Subscribers to MU's Financial Tip of the Week. -
This is to inform you that Dr. Mark Oleson has resigned his position as Director of the University of Missouri Office for Financial Success. While in that position, Dr. Oleson published the MU Financial Tip of the Week. We will continue to publish the MU Financial Tip of the Week but we are migrating to a new, more secure system for sending the MU Tip to you, our subscriber. This not only helps protect us, but will help protect you from unnecessary spam that comes your way.
If you wish to continue to receive the MU Financial Tip of the Week, please reply with an email to financialsuccess@missouri.edu . We wish to be your objective source of financial information for today's young adults and students. It is a part of our mission, as a respected land-grant university.
Thank you for your patience during this transitionary period.
- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211
Friday, February 29, 2008
Thursday, February 21, 2008
Renter's Insurance
Many people do not own where they live, but many still need insurance protection. While the landlord will have insurance to protect her should the apartment or rental house be lost, her insurance will not protect you from the loss of your personal property or protect you in case you are liable for someone’s loss by a means other than an automobile accident. (Often, students have adequate protection through their parents’ homeowner’s insurance protection that “follows” the student to college. Check with your parents’ insurance company to assure that you have coverage. Do not assume you are covered!)
Renter's insurance protects the insured from the loss of personal property as a result of perils listed on a broad form of coverage. To have proper documentation of your property one should maintain a current inventory of belongings, often with photographs, that is kept in a safe place like a safety deposit box. Broad form coverage includes the most common perils of fire, theft and vandalism, as well as lightening, windstorm or hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, breakage of glass, falling objects, weight of ice, snow, sleet, volcanic eruption, sudden and accidental tearing asunder, damages from steam or hot water heating system or of appliances for heating water, accidental discharge, leakage or overflow of water or steam from within plumbing, heating, air-conditioning system or domestic appliance, freezing of plumbing, heating and air-conditioning systems and domestic appliances, sudden and accidental injury from artificially generated currents to electrical appliances, devices, fixtures and wiring. (Note that flood insurance must be purchased separately, if you live in a flood prone area.)
A choice you may have is whether to purchase actual cash value or replacement cost coverage for your property. The former is less expensive but only covers the current, depreciated value of your property, while replacement cost coverage is more expensive but covers the cost of replacement at current prices.
While some could easily live without their personal property, the most important coverage you receive from a renter’s insurance policy is protection in case of a liability lawsuit against you and you lose. While you wouldn’t drive and, in most states, can’t drive without liability insurance on your automobile, many seem willing to ride bikes, skateboards, or engage in other activities where a small, but significant, risk exists that you could hurt someone or damage their property and be found liable. Moreover, if you are responsible, through negligence, for the loss of the building you occupy – like forgetting to turn off the toaster-oven – your landlord’s insurance company has the right to collect their monetary loss from you. Without liability coverage, you could be buying your landlord a new building!
Your next step is to first see if you have adequate coverage through your parents’ policy. If the answer is “no” then shop for coverage from, at least, three companies. You will find that the cost is quite reasonable, typically under $300. While you are shopping for renter’s insurance, include a request for a quote for automobile insurance. Often companies reduce the premium if you have both policies with the same company and it has probably been a while since you shopped for automobile insurance anyway!
See: http://www.insurance.mo.gov/ for more information on insurance and http://extension.missouri.edu/explore/hesguide/famecon/gh3831.htm for more information on household record keeping.
Renter's insurance protects the insured from the loss of personal property as a result of perils listed on a broad form of coverage. To have proper documentation of your property one should maintain a current inventory of belongings, often with photographs, that is kept in a safe place like a safety deposit box. Broad form coverage includes the most common perils of fire, theft and vandalism, as well as lightening, windstorm or hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, breakage of glass, falling objects, weight of ice, snow, sleet, volcanic eruption, sudden and accidental tearing asunder, damages from steam or hot water heating system or of appliances for heating water, accidental discharge, leakage or overflow of water or steam from within plumbing, heating, air-conditioning system or domestic appliance, freezing of plumbing, heating and air-conditioning systems and domestic appliances, sudden and accidental injury from artificially generated currents to electrical appliances, devices, fixtures and wiring. (Note that flood insurance must be purchased separately, if you live in a flood prone area.)
A choice you may have is whether to purchase actual cash value or replacement cost coverage for your property. The former is less expensive but only covers the current, depreciated value of your property, while replacement cost coverage is more expensive but covers the cost of replacement at current prices.
While some could easily live without their personal property, the most important coverage you receive from a renter’s insurance policy is protection in case of a liability lawsuit against you and you lose. While you wouldn’t drive and, in most states, can’t drive without liability insurance on your automobile, many seem willing to ride bikes, skateboards, or engage in other activities where a small, but significant, risk exists that you could hurt someone or damage their property and be found liable. Moreover, if you are responsible, through negligence, for the loss of the building you occupy – like forgetting to turn off the toaster-oven – your landlord’s insurance company has the right to collect their monetary loss from you. Without liability coverage, you could be buying your landlord a new building!
Your next step is to first see if you have adequate coverage through your parents’ policy. If the answer is “no” then shop for coverage from, at least, three companies. You will find that the cost is quite reasonable, typically under $300. While you are shopping for renter’s insurance, include a request for a quote for automobile insurance. Often companies reduce the premium if you have both policies with the same company and it has probably been a while since you shopped for automobile insurance anyway!
See: http://www.insurance.mo.gov/ for more information on insurance and http://extension.missouri.edu/explore/hesguide/famecon/gh3831.htm for more information on household record keeping.
Friday, February 15, 2008
Principles always defeat greed and fear
Much is being said about the current uncertainty that exists within American financial markets. Is it the mortgage malaise? Is it the election? Is it a decline in solutions designed to buoy American spending? Is the American consumer upside-down with more debt than they have the capacity to repay? As the pundits debate, many consumers are afraid to act and some are dealing with recovering from their last consumption binge. How do we stand on solid financial ground at times like these? The answer, “The same way we always have, by following our principles and living our values.”
I tell my students that financial success is not hard. It does not require brain-surgery. Nor, does it require one to know how to conduct brain surgery. One must simply follow the recipe and the recipe is DDT: discipline, diversification, and time.
Discipline requires us to have a plan and do our best to stick to our plan. We spend money to reflect our values, not those of others. We set goals and are disciplined in establishing and supporting a savings program to help us reach our goals. We live within our means and only use credit as a convenient way to purchase, being certain to pay balances off at the end of the month. If we use credit as a source of long-term borrowing, we only do so if the proceeds are used to invest in something with a high probability of return – such as a college education. Discipline requires us to set rules and to play by the rules. We don’t cheat. We don’t steal. We don’t take advantage of others. We do what is right and keep our eyes on the goal.
Diversification is essential to a successful investment program. We can spend time in future financial tips discussing particular diversification ideas but, for now, we simply want you to consider how important it is for your savings and investing program to involve investments in many different companies and different types of assets. We never know which type of investment will do best this period but do know that one will. As such we must have money invested in such a way as to take advantage of the risks that exist within world financial markets. Certainly, mutual funds are very useful for diversification but assuring that your mutual funds cover various segments of the market with respect to firm size, industries, and national markets is crucial.
Time, as you should know, not only heals but is a key to investment success. The miracle of compounding cannot occur, without adequate time. A prior colleague of mine once said, “If you want to take the volatility out of your portfolio, check its value less often.” Too often people react to market movements by panicking at the worst possible moment. When their portfolio is down, way down, they panic and sell. On the other hand, we see some being too optimistic and over committing funds to a particular investment type when the “winning investment parade” is about over. Risky investments require time and should only be used when one has the time to let the market fluctuations work themselves through.
What I am trying to say is to follow your principles. Do not be swayed by today’s fears or the greed you taste observing the luck and/or excesses of others. Set your goals. Chart your path. You will reach your destination.
- Rob Weagley, Ph.D., CFP(r)Chair, Personal Financial Planning
I tell my students that financial success is not hard. It does not require brain-surgery. Nor, does it require one to know how to conduct brain surgery. One must simply follow the recipe and the recipe is DDT: discipline, diversification, and time.
Discipline requires us to have a plan and do our best to stick to our plan. We spend money to reflect our values, not those of others. We set goals and are disciplined in establishing and supporting a savings program to help us reach our goals. We live within our means and only use credit as a convenient way to purchase, being certain to pay balances off at the end of the month. If we use credit as a source of long-term borrowing, we only do so if the proceeds are used to invest in something with a high probability of return – such as a college education. Discipline requires us to set rules and to play by the rules. We don’t cheat. We don’t steal. We don’t take advantage of others. We do what is right and keep our eyes on the goal.
Diversification is essential to a successful investment program. We can spend time in future financial tips discussing particular diversification ideas but, for now, we simply want you to consider how important it is for your savings and investing program to involve investments in many different companies and different types of assets. We never know which type of investment will do best this period but do know that one will. As such we must have money invested in such a way as to take advantage of the risks that exist within world financial markets. Certainly, mutual funds are very useful for diversification but assuring that your mutual funds cover various segments of the market with respect to firm size, industries, and national markets is crucial.
Time, as you should know, not only heals but is a key to investment success. The miracle of compounding cannot occur, without adequate time. A prior colleague of mine once said, “If you want to take the volatility out of your portfolio, check its value less often.” Too often people react to market movements by panicking at the worst possible moment. When their portfolio is down, way down, they panic and sell. On the other hand, we see some being too optimistic and over committing funds to a particular investment type when the “winning investment parade” is about over. Risky investments require time and should only be used when one has the time to let the market fluctuations work themselves through.
What I am trying to say is to follow your principles. Do not be swayed by today’s fears or the greed you taste observing the luck and/or excesses of others. Set your goals. Chart your path. You will reach your destination.
- Rob Weagley, Ph.D., CFP(r)Chair, Personal Financial Planning
Thursday, February 7, 2008
Comparing Student Loans - Web Resources
Following last year's investigation into the student loan industry, several companies have created websites to aid in comparing student loan rates and benefits. Obviously, the volume of loan companies and the wide variety of benefits makes a 'useful' comparison of loan products a challenge by anyone's terms (ignoring the fact that it would be impossible to create an exhaustive list of product options). Trying to determine which loan benefits would best suit the personal needs of students and parents makes this process even more difficult.
I recently came across a posting on the NASFAA (National Association of Student Financial Aid Administrators) website that outlined a few of these different tools. When reviewing the resources, here are a few things to keep in mind:
--> Some of the tools are designed to serve different purposes (i.e., shop for private loans, shop for loan consolidation offers, etc.).
--> No list is likely to be comprehensive - there are always additional potential options that will not be provided.
--> Companies may not be listed because they are the "best" options but merely because they pay a fee to be included on the list.
--> The information is only as good as the site providing it - information changes regularly, always double check to make sure the benefits you're viewing are still available/accurate.
--> View these resources as merely informational, these are not recommendations of any sort.
STUDENT LOAN COMPARISON TOOLS.
- FinAid (http://www.finaid.org/loans/privatestudentloans.phtml)
- Loan Finder (http://www.estudentloan.com/)
- Money Cafe (http://www.moneycafe.com/Educatio.htm)
- Simple Tuition (http://demo.simpletuition.com/missouri)
- Student Loan Listings (http://slbg.greentreegazette.com/gtree/)
- Student Loan Scout (http://www.studentloanscout.com/)
- Tuition Bids (http://www.tuitionbids.com/)
I recently came across a posting on the NASFAA (National Association of Student Financial Aid Administrators) website that outlined a few of these different tools. When reviewing the resources, here are a few things to keep in mind:
--> Some of the tools are designed to serve different purposes (i.e., shop for private loans, shop for loan consolidation offers, etc.).
--> No list is likely to be comprehensive - there are always additional potential options that will not be provided.
--> Companies may not be listed because they are the "best" options but merely because they pay a fee to be included on the list.
--> The information is only as good as the site providing it - information changes regularly, always double check to make sure the benefits you're viewing are still available/accurate.
--> View these resources as merely informational, these are not recommendations of any sort.
STUDENT LOAN COMPARISON TOOLS.
- FinAid (http://www.finaid.org/loans/privatestudentloans.phtml)
- Loan Finder (http://www.estudentloan.com/)
- Money Cafe (http://www.moneycafe.com/Educatio.htm)
- Simple Tuition (http://demo.simpletuition.com/missouri)
- Student Loan Listings (http://slbg.greentreegazette.com/gtree/)
- Student Loan Scout (http://www.studentloanscout.com/)
- Tuition Bids (http://www.tuitionbids.com/)
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