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Show DAILY HERALD Cl THE WALL STREET JOURNAL LOVE ' HI I MONEY STARTING OUT By Shelly Banjo rs Tirn. week, alter six years, write my final Love column: So this week, it seems only fair to give readers their final say. Theyre commenting on two recent columns: the question of who should pay for college, and whether parents should offer a loan backed by a written contract when their kids want some item they can't afford. ; , Last week I wrote that my son wanted to buy a videogame sys-tem, and asked his mom and me to lend him the money. I said ' .that I was considering a tactic that I had heard about from others: I would agree to the loan, but only if my son signs loan documents pledging to repay the debt or lose access to the videogame system. It seemed like a good way to teach turnabout the responsibilities that come with debt. 7 Judie Leimer, in Lincoln, Ca--. lit, says that many years ago, When her son was in seventh, grade, he wanted a computer" and begged us to buy it and he would make the payments. We refused, and told him he had two choices: either save up' from his allowance or go to the .bank and get a loan...'; Impatient: he went' to the bank. The bank manager, Ms. Leimer. says, let him borrow-againthe value of his savings account. .. Next . y. S, . jp6- v . - , , 7 A - " ? V. . A ! not a right . O -level . . , : in-la- semi-offici- al it, . . ' theres, -; MARKETWATCH - v Don't Shut Down When spending and debt get out of control, our first reaction may be to shut down and ignore the problem. But leaving bills - and disregarding ; .unopened credit-car- d statements will only .. aggravate the problem If you feel frozen, take some kind of action. It is never too late," says Judith Cane, a , financial planner in; Ottawa. . tionalize that they need these things for. work and they buy a new suit or fancy telephone without making sure they can. afford it, says Amanda dayman, a financial therapist in New York.. But putting items on your credit cards or taking out loans you cant afford will ; bus-ban- . Call your . companies credit-car- d to explain why you were fete on a payment and see if they can waive the late fee; visit a debt counselor; tell your parents or a trusted friend that you are . struggling. Try to be more aware of finances. .your. ' Make an appointment with yourself to pay your bills and know whats happening' with your money "on a regular basis,;. . - . day-to-d- ; ' Ms. : dayman says. When you know exactly, how much money is coming in .and going out, you will be. more, inclined to plan for your purchases and avoid when things; go .. feeling-anxiou- . wrong. only leave you feeling worse, she says." . . . . . , pick-me-u- ' rs -- sing . ing those problems first.Over-spendeare- usually feeling overburdened in another area of life, such as work, family or finances she says Some use shopping to reward themselves after a hard day at work or a bad experience. New. to. the business world, twentysomethings may feel, pressure to dress for their adult roles Others dont want to be left out by friends who may be. making more money than they are, so they frequently splurge on lavish meals or nights out. . "People feel anxious and ra- . ;.;. . Ask yourself Why am I solving my problems with shopping?" Ms, Yarrow says. Identity what triggers the urge to spend money and focus on solv- : ' . The Urge, to Splurge . ' . . - . gs . . nt entry- twenty-somethin- nancial consequences. Spending money can be like a food addiction we become reliant on something as a soothing mechanism but it ends up the problem,", exacerbating says Kit Yarrow, a professor of business psychology at Golden Gate University. ' It youve been overdoing the retail therapy, try. to identify any underlying problems and then take control of your fi- -. nances with a spending plan. ; . Instead, put a plan in place. Long before heading to the. mall, figure out why you want to buy a particular product and what you can realistically afford. If you decide you really need that work suit, spend the time to find the best deal. Instead of putting expensive. items on credit, save a portion of your paycheck every week and buy only when youve saved enough-Carefplanning eliminates, impulse buys and frees up your money for more meaningful items. Alternatively, if you are seek' scale down, ing a says Ms. dayman. In place of the suit,' buy an inexpensive . bracelet, or replace the trip to the mall with a cup of coffee with friends, , . m lowed him to repay the debt cial needs and Mom and Dads faster than the repayment utility bilL And it means they' schedule called for. wont' face potential conflicts with a spouse frustrated that On the other side of the dis'; cussion is Laura Ristrom Goodfamily dollars have to. fund, an life.. . man, in Tucson, Ariz., who .. Kris Green, in Fullerton, writes, that by becoming the banker, you are giving your' son agrees with our approach the message that it is OK to go 7 for two reasons.. First, he says, into debt to satisfy your wants. the stark reality for parents to- -, It seems to me that this is the day is the foture of Social Secuattitude shared by many with rity is too uncertain to count on and mortgage ; to ease our retirement. That life. ;' huge credit-car- d And the final wont goes to means, he says, that we must debts.,. make our own retirement a critiKevin Burns, in Branford, She says kids' will have Conn., who says my logic Is plenty of time later in life to cal, financial priority flawed because college bills typlearn how to responsibly man, As such, Mr. Green 'says, age debt. Your job as a par"parents must not break the ically arrive two decades before retirement, and that those 20 ent," Ms. Goodman says, "is to bank to finance a childs education. teach by words and actions the years are "usually the time in when to use it." Why not teach But he also sees another ben-- ; which' earnings and savings your son, she says, that there efit to making the children bear rates climb significantly." As a are few things worth going into some of the financial responsi-- , result, he says, an anemic redebt for? bility forcollege. As parents, tirement fond when college Me Green says, "our greatest. bills are coming in is not necesA couple of weeks' ago, I. ; financial, responsibility to our. sarily a sign of coming penury,. asked: Who pays for college?; kids is. to develop our chilFor the most part theres plenty of time and income and savings My wife and I are setting drens financial acumen.. ' 'He got his Mr. Green says that his expe-- : opportunity to catch up." computer and a aside some money to pay for Even if parents later haye schedule of weekly payments,; our kids .college education. Hut rience relying on student loans she says. He quickly .realized .'. were not saving nearly enough 'meant. that I quickly learned, to consume less than they had that .to repay such a debt, he to cover all their costs. The reahow to budget, refinance and planned, they still get the satisneeded a Job, so he began workfaction of having strategically son is simple: We think the best consider the costbenefit asing a paper route. That ulti- - gift we can give our kids is parpects of paying off these loans invested the money in their or extending the time horizon kids our highest value portfomateiy gave way to him design1 ents who are financially to potentially leverage the inter- - lio. in retirement.. ing and printing fliers soliciting est.taix deduction.; As I wrote, this wilt ensure yard work iri the neighborhood. ; In the end, Ms. Leimer says, that; our kids .wont .feel : Another1 reader, in Saddle Jeff Opdyke covers personal finance for The Wall Street Jour- d beher sons desire to earn the torn or guilty-chooRiver, NJ., says she and her Email: lovemoney(3w$Uom naL alHie finanloan tween their own families' are fortunate enough to money tQ repay . verwhelmed by the pressures of a new job and city and living on an salary, many turn to retail therapy." While a shopping spree of--, ten results in a short-termood boost, overspending and impulse buys eventually beget remorse, sadness and deep fi- a secret that comes with this strategy (which is no doubt the reason that fids reader would rather .not have her name revealed): Once the kids are out of school, she and her husband will pay off all or part of the loan as a surprise. This way, she says, the kids get the best of both worlds: They will truly make the most of the opportunity, yet they wont be burdened by loans as they start Yet : - in be able to pay for college and grad school for all three of our children, but. we have never let on that we will foot the bill 100.- Instead, theyve told their kids to expect to have to pay part of the freight, in part because her parents paid for her degree ami, she says, 1 never felt like I folly appreciated the value of my education." She says she hopes that by having her kids take out loans to help pay for college, they will appreciate the value of their de- -' gree more and realize that "a college education is a privilege, f . A Sunday, August 31, 2008 .Email: shelly.banjo3wsjofn ; ByRuthMantell to on grim outlook for the market has. been more workers to reassess, their career options. And its tempting many to con-- ; template a retum.to school to buff up skills or gain completely new ones, More education can add significantly to earnings, according to a report from the Census Bureau. In 2006;' among workers 18 and older, those with less worth the expense,says Mr. Fertaking into account what employers will be looking for in ;, guson. coming years, in addition to ; Do some homework, he skills that are Currently in desays, to be sure that the skills mand, says Ronald Ferguson, an you would be acquiring are ' economist and lecturer in pub-- , both in demand and suffilie policy at Harvard UniversK ciently compensated to make tys Malcolm Wiener Genter for the time and effort and exSocial Policy. pense worth it. .7 There are lots of different ' Start by figuring but how ' ways; fo arrive at estimates of much you are likely to spend. what the future is likely to bring, For the 2007-200- 8 academic tuition and fees he says. Some combination or year, than a diploma; understanding of the current mar- averaged about $6,200 at pub--, earned an average of $20,873, ket and of what informed sources lie four-yea-r institutions- and. compared with $31071 for those have to say about future demand about $23,700 at private four-yewould be prudent" with a diploma, nonprofit institutions, aca for bachelors $56,788 degree, cording to the College Board. Find Local Demand. Try to find and $82,320 for a masters, pro. Unless a degree is necessary, fessional or doctoral degree. out which types of employees workers may be better off finanWhile such financial incenand skills are needed iri your cially if they take just a course tives may be alluring, experts, community, experts say, .or two or pursue a. certificate - ' Ms. Russell, says, you can .program. say there are a number of im" And make sure to Take advanthat start by asking career counse--; portant considerations lors at community colleges, as. tage of low-coor free offermust be taken into account bed fore pouring cash well as checking out state and ings from community colleges, into more schooling: local career centers. Having a local groups and employers, such as programs teaching babetter understanding of your loDetmnfeia Yaw Strengths and cal community is more import sic computer skills. An' extenweaknesses. out tant than looking at it from a sion dass might cost a couple Figuring whether you need to go back to national level, she adds. hundred dollars or less. school should involve a Once you know which skills Prospective students also to determine what are needed, you can tailor your. should keep in mind that stuskills you already have and how. education. More schools are codent loans may be1 harder to come by these days given reyou can build upon them to nab operating with local employers a job, experts say. to offer courses that suit workcent credit-markproblems, Put together a picture ot place training needs, Ms, Russays .Mark Kantrowitz, pubwhat you are good at and what sell says. lisher of FinAid.org, a Web insite offering financial-ai- d , Local training entities are you would like to do, says Deborah Russell, director of workmuch more in tune with devel-- . formation. force issues at AARP. If there is a oping training that corresponds Lenders have tightened criskill gap: the next piece is to figto demands that employers teria, he says. If you have a bad or marginal credit score, ure out where to get those skills. have," she adds. Its also important to deter you are going to have a harder " LmmAu ; mine whether acquiring time obtaining a student loan." new TVCfQn VM CDRnNl MnCTflS. skills will require taking just a Make sure your financial gain course or two, or earning an from increased training is Read more at marketwatch.com entire degree. And workers should make sure to factor in : . family and social responsibiliTAl OF TWO OTIE& Home prices ki the Washington, D.C, area have .: ties, Ms. Russell adds. ( Those with tight schedules . nearly doubled in this decade, even after sharp declines. Since January 200ft ' .the nation's capital leads 20 metropolitan areas tradeedty the S&PCase-may want to consider taking onShiller homeprlce indexes, While the Detroit area has fared worst line . courses, or immersion " , courses that are more intensive 25(1 v.'--- 1 but last for a shorter period ... WashingtMvDXy 200 than a traditional course. Going back to school may look very different to different people," she says. There may be caregiving obligations that 100 Jan. 2000 prices Detroit may preclude you from taking 50courses during the day or The ; , . . ; . high-scho- ol - ar high-scho- ol . . st hard-earne- et . : . StatoftheWeek . ... - evening.; Also keep in mind that a decision should be future oriented, -- '00 L JL '01 JL. '02 '03 1 '04 'OS 5. about If your investments falling on some annuities, making grow, you can periodically .. lock in your accounts appreciit cheaper for you to buy a ated value as the basis for fupaycheck. ture withdrawals. . Much like a 401(k) or indi-- . vidual retirement account, a If your investments decline, variable annuity allows you to the guarantee ensures your income will remain steady. invest money in a menu of ; stock and bond Despite their popularity' ENCORE with investors, GMWBs dont funds and defer get much respect from many; paying tax on financial advisers. Thats you can. gains: After age cause their high costs can generally convert the account balance into a. lifetime stream push the. already hefty charges' bf payments or. withdraw it on a variable annuity to more without penalty. ' than 3 of assets a year. :. But if the market tanks, But recently, Old Mutual Fithe value of your assets will nancial Network Securities , too along with the payment . and Fidelity Investments stream youll derive. unit have introTo address that concern, uk duced cheaper offerings. For a $50,000 investment ; surers in recent years have been offering a "guaranteed with a GMWB guaranteeing in-- . minimum withdrawal benefit come for one persons lifetime or GMWB. and a basic death benefit, fiThis option ensures youll . delitys Growth and Guaran- be able to withdraw annually teed Income annuity charges 1.75 of assets per year and : for life at least a set percent-- , ' the Old Mutual Beacon Adviage of the amount you put in Some also sor annuity may carry a fee as typically, about low as 135. guarantee an annual return of Fees. are '06 '07 JL SancStanMItari . . . . 59, .. . . . '. ce :. . : ; . 5. (At Old Mutual, but not fidelity, the foe goes down as the amount you invest .. creases.) In contrast, the average ' variable annuity charges 0.4 0.75 for to 2.44, plus a GMWB, says Frank ' . OConnor, director of insur- ance solutions at Momingstar. With the vast boomer generation retiring and looking for ways to. secure income,, companies are coming out with different types of guaran-- . tees and making them mare widely available for lower t : costs, says Mr. OConnor. ; '. To get these lower1 fees, , fidelity, youll face trade-off- s, for example, offers just two investment choice, both with 60 in stocks and 40 In 7 bonds.. Youll have to meet : .minimum investment require- ments of $25,000 at Fidelity ' and $50,000 at Old MutuaL' GMWBs are complicated, so in-.- . . . . . . read the prospectus carefully before buying. . By Anne Tergesee : New Choices, Higher Yields in Muni Funds Over the past year, hind . have rolled but d exchange-tradefunds that access give investors low-coto municipal INDEXING bonds. At the ..same time, the & ETFS credit crunch has weighed bn these bonds, making them a good buy, fi- nancial advisers say. .. . Municipal bonds are typi-- . .. cally issued by state or focal ; governments and are often free of federal, state and focal income tax. Due to their tax advantages, muni bonds usu- - ' ally yield less than compare-- . ble Treasury bonds. But the subprime meltdown and credit crisis have dragged down these bonds, partly because some companies that insure mortgages also insure munis. At the same time, safetyseeking investors have flocked to Treasury bonds, driving their prices up and yields down. (Bond prices and yields move in opposite directions.) The result: Many muni bonds now yield as much as or more than comparable Treasurys. : st . . Investors interested in ' muni bonds have a slew of new fund choices. Barclays Global Investors last September launched the first muni-bon- d ETF for U.S. investors, the iShares S&P National Municipal Bond Fund (MUB). That was quickly followed by competitors like PowerShares Insured National Municipal Bond Portfolio (PZA) and SPDR Leh- -. man Municipal Bond (TFI). Van Eck Global has launched muni-bon- d a lineup of AMT-foe-e ETFs, which avoid bonds that are subject to the alternative minimum tax. An ETF sembles a conventional mutual fund but trades on an exchange like a stock. A key advantage of these new funds is their low costs. In traditional muni-bon- d mu- tual funds, expenses can eat up much of the funds typi- cally modest returns. The average muni-bon- d mutual fund charges annual expenses of L0I of assets, according to investment research firm Momingstar. But the iShares ETF charges just . ; 0125, while the SPDR fond charges 0.2. That doesnt mean ETFs are always the cheapest choice. The Investor shares of Vanguards Long-Termutual fond, for exam0.15. charge ple, Online calculators can help you determine if muni bonds are right for you. Using a tool . . m pt ' at investinginbondsxom (dick on Calculators), you can enter your state of residence, net taxable income and status, and see the yield you need to earn on a taxable security in order to ; match the tax-fryield of a muni bond. ... If you believe tax rates are going up, you have another reason to consider muni bonds. "Assuming higher federal tax rates, that will give you some kind of cushion in your munis. Theyll be worth more, not less, says Marilyn Cohen, chief executive officer e of Los Angeles money management firm Envision Capital Management. By Eleanor lalse tax-filin- g . . . - . fixed-incom- |