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How your life is changing in a Heartbleed

Written by William Cowie - Leave a Comment

No, that’s not a typo. If you haven’t heard of “Heartbleed” yet, listen up.

Events that radically change our lives don’t come along that often. The 9/11 attacks changed not only how we travel, but how we think and act when we go out. Having your belongings searched when you go out to a ballgame was unthinkable before; now it’s routine.

Heartbleed is such an event, and over the next few years it will change how all of us do business.

heartbleed logo

What is Heartbleed?

It’s a security breach, but not just any security breach. Think of the infamous Target breach as a little rowboat and Heartbleed as the Queen Mary. Some have called it the biggest data security breach in the history of the Internet, and the ripples across the digital landscape have only just begun.

When you do financial transactions online, have you noticed how the URL (web address) at the top of your browser changes from “http” to “https“? That little “s” stands for “secure.” The boffins call that feature “Secure Socket Layer” or “SSL.” It’s a method used to encrypt your information so nobody can see it. Anybody with a web business knows that, to receive payment, your payment processor will only use those safer SSL pages; and, for years, people have bought and sold on the Internet trusting that little “s” to protect their information.

Heartbleed is not a reach into one or two databases to pinch some data like at Experian or Target. It’s a leak in the very foundation of the encryption applied to all transactions sent over the Internet. Think of it not as robbing a bank, but hijacking all mail going to and from all banks and businesses. The assault is not on a particular target; it’s on the communications between all companies and people using the Internet. Crooks who understand this can simply tap into this “hole” and monitor all the secrets flying across the wires and airwaves — secrets like your passwords and login IDs.

How Does It Work?

Every transaction running on a secure server (one with “s” in its address) relies on encryption (or scrambling) of the information. In order to make sure that the encryption for a particular transaction works, the receiving server will echo it back to the sender, asking in essence, “Hey, is this what you actually meant to send?” When the sender says it’s going to send 100 kilobytes (kb) of data and sends only 1, it gets back 99kb of other data the server had lying around, marked as obsolete but still there.

Here’s a good semi-technical explanation of the bug and its fix.

It is impossible to understate the magnitude and significance of this breach. It affects literally everyone who uses the Internet. Never has a single bug had such widespread impact. Mashable surveyed the major sites and posted their exposure and responses here.

The good news is this isn’t something some bad guys cooked up for evil purposes. It’s an honest coding error which few good guys or crooks knew about. The bad news is that has now changed. You just know the publicity of this bug is like waving a red flag to a bull for evil people. Any crook worth his salt has just canceled his vacation plans and hired every hacker looking for work to figure out how and where to start tapping the lines for ID information on millions of unsuspecting people.

How bad is it? Nobody knows. It’s impossible to say when you’ve sent someone else’s information over a phone line when your logic told you it was only your customer’s. This may be like the Y2K thing, a storm in a teacup. However, all you need to mess up your life is a single identity theft, so this is definitely a prime example of better safe than sorry.

What You Need To Do … Now!

1. Change all your passwords – every single one. I know. I know. Simply keeping track of your 9,237 passwords is a pain in the patootie. So is going through security screening at an airport. Think of this as airport screening for your everyday life — an unwelcome hassle that has now become part of your Internet travels.

We’re talking all passwords, even the ones that don’t affect your money, such as, email, social media, hobby bulletin boards, airline frequent flyer sites, clubs … everything. Some of those sites may already have contacted you to do this. Now you know why. Either way, just do it.

2. Change them again two months from now. There will be a flurry as thousands of servers receive patches to their security systems. However, until those patches are in place, it’s better to be safe than than sorry. I have adopted a system that allows me to change passwords on a regular basis in a way that still allows me to keep track of them.

Keep a log somewhere of your passwords – but don’t keep it on your computer or phone. (Also, not in your wallet.) Or, if you do, encode them with a simple coding system, like writing down the next letter instead of the real one. For example, if your password is “nutso” then write “ovutp” wherever you’re keeping track of it — each letter written down is one letter after the real one. It’s a pain, that’s true. But pain has now become part of your Internet and credit card transactions.

That’s right, even your non-Internet credit card transactions are affected. How? That restaurant you eat at probably can’t afford a sophisticated-enough system. Same with the gas station, dry cleaners, and all mom-and-pop vendors you use. Each “brick and mortar” debit- or credit-card transaction is still sent over an open communication line to their credit-card processors. Secured, you thought. But now we know “secured” is not so secure after all.

3. Go old school. Use cash wherever and whenever you can, especially with mom-and-pop vendors. Is it less convenient? Sure it is. But so is going through airport screening. And just like Osama bin Laden made us all do it, someone else just made you do it. Buy a beer and cry in it or kick a hole in the wall — and then just do it.

This will give new meaning to the old saying “Cash is King.”

Do you have any tips for how to make any information anybody may have recovered on you become unusable to them? Please share.

Published on April 16th, 2014 - Leave a Comment
Filed under: Miscellany, Online

Parents’ attitudes toward money and kids

Written by Richard Barrington - 3 Comments

As parents, we pick up a fair amount of information from other parents. There’s some good advice, some bad advice, and then there are opinion surveys.

Even though I tend to second-guess the way some of the questions are phrased, I like opinion surveys because they are a window into what large numbers of other people are thinking. Even if the view through that window isn’t perfect, we can get enough insight to question certain issues and think them through from a new perspective.

T. Rowe Price just released its 6th annual “Parents, Kids & Money Survey.” I like this survey because I think teaching good money habits is an important parental responsibility, and looking at this survey’s results is a good chance to get a feel for how other parents are handling the relationship between their kids and money. After all, though parents are expected to talk to their kids about money, it seems we rarely talk to other parents about how to talk to our kids about money.

As you’ll see below, I take some of the survey responses with a large grain of salt. Still, the following results of this survey caught my eye and made me think:

  1. One-in-four parents regularly carries a credit-card balance. To be clear, this is distinct from those parents who said they occasionally carried a small balance. Too much reliance on credit can become a hereditary problem. It not only burdens the parents, but it gives the children an unrealistic view of what is and isn’t affordable.
  2. Sixty-one percent of children shop online — including 54 percent via mobile apps. Of course it is wonderful that this generation of kids is so computer literate and has such ready access to information. However, the immediacy of online shopping worries me, especially when it comes to mobile apps which tend to prompt spontaneous spending. I think parents should have strict rules about approving all online spending — not just to make sure nothing inappropriate gets through, but to make sure the kids aren’t buying too impulsively. Perhaps there should be a cooling off period between asking for something and being allowed to buy it.
  3. More kids have computers, tablets, and mobile phones than have bank accounts. This may not be particularly surprising, but it is a little ominous in terms of the message kids are getting. When they have more familiarity with media for spending money than vehicles for saving it, which habit do you think will be developed more?
  4. Nearly half the parents use money to encourage good behavior from their kids. Actually, the way the survey was worded, 48 percent of parents say they sometimes “bribe” their kids to encourage good behavior. I think “bribe” is too harsh a word. After all, the Supreme Court (in its wisdom) ruled that money is speech, so isn’t giving our kids money just a nice way of talking to our kids? Seriously, I think there is an important line to be drawn. It is fine to offer financial incentives for achievement, from good grades to getting chores done. However, money should never be used to try to buy off bad behavior. Never negotiate with terrorists, especially when you have to live them.
  5. Thirty percent of parents raid their kids’ piggy banks. This is disturbing, though it may be more innocent than it sounds — the pizza guy is coming up the driveway and you realize you have no cash, so… However, if it’s done behind the kid’s back, it’s a problem; and if it’s a habit, that’s also a problem. Perhaps teaching the little tykes to charge interest will help cure you of this habit.
  6. Sheltering is not always the best strategy. Seventy-four percent of parents have some reluctance to talk to their kids about money, and not wanting them to worry about it is the most common reason. I understand the importance of parents not “over-sharing” with their kids, but being realistic about the family’s financial situation will help save conflict and disappointment in the long run.
  7. Lying about money is dangerous. Twenty-eight percent of survey respondents said they sometimes lie to their kids about money. As with the question about bribery and the question about raiding the piggy bank, I suspect this one might look worse on paper than what parents really mean. Full disclosure is not always the best strategy with kids; but when it comes to actually lying, that’s the type of thing that tends to backfire at some point.

No matter how much we teach our kids, there is a considerable amount they are going to have to learn about handling money first hand, by trial and error. Perhaps something we can do is make sure they do not accumulate too much debt at an early age because, once someone does that, many of the best lessons about personal finance become impossible to apply.

Published on April 14th, 2014
Modified on April 11th, 2014 - 3 Comments
Filed under: Family & Life, Planning, Saving & Investing

10 Questions for … a Business Coach

Written by FCN Staff - Leave a Comment

This post comes from Jessica Henderson at our partner site LearnVest.

Never miss a new episode of Shark Tank? Invented a revolutionary evaporating kitty litter that you’re itching to debut to the world?

You’re not alone.

Every month, some 543,000 new businesses are launched—but the hard truth is that only seven out of 10 survive the crucial first two years to stay in the game.

To help you get your own big idea off the ground with your expectations in check, we asked Trisha D. Scudder, founder and principal of Executive Coaching Group, Inc.—a pioneer in the field, with over 25 years of experience—to outline the unexpected sacrifices, the rookie mistakes, and yes, the perks of being the big kahuna during the tricky early years of owning your own business.

LearnVest: What’s the first bit of advice you’d give to someone who’s thinking of starting their own business?

Trisha D. Scudder: First and foremost, get the facts! From research to talking to people in your new industry, make sure that you have a real, complete view of what it will take to launch your business and be successful. Most entrepreneurs fall in love with their idea—reality and details be damned. That sets up a lot of suffering and sacrifice later, which could be avoided with an informative plan from the start.

Second, consider a business partner. The right choice in a partner–maybe someone who has different strengths than your own–will help you succeed faster, and not feel so burdened and overwhelmed in the early years.

How much money should someone have saved up before launching a business?

Enough! This question is impossible to answer in generalities. Some start with $5,000 and a great idea. Some require millions to launch. That’s why you must research and forecast what it will take to get your business up and running–plus fund your daily living expenses.

It takes time to build a business, set up a location, hire staff and attract a client and customer base. And during all of this, money is going out, not coming in. In most cases, you should double whatever you project you will need in time and money to start your business. The world isn’t waiting for your idea or business—it is doing just fine, thank you, without it. So it takes great persistence and resilience to have the world finally see you–and want to work with you.

What about quitting a day job to launch a business—good or bad idea?

Many entrepreneurs jump into a new business without first laying a strong foundation, and as a result, those businesses fail within the first year. Before you quit your current job, make sure to spend nights and weekends researching your market and competitors, and developing a solid business plan.

Next, line up funding, and begin to build your team. At the same time, make sure you’re operating with integrity and at full value to your current employer. When you can’t do both, that’s when you have a decision to make.

What’s the most common misperception people have about being business owners?

That they will be their own boss. They think, “Wow, I’ll be free and not have to answer to anyone!” Yes, being a business owner gives you flexibility, and over time, a sense of designing your own life. But until you reach that point, you’ll actually have many bosses: Your clients and customers, the bank, your investors, even partners.

Let’s talk skill sets: What’s crucial for a budding entrepreneur?

There are so many: resilience, imagination, being unstoppable, integrity, the ability to create relationships easily, the courage to ask for help and make big requests, a commitment to face the financial facts, and the ability to excite others about your dream just as you are excited. Need help? Find mentors who know the industry–who are themselves entrepreneurs–and consult people who will hold you accountable, like a business coach.

Can a hobby ever translate into a business?

The two are distinct. A hobby is an interest, or even a passion. And that can sometimes blind you. Your business should exist to help fund a great life for you (and your family), including professional fulfillment and financial peace of mind. But often people who turn their hobbies or causes into a business overly sacrifice. For example, they don’t charge enough for their service because they love what they do so much. In those cases, they end up giving so much to the business, but the business doesn’t give enough back to survive.

If you’ve never managed people before, how do you build a valuable team?

Starting a business quickly transforms you. You must learn to be and do what you’ve never been or done before–or your business will fail. If you’ve never hired or managed teams before, you will learn by failing several times.

Surprisingly, first time business owners often make these mistakes while interviewing: Talking more about their plans for the business than asking challenging questions of the candidate; getting inspired by the interviewee vs. checking references and experience; hiring friends and family who need jobs and then not holding them as accountable as they would a qualified stranger they hired.

What’s an unexpected way to grow your clientele?

Give it away by offering a free consultation, sample or trial coupon. You must make people aware of you early in your business, and get them talking about your product or service. That’s more important than charging full price–but just in the first few months. This can also work to grow existing businesses that have stalled.

So what’s the key to happy clients?

Integrity. That means honoring your word, delivering on what you promise and when–and even cleaning up quickly when you or a member of your team messes up. You have to take 100% responsibility for all aspects of your customer’s experience with you, your product and your company representatives.

Why is the risk of starting your own business worth it—no matter the outcome?

Having your own business is to be coached by a master–yourself! If you aren’t committed, you will fail. If you don’t listen to what your customers and the industry is telling you, you will fail. If you are arrogant, you will fail. If you don’t face facts–financial and otherwise–you will fail. If you are stingy and selfish, you will fail. If you don’t talk straight with your customers or your employees, you will fail. And if you can’t bounce back, you will fail.

In short, what an amazing journey of self-discovery and re-invention this will be!

More stories from LearnVest:

Friends With (Business) Benefits: 4 Small-Biz Success Stories

Be Career Fearless: 7 Tips From Intrepid Entrepreneurs

7 Things to Consider Before Starting Your Own Business

Published on April 11th, 2014
Modified on April 4th, 2014 - Leave a Comment
Filed under: Self Employment, Working

Worst-case-scenario playbook

Written by Jeffrey Steele - 2 Comments

This is the time of year when I annually confer with my financial adviser. As I drove to meet him in his office a couple weeks ago, I had reason to expect we’d both be in jovial moods. The stock market’s performance over the past year has been stellar, after all, and my account has tallied corresponding gains.

But as we talked, I was quickly reacquainted with reality. His role is not to be jovial or complacent. A big part of his role, as far as I can discern, is to remind me to stay on the straight and narrow with my financial goals. So after noting I’ve done a good job accumulating a nest egg, he figuratively splashed ice water in my face. “Consider what would happen if you had to retire today on what you’ve got,” he noted with admirable sternness. “You wouldn’t be living very lavishly.”

Ouch. That hurt. But then, what could I have expected him to say? “You’ve got a nice chunk of change there, so withdraw all of it, jet off to Monte Carlo and bet it all on black at the glittering casino’s spinning roulette wheel”?

From bad to worst

The advice I’ve garnered from my adviser since Day One has been along the same strict, flinty and severe lines. All words of wisdom are geared to reminding me of the worst-case scenario, and enabling me to ride out such a circumstance.

Disability insurance, long-term-care insurance, powers of attorney for health care and finances and a complete estate plan have all been advanced. And those have merely been the warm-up acts for the headliner, a disciplined, tax-advantaged retirement savings plan. That’s what a financial adviser is for.

But most Americans don’t have financial advisers. And that may be part of the reason many dwell on too rosy a vision of the future instead of a more realistic view, the kind that usually leads to more conscientious money management.

Want an example? I happen to have one right here. Thirty years ago I worked down the hall at an advertising agency from a petite young art director. Then in her late 20s, she was all about capturing creative awards and blowing her pay at as many dazzling new nightspots as she could fit into her schedule.

She wasn’t the type to dwell much on preparing for her financial future. Why should she? She was young, talented, had a track record of success, and could assume many facets of the classic American Dream would be hers in time.

Eventually, she honed a bit of financial discipline, landed a high-yield savings account and a few of the best credit cards and started banking some savings. Over time, her cash reserves surged into the low six-figure range, and she bought a condo. But by then, she was in her 40s, and the advertising industry isn’t always kind to those who’ve piled up birthdays. She lost her job.

She was able to freelance for a while, which kept her nest egg from being pared too severely. But then the freelance dried up. So she invested in courses to become a pastry chef. That turned out to be not nearly as lucrative as ad work, and the job security was just as dicey. She lost her job, or quit, and went back to freelance art direction. That proved as elusive as before.

Today, as she hurtles headlong toward 60, her savings are gone, as are her prospects of landing another advertising job. She works part-time in food service for near minimum wage, for a boss about the same age as she was when first I met her. It also looks like she will have to sell her home. The future? I hear she may move back to her East Coast hometown and settle in with her surviving parent at the old house she grew up in, before she embarked on a 40-year journey of discovery only to find that worst-case scenarios can actually occur.

Not enough dough

It’s a story as sad as it is true, but it’s hardly unique. I’ve heard a number of tales that followed similar plot lines. Starring in all of them were people who were once young, earning the kind of large salaries youth-oriented employers bestow and anticipating bright futures. Today, they are old or nearly so, and have no money. The years when they could have really built savings are behind them. All of them were folks who, like my ex-colleague the would-be pastry chef, used too much sugar and not enough dough in their flaky recipes for the future.

So what I’m urging is that if you’re just starting out in a career, forget about silver linings and start assembling what I call a “worst-case scenario playbook.” Here are some questions to ponder as you create that book.

  • Will Social Security and Medicare exist when you are eligible for them?
  • Will the taxes you face become larger, to fund spending on the large voting bloc of Boomers?
  • Will climate change’s impact on aging infrastructure hike your taxes?
  • What will swift technological change do to your job security?
  • Are you sure you won’t be supporting your parents in their old age?
  • Are you sure you won’t be supporting your children in their 20s and 30s?
  • What if your child is a special-needs child?
  • Are you covered in case of a medical crisis?
  • If you don’t marry, how will that affect your finances?
  • If you do marry and end up divorced, how will that affect your finances?

I’m not suggesting young folks become depressed about the future. By all means hope for blue skies. But plan for grey and overcast heavens, with a chance of a couple funnel clouds emerging and possibly even touching down.

When it comes to the size of your late-life finances, spending your career anticipating the worst can actually be for the best.

Published on April 9th, 2014
Modified on April 2nd, 2014 - 2 Comments
Filed under: Frugality, Planning, Retirement

How to rear money-smart kids

Written by Suba Iyer - 3 Comments

The Consumer Financial Protection Bureau estimated, in 2013, that outstanding student loans have swelled to over $1.2 trillion. Seven in ten college seniors who graduated in 2012 had student loan debt, at an average of $29,400. Scary! It is extremely important for kids to have a good handle on personal finance before they enter college. Personal finance is now becoming a part of the K-12 curriculum in many school districts, but the best education can only come from parents and habits developed at home. So how can we raise money smart kids?

How do you teach your kids about money?

  • Educate yourself: You can’t teach something you don’t know yourself. If you are not great with money, it is time you change for the sake of your kids. Learn as much as possible about budgeting, getting out of debt, saving and investing. Once you have a good grip of your own finances, you can be an example.
  • Teach them by example and be honest: What you say doesn’t matter, kids learn by observing what we do. You have to practice what you preach. Lead by example. Be open about your financial decisions. Do not make them feel they have access to unlimited amounts of money. If you do not have money to get something they want, have an honest conversation. Kids understand more than we give them credit for.
  • Teach them the principles, not just the techniques: It is easy to get bogged down by the minutiae of personal finance. Cultivate good spending habits: Teach them to set up goals, prioritize and encourage them to share. Techniques to implement things will always change but good principles will stay with them for life.
  • Teach them to take responsibility: Personal responsibility has the highest impact on one’s finances. Instead of feeling entitled and blaming others, we need to accept the fact that no one cares more about our money than we do. This will automatically lead us to find ways to get out of debt and save for our future.
  • Teach them to give: This is something I want to teach my kids, but don’t yet have any good ways to teach them. Right now my idea is to take them volunteering with me to help them see what a difference a small act of kindness can make in someone else’s life. If you have any ideas on how to encourage kids to give, I would love to hear from you.
  • Help them earn money early on: In an interview with NBC, Warren Buffett quoted a study that tried to find predictors for business success later in life. Turns out the age you start your first business impacts how successful you are later in life. Case in point — Warren Buffett started his first business when he was six. You can help your kids succeed by helping them start their first business. Set up a lemonade stand or throw a garage sale and make it kid centric — let them help set up, choose what to sell, value the goods, sell, and do the books at the end of it. Make them realize that earning more money will get them closer to their goals. When kids learn how to make their own money, they will also learn the value of money; how to be careful with what they earned and how investing money will help them make more money.
  • Talk to them about consumerism, impulse-buying and advertisements: Most of us don’t realize how much advertisements affect us. Ads are created based on years of research into human psychology and are created with one goal — to make us buy what the advertiser wants us to buy. We might think we are rational beings, but we are not. It is better to accept that we are vulnerable and do something about it. Talk to your kids about consumerism, clutter, and impulse-buying; then teach them to have a “cool-off” period before they buy anything big.
  • Teach them to distinguish between a want and a need: If they demand something, is it really a need or a want? For the most part, parents buy what a kid needs, so it is probably a want. Encourage them to evaluate their purchases in this way. If it is a want, is it an impulse buy? Can they wait for 30 days to get it?
  • Let them have control of some money: Let them budget their money, pay bills, save for their needs and wants. Sit with them and draw up a budget. Keep it simple so that they don’t associate budgets with something that is hard and unpleasant.

They should learn that money is not something to be afraid of or obsessed over. It is just a tool, which, if used skillfully, can promote a happy life.

There are plenty of resources to help parents teach their kids about money. Here are some that I found extremely useful and interesting:

If you have kids, when did you start teaching them about money? How are you teaching them? Do you think teaching personal finance should be the responsibility of the school or parents?

Published on April 7th, 2014
Modified on March 31st, 2014 - 3 Comments
Filed under: Education, Family & Life

Smartphone apps to help you avoid traffic

Written by FCN Staff - Leave a Comment

This article comes from Nate Segall from the Quicken Loans Zing! blog.

Traffic – we despise it, we can’t stand it and we’ll do anything to avoid it. You can catch the morning news before you head out to work, tune in to the traffic updates on the radio – or you can download a traffic application on your smartphone. These apps are here to help you elude bumper-to-bumper driving, accidents and any other annoying traffic hazards. Some of these apps may be better than the rest, but each app has its own advantages, so it’s worth trying them out to see which one you like best. Below are a few of the best apps out there to help you evade that pesky traffic.

WAZE

Waze is more than just a traffic app; Waze is a traffic community. The idea behind Waze is to outsmart traffic by allowing millions of drivers to work together to report traffic jams, police traps, accident reports, cheapest gas prices and more. This free app is “killing” the traffic app game, with over 10,000 reviews and a four and half star rating. As you continue to use Waze, it picks up on your frequent destinations, commute time and preferred routes, but will always offer alternate routes based on the current traffic conditions. Waze also lets you connect with your Facebook friends, allowing you to interact and coordinate drives. In my opinion, Waze is definitely the number one choice when it comes to free traffic apps.

TOMTOM

You might be familiar with TomTom as a GPS, but instead of adding clutter to your car with a separate navigation deice, download, or should I say buy, TomTom for your smartphone. For $50, you can relive all of the magic of this navigation pioneer right on your phone. The app works online and offline, which can save you big money on data charges. A trusted, well-known brand, TomTom won’t steer you wrong, as long as if you’re willing to spend a few dollars.

BEST OF THE REST

There are a number of other traffic apps available for both iOS and Android systems. Alothough non of these apps None truly compare to the functionality and effectiveness of Waze or TomTom, apps like Sigalert.com, INRIX Traffic and Twist all feature bits and pieces of what Waze offers.

  • INRIX Traffic allows you to look at live camera shots from high traffic areas. It also lists incidents reported around your area, along with the delay time and backup distance.
  • Sigalert.com has a very cool feature where you can look up any freeways/highways and it will show you the speed of the traffic at each of the exits and cross streets.
  • Twist allows you to communicate with your friends, family and co-workers, and share your ETA.
  • SNL said it best: “Google Maps is the best,” so if that’s what you’re familiar with, keep using it.

My personal choice? Waze. This app has truly has changed the way I drive to and from work. It has allowed me to use quicker, alternative routes, and drastically decreased my commute time. Try some of our suggestions above and see which one you like!

Do you have any other applications that you use to dodge traffic? Share in the comments section below!

More stories from Zing:

Online sales tax: What’s the deal?

Buying and Selling Homes in 2014: A More Balanced Market

Decorating Your Home: A Guide for Music Lovers

Published on April 4th, 2014
Modified on March 11th, 2014 - Leave a Comment
Filed under: Automotive, Consumer, Miscellany, Productivity

Tax refunds: Why following the crowd makes sense

Written by William Cowie - 13 Comments

A few weeks ago, someone pulled out a gun and shot four people in a Detroit tax preparer’s office over a late income tax refund. Though such outrageous reactions are rare, thankfully, there is a surprisingly emotional division among people on the issue of whether it is best to aim (no pun intended) for a tax refund or not:

  • The “Yes” camp believe it is best to shoot for a refund
  • The “No” camp don’t even think about it

Which camp do you think is bigger? The answer might surprise you. In 2011 (the latest available — I know, the IRS isn’t too fast when it comes to updating their stats), a full 78 percent of all individual tax returns received a refund. Clearly the “yes camp” is the greater. The average refund? $2,872.

The “no camp” seems to make up for their lack of number with venom. There’s no shortage of self-proclaimed experts who wag their self-righteous fingers at the nearly 80 percent of individual taxpayers who got refunds. When you comb the Internet for opinions, there are far more “No camp” posts and articles, many of which are surprisingly venomous and insulting. The word stupid (and worse) appears more often than you would expect in an otherwise rational kind of debate.

Okay, so to which camp do you belongthe one with numbers or the one with self-righteous venom? More importantly, why? Let’s take a look at the arguments for both camps:

“No” Camp

The naysayers proclaim refunds a bad idea because:

  1. You forego precious interest on your money by forking it over before it’s necessary.
  2. In addition, inflation kills you — you give Uncle Sam precious money, but it’s worth much less when you get the refund.
  3. You never know when an emergency will strike. When it does, you can’t get that overpayment back from Uncle Sam. It’s much better to have the money sitting in an emergency fund which you can replenish before April 15.
  4. It shows you’re too lazy or incompetent to do proper tax planning (no warm-and-fuzzy crowd, this).

They add more reasons, which amount to simply rehashing the list. Funny, but true. This post lists Reason #4 and Reason #5 as the same thing, only with different (shrill) verbiage to justify it.

“Yes” Camp

They jump for joy at their annual refund bonanza because:

  1. The amount of interest you can earn in a savings account is trivial. Assuming the average refund of $2,872 is earned evenly throughout the year, how much would that cost you in terms of lost interest? We reviewed online banks a while ago and found Ally Bank to have the highest online (i.e., national) interest rates on savings accounts, which at the time of writing was 0.87 percent per year. If that rate remained the same throughout the year, the total loss of interest would be … $12.49! The guilt-ladling experts proclaim that a folly so great you’ll never recover.
  2. The IRS will slap you with penalties way, way higher than $12.49 if you sail too close to the wind and end up needing to pay in more than 10 percent of your tax liability. Again, going to the averages, the average tax bill for 2011 was $9,377. If, trying to save $12 in interest, you underestimate your tax by even a dollar, the IRS will slap you with a $938 fine. A dollar a month is cheap insurance against a nasty surprise.
  3. The tax code is complicated, and only gets more complicated each year. For example, next year you need to add extensive paperwork simply to avoid the new health care fine/tax. That’s just the latest in a long string of added burdens put on ordinary taxpayers. Therefore, it has become next to impossible for an ordinary person to estimate their tax liability accurately a year in advance. If you want to do the kind of tax planning those experts insist you should, you are going to have to hire an expert. Can you do that for less than $12.49?
  4. What inflation? In the ’70s, this was a valid argument, but inflation running of less than 1.5 percent per year now has pretty much wiped out the strength of this argument. In fact, the reverse may be true: By waiting to buy that HD TV with my refund, I actually saved a couple hundred dollars one year. (Inflation doesn’t apply to everything evenly.)
  5. Human nature: Getting a $1,000 refund beats having to pay $1,000 after Christmas shopping season any day. Why be a sourpuss for a buck a month?
  6. More human nature: We tend to prefer lump sums to regular payments. (More than 90 percent of lottery winners pick the lump sum.) Getting a single refund check for $2,400 just feels better on many levels than $200 per month. And, given the small cost of a buck a month, why not?
  7. Everyone loves a mystery. The tax code has become so complicated, and our lives unpredictable enough, that planning your taxes accurately has become next to impossible. So, you suspect you’re getting a refund, but you don’t know how big. Now you have the anticipation of waiting to see how big. For the same $12, you have another cheap thrill.
  8. If you know you have a refund coming but you don’t know how big, you have a terrific incentive to file early and beat the rush. Admit it: It feels really good when you get something done ahead of time. So now you have a triple shot of joy: you’re done early, you know you’re getting money (even if it’s your own) AND you’ve got the cheap thrill of guessing how much. All for just a buck a month.

Can you tell? I’m firmly in the “yes” camp. Those who know me know it’s not often I side with the majority — there are too many times people simply follow the loudest voice out there, right or not. In this case, though, the logic is so overwhelmingly in favor of shooting for a refund, it’s easy to see why most people do it.

Are you still in the same camp?

Which do you think is better: receiving a $2,000 refund or having to pay Uncle Sam $2,000 right after the holiday shopping season? Especially if the price tag for that simple joy is a buck a month, while the penalty for guessing wrong can approach a thousand dollars … on top of what you have to pay in taxes alone?

Let the hysterical guilt-mongers shrill all they want. Shooting for a refund is a no-brainer in my book. Ordinary people are sometimes smarter than their critics. This would be one of those times.

Come on, what else can you do for $12 that adds that many smiles to your life? What do you do? What do you think you should do? (Not always the same thing, is it?) :)

Published on April 2nd, 2014
Modified on March 28th, 2014 - 13 Comments
Filed under: Taxes

Time or money?

Written by Richard Barrington - 3 Comments

It’s a common dilemma: When you are young, say just getting out of college, you tend to have plenty of free time but little money. Later, as your career takes off, you start to have more money but less time.

It would be nice to have both time and money at the same stage of your life. But if you had to choose, which would you pick? This post will look at a few ways that time-or-money choice is a fundamental characteristic of the job market.

Compensation stagnation

First, let’s start by acknowledging that, for many Americans, the choice of more money has been taken off the table. Adjusted for inflation, the total value of the compensation received by Americans grew by just 11.3 percent in the 20 years from 1992 to 2012, or less than 1 percent a year.

This inching forward in compensation is not the vision people typically have of getting ahead in the workplace, especially since America has an aging workforce, with the bulk of Baby Boomers in their late-career, peak earning years. One would have thought those peak earning years would have seen a stronger rise in compensation.

Time deflation

If compensation growth has been sluggish, is it possible Americans have at least been rewarded with more time? Think about what a difference the Internet has made over the past 20 years. Perhaps its greatest attribute has been the way it has allowed people to use their time more efficiently. Here are some examples:

  1. Online shopping. A great deal gets written about online shopping around the holidays, and rightfully so; but the broader truth is that online shopping has become routine for people throughout the year. This doesn’t just save you the time driving to and from the mall. Think about all the time you save finding the right product with a couple quick searches, rather than schlepping from store to store.
  2. Telecommuting. The Internet has given more people the option to accomplish at least some of their work from home. This saves commuting time — and rush hours are usually the least efficient times to be traveling — plus the extra time people who work from home don’t have to spend making themselves look presentable every day.
  3. Home entertainment options. Twenty years ago, if you wanted to see a reasonably current movie, it meant a trip to the movie theater, or at least a trip to Blockbuster for a DVD (or was it still videotapes back then?) Now, between on-demand channels and streaming video services, premium content is available without leaving home. Not only that, but large, flat-screen TVs have made the home viewing experience much more impressive than it was on the CRT-based TVs of the early 1990s.

Think of all this time-saving as a form of deflation. With monetary deflation, you can do more with the same amount of money because prices go down. In this case, it’s time deflation. You might not have more free time, but you can do more with it because the time it takes to do certain things has been slashed thanks to technology.

Paid leave becomes more common

Another way that many Americans have gained in time rather than money over the past 20 years is through increased access to paid leave from work. The percentage of Americans who get paid sick leave has increased from 58 to 75 percent; access to paid personal leave has increased from 16 to 44 percent; access to paid family leave has increased from two to 13 percent.

For some, paid leave has become even more useful because it has become more flexible. Employers in some industries are starting to offer consolidated leave, which can be used for any purpose.

Career and retirement choices

Naturally, careers often make people choose between time or money — do I pick the high-pressure career with great financial rewards, or do I settle for less money in exchange for a more laid-back occupation? In a different way, people face a time-or-money choice in retirement. Much has been written about Americans being forced to work longer because of low savings, but supplementing your income is not the best reason for working longer because you can’t always count on being able to do so. On the other hand, simply having an occupation — something to fill your time productively — can be an important reason to keep working past normal retirement age. Once a person reaches retirement, it often seems that free time becomes too much of a good thing.

The choice between time and money is a recurring theme throughout our careers and even into retirement. Over the past 20 years, the option of more money has become scarce, but in many cases free time has become more widely available. Even if picking time over money would not have been your first choice, enjoy it while you have it.

Published on March 31st, 2014
Modified on April 4th, 2014 - 3 Comments
Filed under: Working

Getting into golf without going broke

Written by FCN Staff - Leave a Comment

This article comes from Nate Segall from the Quicken Loans Zing! blog.

With spring around the corner and warm weather (hopefully) on its way, it’s about time to start thinking about getting back onto the golf course. If you’re not a regular Golden Bear, or if you don’t know who the Golden Bear is, then it’s time for you to start playing the great game of golf. Now, golf is not a cheap sport. It’s not like basketball where you can play with just a ball and a hoop; there’s a lot of necessary equipment needed to even begin to play golf. So if you’re tired of playing virtual golf on your Xbox, or if your boss invited you to play a round and you don’t want to embarrass yourself, the Zing Blog is here to advise you and offer you the best tips and advice for stepping into the world of golf.

BUY USED EQUIPMENT

The first thing to understand about being a beginner at golf is that buying the best equipment will not automatically make you a good golfer. So don’t go out and spend thousands of dollars on clubs, shoes, balls and other accessories. Utilize eBay, used club sections at golf stores and even garage sales to find your first set of clubs. And by set, we don’t mean you need to go out and buy all fourteen necessary clubs. Here are the clubs you should have in your very first golf bag:

  • Driver: The driver is used to “drive” the ball a great distance down the fairway and is used when the ball is set up on a tee.
  • Irons 5-9: Irons are typically used when you’re fewer than 200 feet away from the pin. Middle irons (5-6) are less lofted and are used for longer shot, while short irons (7-9) have more loft and get the ball in the air quickly for shorter approach shots.
  • Wedge: Wedges are used for shots 100 yards or shorter. They have the highest loft of any club, which makes them the best option when your ball is in tall grass or in a sand bunker. There are different types of wedges, each varying in loft degree.
  • Putter: This is the only club you may have previously used (probably at your 10th birthday party) but this time around there won’t be a windmill to putt the ball through.

Now is the time to go and look for your inaugural set of golf clubs before prices begin to rise for the upcoming golf season.

DON’T PAY FOR A PERSONAL INSTRUCTOR

There are too many “free” ways to gain knowledge on the sport of golf to spend money on a Professional Golf Association (PGA) instructor. Have any golfing family members or friends? Ask them to give you a few pointers at the driving range.  I guarantee that they’ll be flattered and more than willing to lend a hand. Another great option for a quick lesson is YouTube videos. After you’re finished reading this blog, do a quick YouTube search of “golf instruction videos,” and I guarantee you’ll find an answer to your question. Another great option is the PGA website. Head to their instruction section for tips, lessons and more!

DON’T BE AFRAID TO GET OUT ON THE COURSE

Now I’m not suggesting that you take your first swing on a tee box, but some people refuse to go to an actual golf course because they aren’t good enough but there are just some things you get on a golf course that you can’t experience at the driving range. And there are golf courses that are more suited for beginners. GolfNow.com is a great place to book a tee time at a local course near you. Each golf course has a review section where you can find the course difficulty, the average pace of play and the type of golfer that it’s suited for.

Your first few times swinging a club should most certainly be at a driving range. A majority of driving ranges use mats with fake grass to imitate real fairways and roughs, but it really isn’t a good substitute. Try your best to find a driving range that uses grass because it will give you a better feel of what it’s like to be out on a real golf course.

Golf is one of the greatest sports in the world because virtually anyone can play it. It’s truly the best way to spend a sunny, summer Sunday morning. It can even be a great platform for making business deals. Take the time to get to know the game and I guarantee you’ll fall in love.

Do you have any tips or tricks for getting started in golf? Share in the comments section below!

More stories from Zing:

Online sales tax: What’s the deal?

Buying and Selling Homes in 2014: A More Balanced Market

Decorating Your Home: A Guide for Music Lovers

Published on March 28th, 2014
Modified on March 11th, 2014 - Leave a Comment
Filed under: Frugality, Retirement

All-star-cash-management lessons from the diamond

Written by Jeffrey Steele - One Comment

If you’re a baseball fan like me, it’s a good bet you read the Michael Lewis book “Moneyball” well before it spawned a Brad Pitt movie. The tome is a laugh-out-loud chronicle of how free-thinking general manager Billy Beane brought some respectability to his woebegone, small-market, tiny-budgeted Oakland Athletics.

But linking money and baseball is nothing new, as Lewis would likely be among the first to tell you. Throughout its history, the grand old game has been just as much about greenbacks as it has been about hits, runs and errors. No wonder the cash-rich New York Yankees, summering within a few miles of America’s financial epicenter and traditionally profiting from the game’s fattest television contract, have captured more World Series crowns than any other team.

This baseball season represents the 50th anniversary of my becoming a fan of the American Pastime, way back in that long-ago, star-crossed summer of 1964. And with the 2014 campaign getting underway this week, I thought I’d mark the golden anniversary of my fanaticism in a novel way.

I’m going to swing for the fences and suggest that baseball can teach a lot about personal finance to those of us who’d like to become better money managers. Then I’m going to ask some of you fans out catching some rays in the bleachers to step into the cage and take a few swings yourself at linking money lessons and baseball.

Whether a fan of the Los Angeles Dodgers or the Pawtucket Red Sox, or any major or minor team in between, consider these connections between personal finance and the action on the diamond as you root, root, root for the home team this summer.

Come to play every day

Unlike other professional sports that serve up a contest or three a week, baseball is a day-in, day-out affair that begins in February and isn’t over until the jack-o-lanterns are glowing. When your team crosses the lines on Opening Day, every player knows they’re in for a long grind. It’s the same thing with accumulating financial resources. To land some loot over your lifetime, you have to be in it for the long haul and come to play every day, conserving and banking money along the way.

Get off to a good start

The best center fielders get a good jump on every fly ball, and teams that win pennants often enjoy highly triumphant Aprils. An early start on success is key in baseball — and in growing nest eggs. If you start early, you don’t have to struggle late at putting together funds for a college education or retirement. In other words, you’re not losing the ball in the lights at the crack of the bat only to blow out a hammy trying to make a last-second, miraculous, diving catch.

Hit to all fields

Ask the fans who followed Ishiro Suzuki this century, or Rod Carew and Pete Rose in Bowie Kuhn’s day. Some of the most valuable hitters on any team are those who spray the ball in all directions. They don’t rely solely on pulling the ball but build their batting averages hitting to the opposite field and up the middle as well.

The parallel in money management is diversification. Those great at stockpiling soaring stacks of simoleons don’t place all their money in one asset class. They spread it around between large-, mid- and small-cap stocks, domestic and international equities and funds, bonds and real estate. Sometimes they even drop a bunt down into a certificate of deposit or a money market mutual fund.

Keep ice water in your veins

For years, it’s been acknowledged that baseball’s greatest relief pitchers have a special emotional makeup. They forget the bad games, stay calm, and embrace a cold-blooded detachment. Then they go out and mow down the side for the save.

It’s likely that those who profit as stock market investors are a little like great relief pitchers. It doesn’t matter if the market’s been on a tear or is losing ground faster than the ‘72 Philadelphia Phillies. These investors avoid letting daily events get them too high or too low and they dispassionately focus attention on long-term goals.

Be smart on the bases

How often have we all been part of a 30,000-fan collective groan touched off when a promising rally was nipped in the bud?

And why? Because after lining a frozen rope into the right field corner, our guy got thrown out trying to stretch a double into a triple. You don’t have to look far to spot analogies in the world of consumer finance. Just think of the folks who got burned in the tech wreck of year 2000, thinking they’d greedily load up on dot.com stocks or the over-reachers who around 2007 were convinced that home prices had nowhere to go but up — straight up, and forever.

Unlike our overambitious base runner, a lot of these people weren’t just called “Out!” They were called out of money.

Get ‘em on, over and in

The walk-off home run that sends a stadium full of fans home with ear-to-ear grins is among the most thrilling events in all sports. But let’s face it. If a team is going to mount a late-inning, come-from-behind uprising, it’s more likely going to do it by means of a couple walks, a seeing-eye single or two, an error and a double. In baseball parlance, the team will get ‘em on, get ‘em over, and get ‘em in.

By now, you probably see where I’m going. The walk-off is like the lottery ticket that pays big one time in a hundred thousand. Most people who get rich don’t do it in one giant blast. They do it over time, with discipline and tenacity, by seeking out the best savings account and best credit cards, getting money into investments, enjoying the gains, letting gains compound, reaping additional gains on principal and past gains, and eventually cashing in.

But they enjoy their largess just as much as someone whose scheme paid off big. Kind of like the team that forsakes the long ball for a grind-it-out win.

So here’s the takeaway: I know it’s out of left field, but if you want to enjoy wealth someday, look beyond currency and coins, and glimpse the wisdom in diamonds as well. Ready to take your cuts?

Batter up!

Published on March 26th, 2014 - One Comment
Filed under: Saving & Investing

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