Debt, Credit Card & Consolidation Current News Digest

For us residents in California, we’re used to seeing budget cuts applied to a lot of things. The financial crisis in California is particularly apparent when you see its effects on the public school system. Well, this article from my local paper just made me wince, because as you can see, the story describes just another example of how our government (this time, at the state level) has been handling its finances.

Well, here’s the latest expose and more fodder on the California budget crisis — apparently, government employees have made off with pretty huge paychecks here in California, simply by NOT taking vacation time. Their unused vacation time translates into big six figure payouts, with the top 25 checks reportedly ranging from $203,921 all the way to a dazzling $815,736. Wow. Imagine this — those state government positions can be a gold mine, with overtime paying off for a whole lot of people. Here is an image that portrays this predicament (Click this link or the image below for a larger picture.):

And here’s a breakdown of vacation pay amounts across California agencies:

Small wonder California is broke.

Want to Attend A Suze Orman Event?

On another note, I’d like to inform you about a personal finance event that’s coming to Club Nokia in downtown L.A. this Sunday, March 14. Suze Orman is slated to speak at this club at an event called “Waves of Inspiration: Women and Money”. The seminar will feature Suze and other ladies and personalities who will talk about personal finance, self-growth and empowerment. For the curious, TD Ameritrade is the sponsor for this event. If you end up attending, you’ll also receive a free annual all-access pass to Suze Orman’s “Save Yourself Retirement Program” (reg cost: $40). There’s also a planned Q & A at the end of the seminar.

You can purchase tickets from Ticketmaster.com, or if you’re interested in picking up a complimentary ticket, let me know (contact me here) — I may have a couple to give away (while it lasts). Here are the event details:

WHAT: Waves of Inspiration: Women and Money with Suze Orman
WHEN: March 14th, 2010 at 2PM
WHERE: Club Nokia, 800 West Olympic Blvd., Los Angeles, CA 90015

Have fun!

Great Personal Finance Articles

• Wise Bread: Worried About Debt? Tips On Managing Your Loans
• Studenomics: Why Parent’s Shouldn’t Pay For Their Kids’ College Education
• Free Money Finance: Top Personal Finance Experts
• Lazy Man And Money: Build Your Financial Home Brick By Boring Brick
• Frugal Dad: Implementing PAYGO Rules For Personal Finances
• Million Dollar Journey: Canadian Income Tax Deadline
• Mighty Bargain Hunter: Would you out a friend’s spending patterns on Facebook?
• Miss Thrifty: The Festival of Frugality
• Simply Forties: Carnival of Personal Finance
• Don’t Mess With Taxes: Carnival of Taxes
• FIRE Finance: The Festival of Frugality

Vacation Pay for Unused Vacation Time? Plus A Suze Orman Event

The National Association of Realtors (NAR) reports that existing home sales have fallen by 7.2% in January 2010; this is the second largest decline since December 2009, when sales of previously owned homes fell by about 16%. Severe winter weather, unemployment, and the traditional winter lull in home sales have likely contributed to these declines. Lower home prices and reasonable mortgage rates continue to offer buyers good opportunities for finding affordable homes and mortgage loans.

Mortgage Loans: Want to Buy, but Low on Funds?

Coming up with a down payment and closing costs can be an obstacle to buying your first home. If you’re otherwise prepared to buy, you may qualify for down payment assistance through state and local home buyer programs sponsored by state housing finance agencies and community home buying programs. Real estate professionals and mortgage lenders can direct you to applicable programs in your area. These programs are designed to help first time buyers , but typically define first time buyers as anyone who has not owned a home within the past three years.These programs vary; please contact local program sponsors to learn more about down payment assistance and eligibility criteria.

FHA Loans: Take Advantage of Low Mortgage Rates with Low Down Payment Requirements

The Federal Housing Administration (FHA) works with mortgage lenders to provide affordable home financing options for moderate income buyers, and buyers facing credit challenges. Some advantages of FHA loans include:

• Low down payment: Most FHA loan programs require a minimum of 3.5% down as compared to 10 to 20% down for most conventional mortgage loans.
• Flexible options for paying closing costs and UFMIP: FHA charges borrowers mortgage insurance premiums in two ways. At closing, you’ll pay an up-front mortgage insurance premium (UFMIP) of 1.75% of your mortgage amount, and annual premiums of about .50 percent of your mortgage amount. You can roll the UFMIP into your loan amount, and FHA is also offers options for financing all or part of closing costs. using these options can depend on home value and other factors; FHA approved mortgage lenders can provide details.
• Credit Challenged Borrowers May Qualify: FHA guidelines for loan approval require verification of income, assets, and employment, but do not rely heavily on credit scores.

FHA is changing some guidelines; in the near future, borrowers with FICO credit scores of less than 580 will be required to make a 10% down payment.

Marketplace (blog)

Two generations reflect on credit cards Marketplace (blog) Personal finance writer Beth Kobliner and her teenage daughter Becca talk about how they find a middle ground between mom's old school rules and today's …

The Guardian

UK firms 'forced to use credit cards to stay afloat' Telegraph.co.uk One in five UK businesses is financing its operation using credit cards, partly due to the lack of finance from banks, according to new research from the … Businesses forced to resort to credit cards, says IoDThe Guardian all 93 news articles »

Welcome to the 243rd Carnival of Personal Finance!

What in the world does that mean? Well, a blog carnival is a weekly round-up of articles on a particular subject (in this case, money). The carnival moves from blog to blog, and gives readers a chance to find new writers they may enjoy.

It’s been over two years since Get Rich Slowly last hosted a carnival (it takes many, many hours to put this together), but I wanted to do one for old time’s sake. Besides, it’s a great way to support up-and-coming financial bloggers. I found several great new money blogs while looking through the submissions this week.

So how does this carnival work? I received submissions from 72 other personal-finance blogs. Yes, I read every one of these articles. Yes, it took forever. I’ve cut out the worst of the submissions, as well as any that don’t apply to personal finance.(Come on, folks: “the economic link between China and Canada” has nothing to do with the day-to-day financial life of the average person.) The 61 articles that remain are included in this carnival.

I’ve organized the articles by topic. The categories below are listed in alphabetical order — except for Relationships, which I bumped to the front in honor of Valentine’s Day! Within each topic, I’ve ranked the articles in order of how much I liked them. (So, the first article in the investing category was my favorite investing article this week.) And if I really liked an article, I marked it with a happy star: . If you’re looking for just the best, skim through and find the starred posts.

Which of these articles is your favorite?

Relationships
Mr. Cheap at Four Pillars has a mind-boggling look at two views on the economics of dating. He explains how a man he knows literally keeps score of how much he spends on the women he dates; and how a woman he knows who tries to get men to spend as much as possible on her. This is “personal” finance in the true sense of the term.

Ray from Financial Highway, whose site slows my browser to a crawl, has a look at frugal Valentine’s Day gift ideas.

Jason at One Money Design also has some inexpensive Valentine’s Day ideas. (Although, I don’t know: Pizza can be romantic? Really?)

Joe from Personal Finance by the Book has a short look at Love and Money, just in time for Valentine’s Day!

Budgeting
Dough Roller has a great article about improving your finances by using an overall financial goal. We have so many financial goals, many of which won’t be met for years or decades, that it can be easy to get discouraged by our progress. Borrowing an idea from David at MoneyNing, DR says that instead of focusing on the future, we should strive to simply do a little better every month. Doubleplusgood.

Darwin at Darwin’s Finance wonders, “How much could you reduce your budget if you were laid off?” Running the numbers on his own life, Darwin finds he could save over $1,000 per month if he had to. As you know from my own experience, I too was able to save $1,000/month when I cut my spending and paid off my debts. I wonder how many other folks could do this if they had to…

At the Canadian Finance Blog, Tom urges readers to control spending with a budget. It’s basic stuff, but it’s important.

Anastasia from Living on a Budget is a 36-year-old Russian woman living in London. This week, she has a short quiz to help you figure out which budget personality you are. (I scored a 55, by the way.)

Career
Mike, the Financial Blogger, explains how he got three salary increases in less than a year. Mike uses a poker analogy — and lots of winky faces — to make his point, which is an excellent one! Remember: Negotiating your salary is one of the best things you can do to improve your personal finances.

At the Early Retirement Blog, Kyle argues that you should set aside 10% of your work for retirement, not 10% of your income. “The miracle of compound interest will get you where you want to be in 40 years,” he says, “but dedicating 10% of your time to generating alternative streams of income will get you there in 5.” While I think Kyle’s guilty of some hyperbole here — it’s extremely unlikely (read: nearly impossible) that you’re going to retire in five years just by spending 10% of your work hours on side projects — I think his overall idea is good.

Paul, the FiscalGeek, argues that the secret to success is hustle. I happen to agree: Hustle is vital in almost every area of life, especially personal finance. (But Paul, please, learn how to use an apostrophe.)

Jonathan from Christian PF has a look at five legitimate work-from-home jobs. I know there are legitimate work-from-home jobs out there, but even the real ones make me wary. I think it’s much better to create a job of your own doing something you’re passionate about…

At Grad Money Matters, guest-poster Caroline shares the secret to finding a part-time job in tough economic times. The advice here is good, but I wish the article were a little more in-depth.

Debt
Though I found the writing a little sloppy and hard to follow, I really liked the submission from Penny Farthing who asks, “Is debt okay if it leads to self-improvement?” This is a fantastic question, and I think most people would say that yeah, this sort of debt is acceptable. (Think college loans and so on.) But where do you draw the line? I like this question so much that I may actually write a post here at GRS about it sometime in the future.

The always-awesome SVB from The Digerati Life explains how to apply for a loan at a peer-to-peer lender. I know know much about peer-to-peer lending, but I know that many folks have found it a useful way to attack their high-interest debt. This brief guide is a great way to get started.

Lakita from Personal Finance Journey has a look at everything you ever wanted to know about the new credit card laws but were afraid to ask. We’ve covered this recently at GRS, too, but Lakita’s take is a good reminder of the coming changes in credit card terms.

Craig from Money Help for Christians answers a question about options for when you can’t make your student loan payments. Because I know nothing about this subject, I learned something from this article.

If you really can’t make your student loan payments, you may end up in bankruptcy. If that’s the case, then Single Money Guy has some tips for rebuilding your credit after bankruptcy.

JS from Smart Money Daily goes over the 9 reasons Dave Ramsey hates HELOCs. Wordy wordy wordy.

Finances
Studenomics has a fantastic look at how you can make money as a tutor. I often think making money is the most-neglected topic in personal finance, so it’s great to see articles that offer real-life experience and advice about earning extra income. Great stuff.

David, the Personal Finance Analyst, has a long look at your secret credit scores and their implication. He doesn’t have any concrete recommendation, but these “secret” scores are important, and not enough folks know about them.

Sun at The Sun’s Financial Diary encourages readers to become master of their financial domains. Sun says that when getting and accurate picture of your financial situation is the first step to becoming a master of your finances.

Adam at Magical Penny has a thought-provoking look at why it’s okay to lose money in a savings account. He argues that even while inflation is chipping away at the value of your cash, there are great reasons to build your savings. I think his advice is right on.

RJ from Gen Y Wealth takes a look at the wealth effect, which occurs when your net worth increases due to an increase in home or stock prices. This increase makes you feel richer, and therefore causes you to increase your spending.

At his blog, Len Penzo explains inflation by showing that Avatar isn’t the biggest move of all time. Inflation can be hard for some people to grasp, and this is a good way to explain it.

Frugality
RC at Think Your Way to Wealth wonders, “Is self-reliance a lost art in this day and age?” This is a great mediation on our throw-away culture.

Ryan, the Financial Student, shares the story of how he’s getting 30 hours of college credit for 15 bucks using something called the post-secondary education option, which allows high-school students to take college classes for free. Way cool!

The Well-Heeled Blog argues that you can save money by embracing your natural hair, and says, “I used to spend $250+ and 4 hours in the stylist’ chair to straighten my hair. After I’ve come to accept (and even love) my wavy hair, however, I stopped the straightening treatments. I’ve discovered that I’m getting better hair and a fuller wallet in return.”

Investing
Note: There were a lot of of submissions in this category, and they’re all pretty good actually. They’re still ranked in order of how I liked them, but I felt these submissions were much stronger than in other categories, so even those near the end of the list are still worth reading.

My favorite post of the week is from Pop Economics, which I’d never heard of until today. Pop explores the illusion of control — our compulsion to do something with our investments. Studies show that we feel happier if we feel like we’re in control of our investing future. When we don’t have control, we feel depressed. With that in mind, how do you reconcile those instincts with passive, low-cost investing? This article explores a couple of options. I love this blog. It just started on January 1st of this year, which is why I’d never heard of it, but I’m a subscriber now!

Mike, the Personal Finance Ninja, gives three reasons the average joe is a bad investor. Mike says that you are not Warren Buffett. For most of us, active trading is not a good idea; instead, we should keep expenses low and diversify with index funds. Ninja cartoons! Warren Buffett quotes! Index funds! How could you not read this article?

Mike at Gather Little by Little shares the second part of a series on what he calls “investing baby steps”. In this installment, he examines some investing strategies for beginners. (There are more strategies to come in the future!) I think this is could be a useful series of articles for folks wanting to learn more about how to invest.

The Dividend Guy shares seven warning signs that you need to repair your investment portfolio, a good reminder that it’s important to review your investments at certain intervals. (I recommend reviewing your asset allocation once per year, though some folks think you should do it every quarter.)

Jim at Bargaineering just published another in his ongoing series of Devil’s Advocate articles, in which he tries to argue against conventional financial wisdom. (He doesn’t necessarily believe what he’s writing; he just wants to present the other side.) In this case, he tries to argue that you shouldn’t invest in the stock market.

Another Mike — Mike Piper, the Oblivious Investor — has a review of Zvi Bodie’s Worry-Free Investing, a book that argues investors should put their money almost exclusively into TIPS, advice that Piper thinks is…well, oblivious!

The Smart Wallet has a good post on a dry subject: Paying capital gains taxes when you trade stocks. This explains yet another reason it’s not a good idea to be an active stock trader.

At Free Money Finance, a guest poster explores the eight biggest mistakes investors make. Solid advice here.

Paul Williams from Provident Planning has an article with a very narrow target audience: He’s reviewed Prudential’s Retirement Red Zone, which is apparently a pitch at soon-to-be-retirees to use variable annuities.

Money Management
Jeff Rose from Good Financial Cents has a great piece on how to find the best financial advisor for you. If you’re in the market for a financial planner (or other advisor), be sure to read this.

Can you retire early without getting lucky? That’s what Tim from Canadian Dream: Free at 45 wonders. He says that nearly every story he’s heard of early retirement has included an element of luck. But can the average person retire early? Tim ran the numbers and found that if you do everything right, yes it’s possible. But you have to avoid consumer debt, buy a small house, and keep away from lifestyle inflation. Great piece!

Ron at The Wisdom Journal has a thought-provoking piece about goals. He notes that 80% of accidents on Mt. Everest happen on the way down, and wonders if this isn’t a metaphor for how we handle financial goals. We spend so much time planning how to reach our financial destinations that sometimes we forget to think about what happens after. Interesting stuff.

At Sweating the Big Stuff, Daniel takes a look at compound interest and why it’s important to pay yourself first.

K from Family Balance Sheet shows how to create your own family balance sheet, which will let you manage your household like a business. (Includes a sample Google Docs spreadsheet you can use!)

PT Money has a run-down of joint savings accounts. What are they? Why should you care?

Modern Gal (a great blog I’ve never seen before) has some short-and-sweet financial advice for thirty-somethings. These are basic but important tips.

Big Cajun Man from Canadian Personal Finance (there are cajun Canadians?) wonders, “Do you have a financial GPS?” He thinks it would be great if there were some automated way to know when you’ve made a wrong turn with your money.

Real Estate
Though it’s basic stuff, I really liked Austin’s article about Renting 101: What you should know before you sign at Foreigner’s Finances. This basic info is valuable for folks just starting out on their own. Maybe you have a brother or niece to forward this article to.

J. Money from Budgets are Sexy warns that owning a home is more expensive than you think, writing, “There are a ton of benefits that go along with this American Dream (tax write-offs, stability, equity, etc), but you’ve got to be aware of the financial drains as well.”

Thinking of buying a home buy confused by the terminology? Elle at Couple Money has a post that explains how amortization and mortgages work. It’s a pretty math-y article, but will probably prove useful to those folks looking to buy in the near future.

Rob at Free Family Finance has an 8-minute video about the differences between 15- and 30-year mortgages. TL;DW.

Taxes
Free From Broke has a quick run-down of qualifying for and claiming the first-time homebuyers tax credit. I’ve had some people ask me about this, and frankly I don’t know much about it. You folks should head over to check this out.

Matt from Debt-Free Adventure explains how he prepares his taxes online and offers tax help and tips for first-time online software users. (Apparently he’s a big fan of TurboTax Online.)

Miscellaneous
Mighty Bargain Hunter has a great reminder about identity theft and financial security: Sometimes your bank will call you for a legitimate reason; if they do, call them back. He explains the process using his own situation as an example.

At Eliminate the Muda, LeanLifeCoach takes a look at money and time, and how we waste them. I’ve said it before, and I’ll say it again: One of the keys to my financial turnaround was that I stopped wasting time. It’s amazing what you can accomplish when you actually do things!

The Weakonomist goes on a rant against bundling, the practice of making you pay extra for crap you don’t want by packaging a bunch of stuff together. I think he’s got a valid point, though his Microsoft example seems to go against his argument. (Or am I missing something?)

Kyle from Suburban Dollar shared a 4-minute video review of Gary Vaynerchuk’s book Crush It! I’m not a fan of video posts (see my whine about Free Family Finance above) because they force the blog “reader” to sit there passively and prevent them from skipping spots. But Kyle does a good job here of staying succinct, and his review of the book pretty much matches my own. (Including the complaint that there isn’t really any actionable advice in the book.)

The blogger from Don’t Quit Your Day Job takes a look at why parents with children seem to volunteer more than others. (Answer: It may be because they volunteer to help with their children’s activities.)

Jason from Live Real, Now has a cute piece about what Dungeons and Dragons taught him about finance. In a similar vein, B Simple from Simple Financial Lifestyle shares the keys to winning your own personal financial Super Bowl. Gimmicky, but fun.

Helen at Science and Money (another blog I’ve never seen before) has a review of Saving Money by Mary Firestone, a financial-literary book for children. Helen thinks it’s lame.

Final carnival stats: 72 submissions, 11 rejected (and another 7 nearly so), 61 accepted (10 of which were highlighted). Six hours to prepare: Five hours to compile and list links, and another hour to create theme and post the carnival. 3705 words. Photo by Sophiea.

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Related Articles at Get Rich Slowly:

• Carnival of Debt Reduction #43
• links for 2006-09-12
• Carnival of Personal Finance - Call for Submissions
• Carnival of Personal Finance
• Daily Links: Debt Reduction, Stupidity, and Mutual Funds

Auto Loans and Dealer Kickbacks

Dealerships employ some of the slickest salespeople in the country. And, once they’ve persuaded you to buy a vehicle, they’ll normally apply all their persuasive skills to selling you finance. And that’s the time to pay most attention, and to be most skeptical.

Even if you qualify for a lower rate from the lender who buys your loan from the dealership, some dealers will charge you much more. The Center for Responsible Lending (CRL) calculates that, across the country, dealerships make $20 billion a year from these kickbacks on auto loans.

Meanwhile, those used car lots that finance purchases themselves (rather than selling them on to big lenders) tend to charge very high rates. This can mean that the buyer ends up paying much more than the vehicle is worth, and that the lot operator makes more profit from interest payments than car sales.

Cheap Loans that Become Expensive

Sometimes a dealer claims that it will take a long time to complete all the finance paperwork, and persuades the customer to drive home in the new car having signed a “spot delivery” or “conditional sale” agreement. This agreement may show an attractive loan rate, but it’s not binding.

The customer is then called back–sometimes weeks later–and told that it wasn’t possible to complete the sale on the original terms, and that he or she must immediately pay the full balance, return the vehicle, or agree to a higher rate on a reworked auto loan. On occasion, the dealer will claim already to have sold the trade-in vehicle, ratcheting up the pressure on the buyer to agree to higher-rate finance.

This practice is known in the trade as the “Yo-Yo” scam. It occurs surprisingly often. And those who are less well off are its most frequent victims. When the CRL conducted a survey in North Carolina last year, 12 percent of respondents who earned less than $40,000 a year, and a quarter of those with an income below $25,000 p.a., reported having been “yo-yoed”.

Loan Packing

It’s after you’ve decided to buy the vehicle that the hard sell really starts. As the CRL puts it, you’ll be pressurized into buying: “Overpriced and underused add-on products including GAP insurance, vehicle service contracts, credit life and disability insurance, and theft deterrent packages.” All of which go to inflate your purchase price, and hence your finance payments.

Loan Conditions That Are Unfair

Many dealer auto loans contain binding mandatory arbitration clauses. These mean that you lose the right to sue the dealer or lender in court, and have to submit any disputes to an arbitration process instead.

This may not sound unfair, but the CRL says that the arbitration system “is potentially more expensive, and biased toward the dealer.”

Shop Around for Auto Loans

Of course, not all dealerships are the same, and you may find one that offers honest, cheap auto loans without strings. But it’s always wise to negotiate from a position of strength, and you’re likely to get the best deal if you already have a loan offer in your pocket before you arrive at the lot.

As with all finance deals, the trick is to shop around. So get a cheap auto loan quote now.

For those who believe in using credit….

Because I don’t carry much debt (the only loan I really have is my mortgage), I am not a big expert on credit management. But this is not to say that I won’t need loans in the future. I’ve been exploring the possibility of starting a new business, and if that ever pushes through, then it’s likely that I’ll need a loan to get it going. So it can only be beneficial for me to keep my credit score at healthy levels and to learn what I can to manage my credit well.

There’s a lot of information out there about how to improve your credit score. You can certainly learn a lot by checking out the myFICO site which has an active forum, community, tools and products on this subject (we’ve also reviewed the myFICO products here). But if you’re looking for more of a concrete guide for helping you learn about your credit, you can check out the book 7 Steps to a 720 Credit Score. I was actually sent this book and some related products by the author, Philip Tirone. And since this is one area in finance I wanted to brush up on, I thought I would review the materials at some point.

Get a Free eBook: 10 Biggest Credit Mistakes To Avoid

But before I get into a full blown review of the 7 Steps series, I was given the opportunity by the author to pass along a free eBook that gives you a hint of what his products are about.

Since it’s free, you could add this to your arsenal of information on credit management. Some interesting points that are brought up by Tirone’s eBook and products: your credit score may not be “what it seems”. For instance, most of us don’t really know the difference between the scores we receive from various credit bureaus and lenders. That is, you can receive a score from one of the credit bureaus that can be 100, 200 or 300 points higher than the score that your lender ultimately bases your loan terms on, because your lender may use a different credit scoring system than what the bureaus use. This is crucial information, especially in light of today’s lending environment, so check out the eBook if you want more background.

By way of disclosure, note that Philip Tirone is a mortgage professional. The good thing here is that he offers an insider’s look at the credit industry (alternatively, having such a background may be construed as having a bias for lending practices). Still, he declares his position as one of educating people about managing their credit. If you sign up for the eBook, you will be receiving other offers on educational materials pertaining to credit management (e.g. additional product offers, concrete examples, case studies and strategies for maintaining, establishing and raising your credit score). Of course you are free to unsubscribe at any time. At any rate, I find this information timely and worthwhile, given the tight credit environment we’ve been currently facing. At some point, I’ll post a review of the related “7 Steps” products and tell you what I think.

Now while this post is really geared towards people who are interested in learning how to manage and maintain good credit, its premise may not be as suitable for that segment of society that decides to live on “cash-only” and that doesn’t value the need for having credit. In fact, if you’re not a fan of credit (I say this euphemistically given that many folks have emphatically sworn off it) and prefer to operate purely with cash, then you may not appreciate the points made in the 7 Steps series. Just a heads up. Personally though, I’m a credit user who has found this information quite useful.

10 Biggest Credit Mistakes To Avoid: Free eBook

This is a guest post from Joe Taylor Jr. Taylor is an internal business consultant for a Fortune 500 company, who also writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

I remember an evening a few years ago, when the company I helped start had to close its doors. I’d sunk my entire savings into building a business that had thrived. As soon as bombs started falling on Baghdad in 2003, however, my largest client cancelled its contract and two other big customers totally shut down. Of course, my creditors didn’t care about the reasons I hadn’t been receiving payments on invoices we’d sent. They just wanted to get paid themselves.

My wife and I ran down the list of changes we’d have to make: downsize to a smaller home, cut the cord on cable television, maybe even cancel my life insurance policy. While we had to cut plenty of budget items to the bone, I kept scraping together a few bucks every week to keep paying that term life policy. After all, I joked at the time, it meant that I was at least worth more dead than alive.

Staying the course through tough times
Those were scary times. I’m in good financial shape now, but the recent economic downturn has many of my friends in the same place I was that night. For most Americans, the cost of maintaining a term life insurance policy amounts to the same price as a meal for two at a casual restaurant, maybe less. And it’s easy to consider dropping life insurance when you’ve been laid off or you’re facing another kind of money crisis. It’s not like things can get any worse, right?

In fact, they can.

Economists from Columbia University and the U.S. Federal Reserve examined death statistics and found that laid-off workers face a higher mortality rate than colleagues who remain steadily employed. Over twenty years following mass layoffs, discharged workers were, in many cases, up to twenty percent more likely to suffer medical or mental problems that led to their deaths.

Why staying current on term life insurance saves money
Of course, if your life insurance is tied to your job, you typically need to establish a new policy. Many financial advisors urge clients to maintain a term life insurance policy in addition to coverage offered as an employment benefit. This way, you can maintain coverage and enjoy consistently low monthly premiums. In addition, you won’t have to subject yourself to new exams when you change jobs.

I’ve been able to supplement my term life coverage with employer-provided insurance over the past few years, secure that my primary policy can care for my loved ones regardless of my employment status.

Getting healthy can help cut life insurance costs
I’d like to say that I kept the same insurance provider throughout the past decade. Instead, I made a switch when I learned more about how term life insurance providers rate risk. If you smoke, if you’re overweight, or if you lead a sedentary lifestyle, you may feel more of a pinch when you pay your monthly premium. I’ve never smoked, but after my wife started dragging me to the gym a few times each week, I found a life insurance provider online who was able to shave ten dollars a month off my payment. It’s a small reward for doing the things I should have been doing all along to take care of myself.

If you’re thinking about canceling your life insurance, what are some other items in your household budget that might make more sense to cut? Are there ways you can kill two birds in one stone, by spending less on unhealthy items and keeping your premiums intact? Tell us about your challenges.

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Related Articles at Get Rich Slowly:

• Living with and Learning from Layoffs
• Insurance
• How to Make Yourself Recession-Proof
• When the Going Gets Tough, Get Back to the Basics
• Can Saving Prepare Us for the Oncoming Recession?

Today, I’m departing from my usual fare by presenting a snarky and controversial guest post by Mr. Moneybags, a personal finance blogger I’ve recently come across. I’d characterize his writing style as risque, highly edgy and different (I had to tone down his post somewhat, in order to run it here). For a much tamer look at the gender debate in finance, check out our posts: Managing Money: Men vs Women and Traditional Jobs For Men and Women. I now offer the floor to Mr. Moneybags.

Is there equality for women in the workforce? Sure, you can talk about equality all you want and acknowledge the plight of women and what they have gone through in the last century to achieve socio-economic parity, but the corporate world still seems to disagree.

Employment Discrimination & The Gender Wage Gap

In 2006, the United States Census Bureau determined that women earn an average income of $32,515 every year, while men bring home $42,261 worth of bacon -– that’s a difference of $9,746.

Over the average person’s work life (24 to 65 years old) of 41 years, this amounts to men making almost $400,000 more than the average woman. If you invest that same $9,746 every year growing at an annual compounded rate of return of 15%, that amounts to almost $26 million — the equivalent of 15 beach homes, 260 Porsches or 2.6 million Danielle Steel novels.

So, what is the reason that men make so much more money than women? Is it because men can lift heavy boxes and lug them across far distances? Or could it be because of that thing which requires a magical blue pill for optimal performance?

The purpose of this article is to find out why these compensation differences exist, and what women can do to close that earnings gap short of a sex change operation (a.k.a. Plan B). Let’s get started!

How To Break the Glass Ceiling: 13 Fortunate Women

Of all the companies in the mighty list of the USA’s largest 500 publicly traded companies known as the Fortune 500, only 13 companies (or 2.6%) have had female CEOs. Outside the Fortune 500 companies, the ratio is even lower at 1.5% of CEOs being women.

So, why is this the case even though women now receive about 6 out of every 10 college degrees, have earned more than 40% of MBA designations at top colleges and have performed better than their male counterparts in executive roles at many companies (according to some reports)?

Let’s take a closer look at some of the female CEOs of the top companies:

From left to right we have: Patricial Woertz (Archer Daniels Midland), Indra Nooyi (PepsiCo), Irene Rosenfeld (Kraft Foods), Ellen Kullman (DuPont) and Laura Sen (BJ’s Wholesale Club).

So, what do they all have in common? They all look like men.

And there’s your problem — instead of accentuating the wonderful aspects that makes a woman a woman, these ladies instead lopped off their beautiful tresses and donned pantsuits worthy of taking on Jon Travolta on the dance floor (Saturday Night Fever, anyone?).

And there’s your first tip: if you can’t beat ‘em, join ‘em! Want to make as much money as a man? Then look (work and play) like one!

Of course, many women won’t take kindly to such a proposition, so unless you are fine with changing your identity a la John Travolta in Face/Off then you may want to keep reading.

Do What You Love And The Money Will Follow? Don’t Think So.

In a study performed by some super economists at the University of Chicago, a few rather interesting facts were discerned about the reasons for the gender wage gap, one of them being this:

On average, women score slightly lower GPAs than men and take fewer finance courses.

What does this have to do with the wage gap? Remember those Wall Street jobs that were under scrutiny during the financial crisis? Think of that and everything you have ever heard in the news about the financial industry, and remember the ridiculous salaries and bonuses that the top executives got at these firms and compare it to the average person’s. Now you have your answer.

If you don’t take finance courses or learn about finance and business in some way, chances are that you’re not going to join the financial industry and end up taking your very own jet (forged out of solid gold) to work every day like the rest of us. Since fewer women join the high-paying financial industry, it follows that fewer women are making as much money this way.

Why is this the case? I can assure you that most men don’t fight to the death to get an internship at a leading financial institution because they enjoy studying Aroon Oscillators and utilizing the Elliot Wave Theory. They do it for the money.

Women, on the other hand, know that the size of their bank account doesn’t compensate for the lack of size of certain appendages, and instead, do things that they actually enjoy. It is for this reason that women take the courses they want to study in college as opposed to where they can get the easiest marks, even though doing so may result in a lower GPA. Of course, this may ultimately result in a lower salary as well — but then again, they’re not in it for the money in the first place.

The Other Side of Having Babies

If you are a capitalistic pig such as myself who only cares about money, you may want to avoid having children. Why?

After ten years in the workforce, only 10% of male MBAs went for six months or more without working, compared with 40% of female MBAs. If that wasn’t enough, over the first fifteen years of their careers, women work fewer hours than men (52 per week versus 58) -– adding up to a whole six months’ worth of experience over those 15 years.

In short, women work less than men.

Is it because women would rather kick back in their sofas and read the latest novel of the Twilight saga rather than drag themselves to work? Or is it because they would rather take a “personal day” off at the mall complete with a credit card with no limit?

Not exactly.

It seems that for women, their family and children are more important than working day and night in order to be able to lug some big fat moneybags home –- and I don’t blame them.

Having money is fine and dandy, but having no one to share it with kind of defeats the purpose. This is something that too few men seem to realize. Still, more and more women are straying away from directly competing with men for the high-paying executive positions.

So if you’d like to risk living the rest of your life childless or with a broken family in exchange for a few extra bucks, then I wish you the best of luck.

Parting Thoughts

In the end, we see that women aren’t really equal to men. In fact, it may be the case that women are infinitely superior to men in every way but one. But if not for these differences, how else would I be able to pass on my legacy and build a little army of Mr. Moneybags that will assist me in conquering the world?

Shall we therefore conclude that in order to be on the right track to greater financial success, that we should learn to sacrifice some of the things we love for the money, and perhaps even risk the possibility of growing old without kids or a family?

In fact, why don’t I help you discover and evaluate some of these points. Please head on over to my lair at BigFatMoneybags.com where I will show you how to make some big fat moneybags through conquering the stock market and the world of business, and by cleverly managing your finances.

P.S. I’ve written controversial posts on my own site in the past (such as how a few cows can cause more environmental damage than a parking lot full of Hummers or how to get rich by being racist) but this is definitely my most controversial guest post (so far)!

Mr. Moneybags is the richest being in the universe to have ever existed, and accidentally invented the stock market in 16th century France while searching for a way to smuggle pilgrims across the country. He and his blog are determined to prove to the world that the subject of money shouldn’t make you want to douse yourself in gasoline and run into a forest fire.

Employment Discrimination, The Glass Ceiling & The Gender Wage Gap

Congressman Barney Frank of Massachussetts is leading the charge towards increased federal regulation of consumer loan products, including credit cards, personal loans, and even pawnshop loans. Basically, the new legislation being proposed would create a new Consumer Financial Protection Agency.

As the name implies, the idea behind the new legislation is to protect unwitting consumers from being lured into loans they cannot afford, as has happened with astonishing frequency over the past ten years, with credit cards and subprime mortgages being the two main forms of “predatory lending.”

However, as highlighted in this report from the National Center for Policy Analysis, the new consumer credit regulations could have the unintended effect of lessening the availability of credit to small businesses, which are a major job creation engine of the U.S. economy.

Unsecured Personal Loans: Are They Already Regulated?

Particularly with respect to unsecured personal loans, such as online personal loans, it may be helpful to begin the discussion with an overview of how, and how much, unsecured personal loans are regulated.

Or, in this case, are not regulated.

In fact unsecured personal loans are among the least regulated consumer financial products available today. Payday loans and credit cards loans are already regulated by the Feds, but personal loans are largely free from regulation as of now.

Notably, the reality that personal loans are largely unregulated creates an interesting dynamic in the sense that neither borrowers nor lenders have much protection against default of the terms of the loan. This reality makes personal loans one of the last forms of finance out there that is truly reliant on mutual trust.

More Paperwork, More Cost

One thing you can be sure of, if the new legislation passes, is that the paperwork required of lenders will increase substantially. That is just the way government works.

Increased paperwork has always meant increased cost. More cost related to corresponding with government agencies, more cost for government-mandated record keeping requirements, more cost for various bonds and insurance that may or may not be required by the new regulations.

Today, borrowers can go online, fill out a simple personal loan application, and either be approved or not approved within 15 minutes, and then, if approved, get a personal loan wired right into a bank account.

That brand of simplicity would almost certainly vanish if the new financial regulations are imposed.

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