Saver at www.americasaves.org/enroll and receive regular newsletters from the non-profit Consumer Federation of America, the organization that runs the America Saves program.

So how do you get started as a saver or ramp up your current level of savings? Go for the goal! It’s a whole lot easier to save for something specific than to save for savings sake. Here’s an example. To calculate how much you need to save to achieve a goal, divide the amount you need to save or invest by the time (e.g., number of months) you have left to save. If, for example, you want to save $5,000 by next year, you’ll need to put aside $416.67 ($5,000 divided by 12) a month, or $96.15 ($5,000 divided by 52) a week. To download a goal-setting worksheet with spaces to calculate the savings required for short-, medium-, and long-term goals, see http://njaes.rutgers.edu/money/pdfs/goalsettingworksheet.pdf.

Consider becoming an American Saver during America Saves Week and, remember, “Build Wealth, Not Debt.”

Ps: I’m sorry I had to rely on my good friend, Barb O’Neill, for this week’s Financial Tip. It is Finals Week at MIZZOU and I’ve 71 students in my Investments class preparing for their final on Friday at 10:30. Needless to say, I’m busy and getting tired. Thinking of Barb and the Holidays reminds me of how grateful I am for friends, family, and whatever future I have in front of me. May all of you have a Blessed Holiday Season!! I’ll write soon! - row

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

Money Health!

Robert O. Weagley, Ph.D., CFP^®

with Mary Rotert and Qianyi Li¹

We all know how important it is for everyone to have an annual physical checkup. The goal is to ensure you are free of health problems and to address issues that might exist before they become larger issues. This information is crucial for our health and well-being. As you are well aware, the current economic situation has created an environment where many have been forced to think that their financial plan, not them, has contracted a terminal financial illness. Small problems, that can be overlooked when the economy is performing well, can become troublesome and more apparent during harder times. What can you do? Take some time to perform your financial checkup, detect potential financial problems, and identify opportunities to improve. The end-of-the-year is an excellent time to perform this “check-up” of your progress toward financial success.

An annual financial check-up takes only three steps to complete.

Step 1: Check Your Income and Expense Statement (Your Budget)

We all know that income and expenses are the major categories in a budget statement. Many, however, do not have a clue about where they are spending their money. If you’re one of these, this provides a great opportunity for you to take action to control your spending. There are many published recommendations of how people, on average, spend their money. If you’re average, follow one of these publications. Otherwise, if you’re like most of us and not average, make it a goal to begin the New Year with a better understanding of your sources of income and expenses. For income sources that can be realistically enhanced, enhance them. For expenditures that can be realistically reduced, reduce them – except for savings. The first item in your budget should be your savings for your future, as well as an emergency fund. Pay yourself first and try to save at least ten percent of your income. If this requires you to eat more meatloaf and less porterhouse, eat more meatloaf. Controlling your spending and seeing your opportunities grow is an incredible reward for making these “sacrifices”.

Step 2: Check Your Balance Sheet, or Net Worth Statement

A balance sheet outlines what assets a household owns and what liabilities (debts) it owes. We all know that the greater your liabilities, everything else constant, the less healthy your finances. Knowing this, if you can move toward fewer liabilities, your household financial health will improve. While we cannot control the returns on some of our investment accounts, we can control our decision to borrow and spend money. So, take control of what you can control. A simple trick is to first pay down loans with high interest rates. A helpful tool is PowerPay, freeware from Utah State University (https://powerpay.org/).

To help you make progress, I’ve attached a net worth statement in Excel that I have used for years – without my personal information on it – that allows the user to list the value of each of asset categories and each loan to calculate a net worth. There is also a column where I have listed a guess of possible returns for each category, to provide estimates of a household’s net worth at different points in the future. Then, in the following year, compare last year’s estimate of your future net worth to what it is, in order to see if you’re ahead or behind in the “finance game”. No doubt, this year will be a disappointment but, trust me; you will be positively surprised in many years. (Note: You can enter your own estimates of returns, and add rows for additional assets, loans, etc. just like any Excel file.)

Step 3: Check Your Assets

Take your assets and calculate the proportion of your assets in different asset categories: Small, mid, and large capitalized companies, value versus growth, bonds versus stocks, real estate versus financial, international versus domestic investments, risky assets versus less risky assets – whatever categorization is appropriate to help you. There are software programs on the internet that can help with this but I am unaware of any freeware. Regardless, you should have a better understanding of where your investments are invested and judge if the allocations are appropriate for the time-frames and magnitudes of your financial goals.

Importantly, the old adage, “don’t put all your eggs in one basket” is a maxim that points out the importance of diversification to your portfolio’s performance. Moreover, overtime, the diversification of your portfolio will change as deposits, gains, and losses change the actual weights from your desired weights. Importantly, diversification can increase your return on your investments, while decreasing the risk of your investments.

As we approach the end of the year, perform this simple three-step financial check-up. Your financial success requires you to be financially healthy. Lower your debts, add to your assets, reduce your expenditures, and take control of what you can control. Then, when the economy is back to her robust self – and she will be – the results of the habits you learn during this “teachable moment” in history will exceed your expectations. That is my promise to you, if you take this opportunity to give the gift of financial health to yourself.

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

1 Mary Rotert and Qianyi Li are MS students in the Personal Financial Planning Department, University of Missouri.

What to do about billing errors?

I-Ting Lu, MS[i]

Mary Ann Rotert

December is here and that means the holidays are upon us! Many stores are promoting great values and attractive discounts to stimulate their sales. We’ve talk about the need for consumers to be cautious in their consumer behavior and to make sure their choices are consistent with their goals. We also need to be cautious about the behavior of others. One way to do the latter is to check your credit card bill for errors during this busy buying season. If you are unlucky enough to discover billing errors on your credit card statement, don’t panic. You can correct errors before it’s too late.

First, you need to know what qualifies as a billing error and what you should do, if an error exists. The federal Fair Credit Billing Act (FCBA) was passed precisely to help protect consumers against unfair practices and errors by credit card companies. The FCBA gives specific examples of billing errors. They are:

· A charge for something you did not buy.

· A bill for an amount different from the actual amount you charged.

· A charge for something that you did not accept when it was delivered.

· A charge for something that was not delivered according to agreement.

· Math errors.

· Payments not credited to your account.

· A charge by someone who does not have permission to use your credit card.

If the error you find on your bill is one of the above, take the following steps to dispute the charge:

1. Write to the credit card company within 60 days after the statement date printed on the erroneous statement. Use the address listed on the bill for billing inquiries and tell the company the following four items:
(a) Your name
(b) Account number
(c) Clarify why you believe the bill contains an error, and the reason why it is wrong. Provide copies of supportive documentation if you have any.
(d) The date and amount of the error.

2. Be sure to pay all other parts of the bill that you do not dispute. You do not have to pay the disputed amount immediately.

3. Your account must be corrected by the credit card company, if there is an error. You will not have to pay any finance charges on the disputed amount, if you are found to be correct in your dispute.

4. If there is no error, you will receive an explanation and a statement of the amount you owe from your credit card company. Unfortunately, the amount you will owe will include any finance charges or other charges that accumulated while you were questioning the bill.

Pay attention to your bill every month and, if you find an erroneous charge to your credit card, dispute the charge. Paying money to others that you do not owe to them is not a destination on the road to financial success. Happy Holidays!

For additional information on disputing errors and your rights as a consumer, visit the Federal Trade Commission’s website at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre16.shtm.

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211