Friday, March 25, 2011

Of Credit Cards and Spring Break

The University of Missouri is just finishing up our Spring Break.  As I visited with students last week about their plans for the break I heard everything from “My Spring Break will be in the library studying” to trips to locations all of the United States and even overseas trips (most of the locations involved a warmer climate than was predicted for here in Columbia, though!).


The question of how students pay for these trips is always an interesting one – some consider it part of their “education expenses” and use student loans, some student’s parent’s help out with a portion or all of the trip, a few save up for it, and some use a credit card.


In this article I would like to address the last two strategies – paying for it with a credit card and saving up for it.




I pulled up some statistics recently about credit and credit card[1] usage. Here are a few highlights:

·         75% of families carry credit cards

·         58% of those who have a credit card carry a balance

·         Americans carry $796.5 Billion in revolving debt – 98% of that is credit card debt

·         The average balance per household with credit card debt is $14,750

·         The average number of credit cards a person holds is 3.5

·         The average APR on new cards is 14.73%; of those that carry a balance the average is 13.67%

·         39% of freshman start college with a credit card already in hand

·         84% of students carry a credit card

·         50% of students carry 4 or more credit cards

·         The average undergraduate graduates with a $2200 balance on their credit cards

Let’s say that a student is going on Spring Break and they figure that with plane tickets, hotel, food and entertainment they are going to spend $1000. They have their shiny new card with a 14.73% interest rate and charge the whole trip on there.


Using the Credit Card Repayment Calculator[2] on the Federal Reserve Website if the student pays the minimum balance it will take them 7 years to pay that $1000 off and they will pay $560 in interest! They add more than 50% to the cost of their trip with interest.


There is a better way – let’s visit it here:




I know this is a theme that is revisited over and over – but saving up and paying cash is almost always going to be the best option – especially for something like a Spring Break trip. One of my favorite budgeting tools is something I call Revolving Savings. Basically you sit down and map out the next 12 months and put everything in there that you might spend over the next year that is known, but irregular. Here is an example:




Birthday $20



Spring Break $1000





Car Registration $90






Christmas $200

Obviously this example is simplified and you are likely to have more expenses than listed here, but it gives us a good guideline. Include everything you can think of that you know is coming up, but isn’t on your regular monthly budget.


Add all the numbers up and you get a grand total of $1310. Divide that by 12 and you get $110, which becomes a line item on your budget. If $110 seems high you need to visit each line again. Do you really need to spend $1000 on Spring Break? Maybe not – you can probably find some lower cost destinations, and you can usually save money by buying things like plane tickets ahead of time. Once you come up with a final number transfer that amount to savings each month, then as expenses come up simply transfer the needed amount to checking.


My wife and I sit down every December and map out the next year. We look at what we spent the previous year and we try to anticipate what may come up the next year and how much we want to spend on it. This budgeting tool can help you save interest on an item that you should be paying cash for.


For those of you just getting back from Spring Break that charged it on their credit cards – I encourage you to look at how you can get your trip paid off as quickly as possible. Memories from a trip are wonderful – the bills that come later – not quite as much fun.





Ryan H. Law, M.S., AFC

Department of Personal Financial Planning

Office for Financial Success Director

University of Missouri Center on Economic Education Director


239E Stanley Hall

University of Missouri

Columbia, MO 65211


573.882.9211 (office)

573.884.8389 (fax)


Wednesday, March 23, 2011

Students! Get Organized!

We are sure that many of you are so organized that you never lose your class notes, your homework, or your umbrella.  If you are one of these students, then you need to do the same with your financial papers.  If you are not one of these students, then you may a larger barrier to cross but now, when you are young, is the best time to treat yourself to the beginning of an organized financial life. 


The National Endowment for Financial Education (NEFE) suggests organizing your financial files with folders and, yes, manila folders work.  In 2011, some of these may be best kept on the computer – assuming you back-up your files.  The main thing is to get organized and you may wish to consider having a locking file box or a locked drawer or closet for your financial papers.  The following organizational structure is suggested as a starting point.  They are, in alphabetical order:


Banking – Collect your bank statements and copies of checks in a folder or, perhaps, a three-ring binder.  Many banks have electronic services where records may be kept on their servers.   Remember to print them out, if you change banks and the records are less than three years old.


Bill to be paid – This is a good one to keep handy.  Making timely payments to your creditors, utility company, cell-phone provider, cable television supplier, and other vendors is crucial to establishing and maintaining your credit rating.


College – It is a good idea to maintain your own records about your courses, grade reports and credits earned should questions arise.  This is increasingly important when you complete your education and have a job that requires continuing education credits.


Financial Aid – Keep copies of your financial aid and scholarship applications, essays you’ve written, award letters, and notes about telephone conversations.


Insurance – Have a file for your automobile, medical and renter’s insurance policies.  Before you put the file away, read over the main points of the policies and double-check to assure that you are adequately insured.


Loan and Credit Records – File each of your loan agreements with your payment records for student loans, credit card loans, auto loans, home loans, or whatever loan you may have.  Keep the paperwork here.  Think hard, however, before you take out any consumer or student-loan debt.  When it is time to pay the loan, the payments will always be less fun than the spending.  While you are a student, your number one job is to earn your degree – not work excessively so you can make payments on your loans.


Receipts and Warranties – Have a file for receipts for major purchases, such as computers or electronic equipment.

Savings and Investments – This is the file you want to see grow.  Keep statements with respect to each savings account and investment account.  A separate file for each account is considered best.


Taxes – Each January, start a new file for anything that has, or you think could have, anything to do with your tax returns here.  This includes the obvious such as W2 forms, pay stubs, receipts for charitable contributions, 1099 forms, as well as receipts for medical expenses and investment expenses that might be deductible, should you be able to itemize your deduction.  (Until you purchase a home and have a mortgage, you are not likely to itemize.)  If you are not sure if an item needs to be kept for taxes, keep it.  It can always be thrown away later but it can be an aggravation to replace it.


Records can be very special to you.  Some are difficult to replace; such as your birth certificate, Social Security card, marriage license, military discharge papers, wills, trust documents, power of attorney documents and et cetera.  Items such as this should be stored in a safety deposit box in your bank or, if not, a fire-resistant box or vault in your home.  This can include some unlikely belongings, such as the George Brett rookie baseball card a friend of mine gave me to pay for my son’s college education.  It did not.


In closing, the best thing about record keeping and being financially organized is that you begin the disciplined practice of doing your part to assure that you have the best chance of reaching financial success.  George Brett had a lifetime batting average of .305 – or three hits for each ten times he appeared at the plate.  Your chance of financial success is less than this, if you are not organized and aware of your financial life.


Wednesday, March 16, 2011

Happiness Strategies

Many people often assume that having more money brings greater happiness. In September 2010, Ryan Law wrote the MU Financial Tip “Happiness at What Price?” ( and talked about a study that found having a certain amount of money helped people feel safe and satisfied with life overall, but that having money did not always make a difference for the day-to-day level of happiness.


I am reading a book called the How of Happiness by Sonja Lyubomirsky, PhD, a researcher who has studied happiness for over twenty-five years.  People often wish for more time, more money, a different job, etc.—thinking that those things will make them happier.  But they do not find lasting happiness in those things.


So, what makes people happy in the long term?  Through many studies, Lyubomirsky has found that:


• 50% of happiness is determined by our genetics

• 10% is determined by circumstances or situations (health, wealth, age, where we live, life events, etc.)

• 40% is within our control—we determine that part


You may be asking questions like I did.  Why doesn’t what we buy or where we live or where we work make us happy?  Lyubomirsky explains the concept of “hedonistic adaptation.”  These things may make people happy for a short time, but the happiness does not last. 


People tend to rapidly adapt to any circumstantial change in life.  A person may get a new job, like the change for a few months, adapt to his new surroundings and then start wishing for something more or different again. So the person gets into a cycle of wanting something, getting it, adapting to it and then wanting the next better thing.


Lyubomirsky outlines 12 happiness activities with strategies of maintaining happiness.  The strategies focus on developing relationships (friends and family) and changing our intentions (what we do and how we think).


Here are a few ideas to try:


Cultivate optimism (a belief that one’s goals can be accomplished or that the future is positive)

One strategy that the author recommends is a “Best Possible Selves” activity.  You think about yourself in the future and write about all areas of how you will be your best—family, work, accomplishments or other areas.  The act of writing helps people, because they learn about themselves, helps them organize thoughts and give meaning to life, and helps people look at who they are today so that they can be their best in the future.


Increasing optimism is not to say that bad things do not happen, because they do.  It is more of a feeling that if something bad does happen, a person can get through those times.


Practice acts of kindness

Find one day of the week and do one new big act of kindness or three to five little ones.  These can be done at home, school, work or when you are out.


If a person already does kind things on a daily basis, picking one day and doing something extra special will increase the happiness boost.  Maybe a person decides she will volunteer at a school or food pantry for an hour. Maybe for a small act, someone will let cars ahead of him in line for the day to help others get through traffic.


At a recent training, a mom shared with that her family does pay-it-forward Fridays.  Everyone, including the kids, has to do one kind/helpful thing for each person that Friday.  Maybe it’s leaving a note in a lunchbox, cheering a person on at a game or setting out the person’s coat that morning.  Her kids grumbled at first, but now look forward to doing little things for each other that day. And she notices a difference in how they all treat each other.


Invest in relationships

In successful relationships, people spend time together and talk.  In our busy lives, trying to find more time to be together can be difficult.  Start small and add time here and there—one idea is in the morning, find out one thing each person is going to do that day.  Then sometime later that day or evening, have each person share how that activity went. 


Another way to have stronger relationships is to think about your family and friends.  What is one good thing that each person brings to your family or friendship?  The next time you see that person, say “thank you’ for what he or she does.  Sharing positives and gratitude lets people know you care and appreciate them.  They are more likely to want spend time with you and create a better relationship.


It takes time and effort to engage in happiness strategies.  It doesn’t always happen overnight. Not all strategies work for each person.  Individual personalities and styles play a part in which strategies work, so try different things and see which ones give you the biggest happiness boost. 



Lyubomirsky, S. (2007). The how of happiness. New York, NY: Penguin Group.


Sonja Lyubomirsky - the how of happiness (from a 20/20 interview)



Lucy Schrader

HES Associate State Specialist and

Building Strong Families Program Coordinator

University of Missouri Extension

162 Stanley Hall

Columbia, MO  65211


Thursday, March 10, 2011

The Top 5 Economic/Finance Blogs and how I Stay Current

tl;dr: See the list of five blogs below and use Google Reader*


News travels fast, and on the Internet, it travels even faster. Along for the ride is the commentary and analysis that goes along with the news. There is a small, but growing portion of the Internet that is devoted to all things Economic/Finance. The most lively part involves the economic/finance blogs; they often link to each other and challenge ideas with meaningful discussion. Here are the top 5 (in no particular order) that I believe are worth your time:


1. Free Exchange is hosted by The Economist and provides an economic outlook on the news. The correspondents from The Economist often take a critical look at what is happening around the world and converse about the implications. The best part is how the authors often pull in discussion from all over the internet and offer a wide perspective. Even the comments are often insightful, instead of everyone just posting “First!”


Great example:


2. Marginal Revolution is a blog managed by Tyler Cowen and Alex Tabarrok, both professors at George Mason University. This blog covers a wide range of topics, and sometimes you may not care about the topic (when one of the authors travels to Costa Rica, I tend not to care), but the blog always tends to surprise me at least a few times a week. At the very least, the common post  of “Assorted links” tends to provide some excellent timely articles from around the Internet.


Great example:


3. Greg Mankiw’s Blog is where Greg Mankiw posts his thoughts and often links to interesting parts of the Internet. I don’t have a recent great example, but he often uses his blog to share interesting econ related items with current and past students. He often has a little fun on his website as well. Yoram Bauman, PhD is a economist who is also a comedian; he poked some fun at G. Mankiw by using  Mankiw’s top 10 principles of economics as a basis for a comedy skit. Mankiw not only approved, but links to the video from his site.




4. Freakonomics started as a book by Steven Levitt and Stehpen Dubner, but has grown into a second book, Super Freakonomics, a radio podcast, a movie, and a blog. Both Levitt and Dubner contribute to their blog, and they also invite several other bloggers write about interesting topics. They used to be hosted at the NYTimes, but since the newspaper instituted a paywall, they have moved to their own site. The authors at the site tend to apply economic theory to topics we generally don’t associate with economics. The example post examines the unintended consequences from polio eradication in India.  


Great example:


5. Economix at the NYTimes has rose quickly through the blogging ranks with quality bloggers writing about interesting topics. The example examines the difference between male and female unpaid work in several countries.


Great example:



“MV=PQ: A Resource for Economic Educators” posts some interesting information/media.

They recently posted about a video that uses house prices from 1890-2010 visualized as a roller coaster.


So, those are six blogs that are often worth reading. But it is hard to keep up with blogs. Either you check them too often and waste time or not often enough and miss posts. The best solution is to use a feed reader to organize the posts from blogs you follow. Because I’ve already typed enough for a wall of text, I will leave you with this great video to explain how to use feed readers to organize your consumption of information.


As always, feedback is a gift. Please feel  free to email me your thoughts about this post, the blogs, or Google Reader.


*tl;dr is short for “too long; didn’t read”;_didn't_read


Andrew Zumwalt, M.S.

Director of the MoTax Education Initiative

162 Stanley Hall

University of Missouri

Columbia MO 65211

Google Voice #: 573-234-4268

Fax: 573-884-5768

Thursday, March 3, 2011

Protecting Your Identity

One of my favorite things about teaching the class I teach (Financial Counseling) is the opportunity to review, on a regular basis, the basics of Personal Finance. It reminds me of some of the gaps in my personal financial plan.


I know we have discussed identity theft a number of times in the past, but it has been on my mind a lot lately and I have taken some steps to further protect my identity. I encourage you to review the following suggestions to see where you can improve and better protect your identity.

·         Have a Cross-Cut Shredder
You should shred any document from a financial institution, any pre-approved credit card offers, and any other information with your information on it. Shredders that shred in long strips don’t work – thieves can tape together the strips (and will tape them together) and get your information or apply for credit. Some sites suggest simply tearing up and throwing away pre-approved credit card offers. Does that work? Check out this site for your answer:

·         Opt-out of Receiving Pre-Screened Credit Card Offers
On the website you can opt-out of receiving pre-approved credit card offers. If you don’t want to do that online there is a phone number to call or an address to write to on the website. Eliminating these from your mailbox is one less thing for thieves to be able to steal.

·         Mail
Speaking of mail – if possible it is best to have your mail delivered to a locked box, but if you can’t do that be sure you know approximately what time the mail carrier comes and retrieve your mail promptly. Be sure to forward your mail to a new address when you move, and place your mail on vacation hold when you are away.

·         Social Security Number
Don’t carry anything with your Social Security number printed on it. Check your wallet or purse to see if you are carrying your social security card OR any other item with your social security number printed on it, like your Driver’s License (go get a new one if it has your social security number on it) or an insurance card. Thieves really only need this one piece of information to steal your identity, so taking steps to keep it safe will help you keep your identity safe.

·         Phishing
Never reply to e-mails for requests for any personal information, even if it looks like it is coming from your bank. Your bank will never request personal information via e-mail.

·         Credit Freeze (or Security Freeze)
One of the most effective things you can do to protect your identity is to freeze your credit.  Here is a statement from the Equifax website: “A security freeze is designed to prevent the information in your credit file from being reported to others, such as credit grantors and other companies, except those exempted by law or those for whom you contacted us and requested that we temporarily lift the security freeze or those that access during a period of time when you requested we temporarily lift the security freeze.” What this means is that if a thief does steal your identity they can’t open new credit because your record is frozen. This will also prevent you from opening new credit unless you plan ahead and “unthaw” your credit report for a period of time.  Credit freezes and unthaws do cost money, but think of the money spent like an insurance policy. In Missouri it is just $5 for each freeze.  Here are the websites to freeze your credit report:

·         Checking Your Credit Report
It is important that you check your credit report on a regular basis. You can get one free copy of each of your credit reports annually by visiting A strategy I use is to check one of the reports every 4 months – that way I am checking it out on a regular basis. If there are any errors or accounts you don’t recognize you need to take steps right away to get it taken care of.

·         Cash
A few months ago I got a call at 7:30 in the morning on a Saturday from the Fraud Department at my bank. My credit card number had been used for an online purchase that seemed uncharacteristic (it was a dating site), and the Fraud Department was calling to find out if my wife or I had used our card there. We had not, so they immediately closed down the card and issued a new number. When we tried to figure out how it happened we realized that the most likely scenario was when we used our debit card the last time we ate out. When the waiter/waitress takes your card and disappears with it for 2-3 minutes it is easy for them to snap a photo of the front and back using their cell phone. We now pay with cash anytime we eat out.

If you have been the victim of identity theft visit the Federal Trade Commission’s website at where you will find a list of steps to take to deter, detect and defend against identity theft.


Ryan H. Law, M.S., AFC

Department of Personal Financial Planning

Office for Financial Success Director

University of Missouri Center on Economic Education Director


239E Stanley Hall

University of Missouri

Columbia, MO 65211


573.882.9211 (office)

573.884.8389 (fax)