Tuesday, February 23, 2010

Since You Asked

Last Friday afternoon, I met with a couple of bankers and the executive assistant of a financial professional who lives in New York, NY.  The financial professional hails from Columbia, MO and is funding a financial literacy program for elementary school children in our town.  He was referred to us by the executive of a different bank, who used to be the Director of Economic Development for the State of Missouri.  When in that position, he and I came up with a plan to write a Top Ten Teen Financial Tips, to be delivered to high school students by members of the Missouri Chamber of Commerce.  We wrote the program but it was never implemented due to our Governor putting his political capital behind Missouri becoming the third state in the nation to require a course in personal finance for high school students[i].   


As luck would have it, I mentioned this at our meeting.  Those present thought that this might be a good idea to use for third-graders.  We could call it the “Top Ten Third-Grade Financial Tips”, I guess.  I made the point that it would have to be different but that it might work.  Then, one of the women present told me that she is a reader of this “Tip”. She asked me to take a stab at “Top Ten Third-Grade Financial Tips” for this week’s Financial Tip.  So, since you asked……


Tip #1: Believe You Can – Each American has dreams that they are free to pursue.  To achieve your dreams, however, requires you to set goals.  Accept those things you cannot change and then work to change those you can.  Begin with a goal you have for today, and then work toward it.  Think about other goals you have in sports, scouting, church, family, relationships, or whatever.  You can reach them, if you devote yourself to your goals.  America remains the wealthiest country in the world and, by making good choices; you will achieve your measure of financial success.  Today is the day to make choices in support of your dreams for tomorrow.


Tip #2: Discipline is Power – Learn to save some money and save it in a bank, a credit union, or other investment.  Watch it grow, while you learn how to interact with the bankers and other financial professionals.  Do not be afraid of people in ties.  Learn the power of compound interest, while you are young and continue to use it through life.  Simple, good decisions at a young age will make you a financial success.


Tip #3: Budget Your Money – If you receive an allowance, save a portion of it before you spend it.  Make yourself learn to live on less than your income, in this case your allowance.  If you don’t have enough money, look for ways you can earn money.  Ask your parents for a job, other than your usual home tasks.  Help your older neighbors (like me) when they are shoveling snow.  We just might find something to help you reach your goal.


Tip #4: Debt Can be Bad – Try not to borrow money to purchase anything that does not have a chance to go up in value.  Too much debt can take away your freedom and make you a slave to the credit company.  Too much debt can make the whole economy sick.  Can you think of things you have purchased or your parents have purchased that you really don’t use anymore.  I bet you can.   (Don’t you wish you had that money now?)


Tip #5: Greater Income Means Higher Education – It is clear that those with higher education earn greater incomes.  This means that you need to work hard at school and do the best you can, all the time.  Make good choices and act like you want to make more money by making good investments in yourself.  Set goals for your grades today.  Make a deal with your parents that you will surprise them with the best grades you’ve ever had.  Make it a game to do better in school than your parents did when they were in school. Then, do this every day and the rest will take care of itself.  (If one of your parents did really well in school, pick a different parent to compete with!)


Tip #6: Take Care of Your Health – If you are not sick, you can go to school, go to work, go to scouts, go to church, or go out and play.  If you are sick, you are sick.  Eat good nutritious meals, when you can.  Try not to eat too many sweets or drink too many sodas.  Eat more vegetables and fruits.  Make yourself take one bite of everything - especially if you have never eaten that food.  You never know, you might like it.


Exercise daily.  Play and have fun.  Practice sports.  Walk the dog.  Walk the cat.  (You should try this one.)  Swim with your fish.  Whatever it takes for you to enjoy being active is a good thing.  We all need exercise.


Staying healthy makes you more productive.  Those that are more productive, make greater incomes.  Greater incomes help us be financially successful.  So, you really are what you eat and how you act!


Tip #7: Set Up an Emergency Fund – Have some cash around so, if you need it, you’ve got it.   Ask your parents if they have an emergency fund.  If they do not, tell them that you think it would be a good idea to start one, just in case the car needs repaired, the refrigerator needs replaced, or you have a health problem.  “Be prepared” is not just for Boy Scouts. 


Tip #8: Review Your Risk Program – While you are too young to worry about the financial risks of life or to buy insurance, talk with your parents about their insurances.  If they own your home, they have homeowner’s insurance.  If they drive, they have automobile insurance.  If they get sick, they have health insurance – or do they?  Ask them what would happen if someone got real sick in your family and needed to go to the hospital.  What would they do?  Insurance is not about talking lizards or clumsy, goofy ducks.  Insurance is about protecting you from losing your dreams due to a terrible financial loss.


Tip #9: Diversify Your Talents – Don’t gamble your money.  Make investments in yourself and with your money, by making many different investments.  This lowers your risk of missing out on something you’d like to do – like win!  Think about what would happen if you were “made to be a swimmer” but you never learned how to swim?  The same is true for investments.  We need to invest in different investments because some will be better than others and, unlike our skills in sports, the one that is best today may not be best tomorrow.  So, when you are young and growing up, don’t just play basketball because you “know” you are going to play in the NBA.  Play football. Swim.  Do gymnastics.  Dance.  Run.  Play baseball.  Sing in the choir.  Play dodge ball.  Climb trees.  Just play.  Do lots of different activities and find the one that brings you the most joy or the one that fits your skills.  Diversity will enrich your life, just like diversification protects your investments.


Tip #10: Have a Balance Life – Yes, work hard in school and at your hobbies, jobs, and other activities.  Yet, take some time to look at the clouds and imagine what might be on the other side.  Chase fireflies, then let them go.  Go fishing.  Get dirty.  Let yourself dream.  Be thankful for what you do have and promise yourself that you will work hard to change the things you can.  Smile, laugh, and allow yourself to love for, as the famous band from your parents’ and grandparents’ era, The Beatles, sang, “Money can’t buy you love”.



Salus populi suprema lex esto. 

- Motto of the State of Missouri


[i] The good news is that our Office for Financial Success has just received funding for teams of our MU students to deliver this program in 50 Missouri high schools!

Thursday, February 18, 2010

"Circuit Breaker" Missouri Property Tax Credit for Senior and Disabled Missourians

Brenda Procter, M.S., Associate State Extension Specialist in Personal Financial Planning


As many of you may have heard by now, there has been considerable controversy about a change in interpretation of the rules for the Missouri Property Tax Credit, formerly known as Circuit Breaker.  “Rent tax credit” and “rent rebate” are other terms used to refer to the credit.  Under the Circuit Breaker program, income-eligible senior and disabled Missourians can claim a tax credit of up to $750 if they pay rent or $1,100 if they pay real estate tax on the home they own and occupy.  The Circuit Breaker program has been around since the mid 1970s, but renters did not gain eligibility for the Missouri Property Tax Credit until the early 1990s.


For the 2008 tax year, some 220,000 taxpayers received the credit, which averaged $544 per individual.  Renters with income less than $27,500 ($29,500 for married couples) and owner occupants with income less than $30,000 ($34,000 for married couples) are eligible if they or their spouses are 65 years of age or older or if they are 100% disabled.  Surviving spouse social security benefit recipients can qualify beginning at age 60. 


A new interpretation of the law has taken many taxpayers and tax preparers by surprise, and lawmakers’ phone lines have been busy with calls from confused and sometimes angry constituents.  There has been no change in the law.  So what happened? 


Around the beginning of the tax season, word started circulating that a small and largely unnoticed technicality in the law had not been enforced in past years.  Many residents of low-income housing units and nursing homes received a notice that they are not, and never have been, eligible for the property tax credit they have come to count on every year.  Why?  Because their public housing facility did not pay property taxes.  Many facilities do make “payments in lieu of taxes” (PILOT), but those payments are not technically “property taxes” and do not qualify residents in those facilities for the Missouri Property Tax Credit.


Some lawmakers, advocates and residents are crying “foul.”  Missouri Property Tax Credit recipients often use their benefit to catch up on bills and meet some of their most basic needs.  The change came without warning and many people who receive the property tax credit do not understand its terms and do not understand why they are no longer eligible.  Taxpayers and preparers do not have access or training to interpret local property tax records, which has added to the confusion.


The Missouri Department of Revenue assures those who are now deemed ineligible and who have received the credit in the past that they will not be required to return past payments.  According to Ted Farnen, Communications Director for the Department of Revenue, taxpayers and preparers who file claims in good faith to the best of their ability will not be held liable if claims are later found to be ineligible.


A group of lawmakers have met to address a potential “stop-gap” measure to ease the transition for seniors and disabled Missourians who were caught off guard this year.  For more information, visit the Missouri Department of Revenue website at http://dor.mo.gov/tax/personal/faq/ptc.htm#q1 or contact your own Missouri legislators.  You may look up contact information for your Missouri Senator or Representative at http://www.senate.mo.gov/llookup/leg_lookup.aspx


Wednesday, February 10, 2010

Stay the Course

First, thank you for your kind comments to Ryan Law, our new Director of our Office for Financial Success.  While I have had the opportunity to deny rumors that I have either been promoted or fired, I would like you to know that Ryan will be sharing the duties of writing our weekly Tip.  I am certain that he welcomes your suggestions on how we can make the Tip better to serve your needs.  He can be reached at lawr@missouri.edu .


We spend a lot of time with college students.  We teach, we engage them in research, and we attempt to serve them through our financial counseling center, the Office for Financial Success.  It is apparent that students are increasingly concerned about their ability to financially support their college education.  A very recent study by the University of Arizona’s Arizona Pathways to Life Success in University Students (APLUS) came across my computer screen this morning.  The findings of the study should start you to thinking about your futures – whether you are a student, a parent, or a citizen that merely desires to see our society and economy continue to be successful, both financially and socially.


I will present the cogent points in bullets, with my commentary, if any, in sub-bullets and italics. If the bullet talks about change over time, you should be aware that the first data were collected in early 2008 and the most recent data in early 2009.  Hence, the current recession was in “crisis” mode.


·         Ninety-five percent of college students say the economic crisis has impacted their family's finances and 93% have felt an effect on their own financial lives.

·         One of the most significant outcomes related to students' perceptions of their financial capabilities. Although students' factual knowledge of financial basics held steady, students rated themselves less knowledgeable, 19 percent less knowledgeable, than when previously surveyed.

o    A crisis in confidence can be very harmful to individuals’ decisions to stay the course to reach their goals.  We must have confidence in what we know are sound financial principles. Do not cut and run to the “land of fear”.  If one lets negativity take the place of confidence, personal control will erode and “quick fixes” will be sought.”Quick fixes” often become “long and painful”.

·         Ninety-five percent of the students have changed their personal money management in response to the recession. Some of this is good.  For example, budgeting, as a financial practice, rose 3% among students who felt the most impact from the crisis. The most dramatic changes, however, were not positive.  For example:

o    169% increase in the number of students who report dropping classes

o    106% increase in those taking a "leave" from school

o    78% rise in the number of students who report postponing health care

o    26% percent increase in students using one credit card to pay off another

o    Before students take such drastic measures, they should seek competent, independent advice from a financial counselor or financial aid office. These figures are alarming and devastating to a generation of students.  Students who, by tomorrow, are our leaders.

·         Debt increased among students. Students reported credit card debt up 60% percent and education loan debt up more than 85%, compared to the spring of 2008. For some ethnic groups, the rates of increase were double and triple those of the overall sample.

o    Since the data are from a longitudinal survey of a panel of students, we could expect students to both need and rationally demand more student loan debt later in their academic careers.  Yet, these increases point to the existence of severe financial stress in the students and their families.

·         Money problems chip away at mental and physical health. In comments and open-ended responses students described worrying over:

o    parents losing their jobs,

o    increases in tuition,

o    fixed scholarship amounts,

o    the need to work more, and

o    whether they should transfer to more affordable schools.

·         Students’ trust in major institutions has suffered. Overwhelmingly, students in the latest wave of data report "only some" trust in government, business, banks and other major institutions. And 20% said they harbored "hardly any confidence" in these entities.

o    We all like to bash the government, the big banks, and big business.  Yet, can you imagine our life without them?  This lack of trust and its implications for political and social involvement is troubling as it interferes with, as the researchers called it, the development of “social capital”.


Although the data are sobering, the authors note that parents are in the best position to help moderate the effects of the economic crisis on their children's attitudes and behaviors.  They state, "From the current study, we know that nearly 80 percent of students are financially dependent on their parents, and we know from earlier APLUS research that parents are the top influencer when it comes to students' financial knowledge, attitudes and behaviors. That puts parents in a powerful position to help their young people navigate the wake of the crisis in ways that repair and restore our economy rather than hobbling it for years to come."

o    Parental readers - Have you spoken with your child about your financial situation and their responsibilities with respect to working toward our collective brighter future?  If you are in crisis, are you optimistic or depressed?  If you are optimistic, you are much more likely to find a solution, perhaps another job, than if you are depressed.  If your depression is keeping you awake or causing you to lash out at the innocent, seek a competent counselor to help you heal.


I wish I could say that the above is “Good Stuff”.  You know that these results are not comforting.  We desire to see a horizon sporting a financial success banner.  If you are a student, please commit yourself to your studies and your investments in yourself.  Those investments cannot be taken from you.  If you are a parent, stay the course but make sure it is a good course.  Talk frankly with your older children about the successes and failures of your financial lives.  As a parent myself, I know they don’t seem to be listening and, often, they are not listening.  Yet, they are always modeling the behaviors of those they know and trust and you can’t have trust, without honesty.


For more information about the survey, visit http://aplus.arizona.edu.  The survey was funded by the National Endowment for Financial Education .


The entire packet will also be available with additional details on the TCAI Web site.


Attend a Webinar on the APLUS research on February 18, 2010, at 11 a.m. EST.

You may sign up at: http://aplus.arizona.edu/webinar.html .




Thursday, February 4, 2010

Debt Management

As the new director of the Office for Financial Success I want to take this opportunity to quickly introduce myself to you.

I graduated from Utah State University where I received a Family Finance Degree.  After spending several years in the industry (insurance, banking and financial planning) I decided it was time for me to return to school.  I enrolled in the Personal Financial Planning program at Texas Tech University and graduated in December of 2009.

I am excited to be here at the University of Missouri – the support of the department and community is outstanding.  For me, financial counseling is not just a job or a career, but a calling and my passion.  There is no greater feeling than sitting across from someone and seeing hope enter their eyes.  That is why I love this work.  Thank you for your welcome and support.

One quick note before we jump into today’s topic – this is YOUR Financial Tip of the Week!  If you would like to see a specific topic covered or have a question you would like answered, we would love to receive those!  Just send an e-mail with your question or suggestion and we will utilize those as we write future tips.

Debt Management

The National Foundation for Credit Counseling (NFCC) just released a report of a survey that asked consumers what they would do if they find themselves in financial distress.

The question asked was:

“If I were in debt beyond what I could manage on my own, my first point of action would be to:”

Here are the responses and percentages:

Seek help from a legitimate credit counseling agency


Talk directly to my creditor(s) about debt settlement


Consider debt settlement through a debt settlement company


File for bankruptcy


Ignore the debt since I can’t pay it



As a financial counselor I was happy to see that over 70% of respondents said they would seek help from a legitimate credit counseling agency or talk directly with their creditors.

I would like to discuss each of these options briefly in today’s tip.

Seek Help from a Legitimate Credit Counseling Agency

There is a great book about debt published by The National Consumer Law Center titled Guide to Surviving Debt (ISBN: 978-1-60248-027-8).  In this book a legitimate credit counseling agency is defined as an “agency that offers a range of services from basic budget counseling to education courses about finances to debt repayment plans” (p. 58).  A credit counseling agency will not only help you work through your situation, but will also educate you so can avoid the problem in the future.

Talk Directly to my Creditor(s) About Debt Settlement

It is important to communicate with your creditor(s) when you are facing a financial crisis.  You should call them and tell them that you are facing financial problems right now and cannot pay but that you will pay the debt as soon as possible.  They may also be willing to work out some kind of re-payment plan that fits your budget better.  They are usually much more willing to work with you if you are honest and upfront with them before the situation gets bad.

Consider Debt Settlement through a Debt Settlement Company

It didn’t surprise me that more than 10% of respondents selected this.  Debt Settlement Companies advertise very heavily on TV and radio.  You hear claims that someone who owed $41,000 settled for $8200.  What is a Debt Settlement Company?  They will collect information about your debts then you will send a payment to them that they maintain in an account.  They do not send the money to the company you are in debt with.  When they believe there is enough money in the account they will call the company to try to settle the debt with them.  In the meantime, you aren’t making payments, so you will likely be facing pressure to pay, be sued for collection, have your debt turned over to a collection agency and have your credit score destroyed.  You also often pay very high fees to these companies.  While debt settlement can work, it can be a long and expensive process, and finding a legitimate company can be difficult.

File for Bankruptcy

While only 5% of respondents selected this option it is important to address it.  Filing bankruptcy is a very serious decision that needs to be made with care.  Bankruptcy is a legitimate means of getting a fresh start, but it will drop your credit score and stay on your credit report for 10 years.  You may have difficulty getting loans after that.  It is important to work with a legitimate credit counseling agency to explore all options before declaring bankruptcy.

Ignore the Debt Since I Can’t Pay It

If you ignore the problem it eventually goes away, right?  WRONG.  Ignoring the debt is not a good decision.  Late fees will pile on, you may get sent to collections or be sued, your assets may be repossessed, and your credit score will start to drop.

If you are facing financial problems set up an appointment with a legitimate counseling agency and be up-front with your creditors.  Taking these pro-active steps are the best things you can do.

If you need help with your debt situation be sure to contact The Office for Financial Success at http://financialsuccess@missouri.edu.