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

Financial Strategies for Today’s Economy

Dr. Cynthia Crawford

MU Family Financial Education Specialist

A collection of ideas from leaders in family financial education

Dr. Barbara O’Neill, Rutgers Cooperative Extension, points out, “When the financial news is grim and market indices fluctuate hundreds of points daily, it's real easy to feel that you are helplessly at the mercy of external forces. Research has found that people are especially unhappy in situations where they perceive themselves to have a lack of control.”

A recent Wall Street Journal article summarized several studies that found that, when our sense of control is threatened, people tend to latch on to whatever small fragments of information are available and believe that they are reliable. The article concluded, “You cannot control whether or not the market will continue to trash stocks, but you can control how you respond.”

What to do? Here are themes from leaders in family finance:

1. Don’t panic. Sit down in the financial canoe. Decisions based on fear or greed are seldom good decisions.

2. It’s buy low, sell high. Not the opposite. If you’ve made investment decisions based on the principles of diversification and matching investments to goals with quality products, do watchful waiting (i.e. do nothing). Until you sell, your losses are on paper only. If you sell, your losses are real. Investments have recently been on sale. It may be time to buy, particularly on pullbacks.

3. Watch your spending. In times of economic uncertainty, it's wise to "live below your means" and practice what economists call "precautionary savings." There is some recent evidence that Americans are already doing this on a large scale. Track your spending. You may use financial management software on the computer, develop an Excel spreadsheet or you may want to do it with paper and pencil.

4. Get busy learning the principles of financial planning, including saving and investing. Financial markets are less scary the more we know about the characteristics and historical performance of investments. We know from history, for example, that stocks can be very volatile day to day but, over periods of 10 years or longer, volatility is greatly reduced. In times of turbulence and change, knowledge is power!

5. Tune out negative “noise.” Monitoring the state and national news morning, noon and night along with the Internet can be too much negative information. Since you’re managing your finances for the long term, it may not be important to monitor the media day-by-day or hour-by-hour. Focus on things you can positively impact – starting in your corner of the world.

6. Minimize investment expenses. Especially at times when mutual funds are experiencing paper losses, there is no reason to be earning anything less by having high investment expenses. Expenses, along with historical performance, are a key factor in the selection of a mutual fund. Dr. O’Neill says, “Look for stock mutual funds with an expense ratio below 1.4%.” Others suggest an even tougher standard of 1% or less.

7. Save money, be happy. Research has found that people who do things that constitute good planning tend to feel happier than those who don't. Specific practices that made "planners" feel better about life included setting financial goals, saving to achieve goals, and spending within a financial plan. Money in the bank for emergencies is life changing.

8. Pay off debt. Power pay on debt – especially any debt with double-digit interest rates. Paying off debt is a form of wealth building. Think twice about taking on new debt. Use your home as a savings account, not an ATM.

9. Be a survivor at work. Be the best employee you can be in order to reduce the odds of losing your job. Don’t quit until you have the next job in hand.

10. Work at an impeccable credit report. At the time he spoke to MU students and faculty this past fall, Dan Iannicola was an assistant secretary of the treasury. He asserted that a poor credit report can cost a person $250,000! Check your credit report – there’s only one truly free site: www.annualcreditreport.com

Pay your bills on time
Correct any errors on your report
If there is negative, true information – time will heal
The most recent credit history counts more with creditors than older information

11. You may need to delay retirement – especially if you were anticipating retiring in the very near future.

12. Fun is essential! Spend time on inexpensive activities that bring you pleasure. Turn off the computer and host a pot-luck, break out a board game, play in the toy box with a youngster, be the MU Tigers’ most enthusiastic fan…find some meaningful distractions.

13. Take Care of Yourself. The last thing that someone needs in an uncertain economy is health problems, especially if your job (and access to health insurance) is shaky. Put the odds in your favor by taking charge of your health. You will not have financial security without decent health and decent health insurance.

MU Personal Financial Planning Department Chair Rob Weagley concludes, “When we are in the midst of rapid change and uncertainty, we feel like we can’t control what is happening to us. This is often true of financial markets. Given this, we have to invest our time and resources in those items that we can control. In that light, investments in yourself, whether educational, physical, or spiritual are investments that we know have a positive return and, importantly, they are investments that cannot be taken from you. In this economic environment, this might be the best investment we can make and, frankly, it will help prepare you for the better times, as we work our way through the current economic environment.”

Reference list:

· Barbara O'Neill, Ph.D., CFP; Extension Specialist in Financial Resource Management, Rutgers Cooperative Extension.

· Laura Cohn, “What You Need to Know About Financial Stress”, Kiplinger’s Personal Finance magazine, February 2009, page 84.

· Rob Weagley, Ph.D., CFP; MU Department Chair for Personal Financial Planning.

· Carole Bozworth and Janet LaFon, University of Missouri Extension Family Financial Education Specialists

· Keynote speakers and session presenters at the national meeting of the Association of Financial Counseling and Planning Education, November 2008, Anaheim CA.

· Dan Iannicola, Jr., Deputy Assistant Secretary for Financial Education, speaking to MU students and faculty, Fall 2008.

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

Universal Default

Suppose you apply for a credit card that offers a 12% Annual Percentage Rate (APR) of interest. You are approved and you use it as a source of credit, realizing some months later that the interest rate is closer to an APR of 24%. Of course, being attuned to issues of financial success

and being proactive, you contact the credit card company about their “mistake” only to find out that the firm has applied the “Universal Default Penalty Clause”, in your signed contract, to your account. How can this be? Simple, your credit score must have decreased since you applied for and received the credit card. As such, you should know the factors that decrease your credit score.

· Failing to make a payment either on to the subject credit card company or to any of your other creditors. All of your payment records are a part of your credit history. As such a misplay on one can change the cost of all your credit cards.

· Borrowing more than your limit can make you less credit worthy in the eyes of lenders.

· Your income decreases as a result of job loss, relocation, or your personal life choices.

· You get another credit card, perhaps to receive a 10% discount at a retail store. Having access to more lines of credit is seen as a means for you to be able to borrow more – thus making you a higher risk borrower.

While Universal Default is legal, there is increasing pressure by consumers and legislators to have the practiced stopped. You should know, however, that even if the practice is stopped, credit issuers will soon find other means to restore levels of profitability – perhaps by making credit unavailable to all but the lowest risk borrowers. For your financial success, however, what you should take from this financial tip is to continually monitor your credit score, the practices of those with whom you have a borrower relationship, and do your best to maintain a business-like relationship with others.

To check your credit score, go to the following website: Credit Report. It is annualcreditreport.com, the only truly free credit report site.

Teachers, the following links are to movies provided by the Federal Trade Commission. They are parodies on the advertisements we often see on television about credit reports. You, or your students, might like them: FTC 1 FTC 2

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

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211

MoTax: Financial Education through Taxpayer Assistance

Occasionally, I have to write about “what’s going on” in our university department, including the Office for Financial Success and the Center for Economic Education, as I am very proud of what we do for our campus and the larger community. As I think about the current economic situation faced by our country and our world, I have to conclude that there are many activities done by each of us that are never counted as a part of our economy. Such broad categories as household production and volunteerism are two that are commonly excluded from national accounts.

One such volunteer effort is MoTax: Financial Education through Taxpayer Assistance; a cooperative effort between our academic department, University of Missouri Extension, the Internal Revenue Service, Central Missouri Community Action, the Certified Financial Planning Board of Standards, and the Center on Budget and Policy Priorities. I will focus on the efforts of our students and I ask you to consider how we each contribute to the development of our total economy by the gift of a few hours of our time, whether it be to our church/synagogue/mosque, Boy/Girl Scouts, Professional Ladies Auxiliary, the Food Bank, Salvation Army, Meals on Wheels, or tutoring youth - the list is endless.

Following completing a course, Tax Planning, and being certified to do tax returns through the IRS’s Volunteer Income Tax Assistance program, fifty-five of our undergraduate students volunteered this spring to prepare tax returns for low and moderate income household in the Columbia area. (Through our Missouri Extension state-wide staff, MoTax is also done at various locations across Missouri, effectively doubling the numbers you’ll read below.) The effort is a part of our academic pedagogy and we have identified three primary outcomes received by our students. First, communication skills are developed as they learn to interact with people from diverse backgrounds. Second, students enter the experience a little scared of doing real tax returns for real people and they end the semester as confident young-adults. Third, once the refund is known, the students engage the individuals in a conversation about what is the best use the household can make of the money they expect to receive. As you’d expect, paying off debt, saving for a down payment on a home, and saving for retirement are often answers. Moreover, these “future financial advisors” are learning skills sought by employers, as most people have never sat across a desk and talked to someone about their money.

What do those who have their returns completed receive? This year, the 1,850 returns completed by our students accounted for federal tax refunds totaling $1,911,093 with an estimated savings in tax preparation fees of $254,000. Given the hours our students donated, this amounted to savings for the local economy of $804 per student volunteer hour. Of course, those of you with a little training in economics know that the total savings, about $2,165,093, when multiplied by a conservative multiplier of 2.5, results in an economic impact to Central Missouri of $5,412,732, while improving the financial literacy and outlook of thousands of individuals.

I can’t help but call this “Financial Success”, as this is more than ten-times the budget of our resident, academic department. I encourage you to think of the things your school is doing, or that you could do, to build the financial- and/or human-capital of your local community to lead our country to continued financial success.

Now you know one more reason why I am so proud of our little department and why we have the Office for Financial Success.

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