Second/Third Tier College Ripoffs

Finally, an article from Forbes that asks the question, ""Why do second and third tier schools cost as much as Harvard?". The author says the answer is because they can!

We believe that as long as the gov't provides the funding needed for college loans and colleges are free to charge what they want because there is no free market for education, the situation will exist.

• The author believes that over the last 30 years the demand has risen for college education and supply has not kept up.
• But financially unsavy parents are also the problem and their notion that a higher price makes something better. The author puts it best: " For parents like that, in fact, price may be part of the appeal. It's what's known in college circles as the "Chivas Regal effect" - a lofty price is a sign of status; discounting would tarnish the image."

http://money.cnn.com/2009/04/10/news/economy/kaplan_college.fortune/index.htm?postversion=2009041007

Open a Roth IRA

From Kiplinger and Yahoo Finance: "Why You Need A Roth IRA."

1. You can invest $5,000 per person per year. (Couples $10,000).
2. You do not get the tax deduction now, but you will not pay tax on the tax deferred growth and when you retire you are not forced to take Required Minimum Distributions/ or pay tax on distributions if you decide to take money out.
3. Beware of the income limits.
4. You can withdraw your contributions (not earnings) at any time without tax penalty.
5. Special tax breaks for home, education and medical expenses.

If your company is not giving you a match in your 401k, open a Roth.
http://finance.yahoo.com/focus-retirement/article/106797/Why-You-Need-a-Roth-IRA;_ylt=AirBN2_8XNyDO4jZaU369Zi7YWsA?mod=fidelity-startingout

Preserve your wealth by planning your estate

There are many reasons why people fail to plan their estates.

Some people mistakenly think that the rules that are in place will adequately distribute their property.  Others think that a will is a magic document that encompasses the beginning and end of an estate plan.  Still others think they have not accumulated enough wealth to require estate planning.  Some people even think that their lawyer, accountant, broker, or some other professional has already efficiently and intelligently planned their estates.

These are just some of the many misconceptions that lead people to plan poorly.  It is unfortunate to see people spend so much of their lives living frugally and worrying about money only to give a big chunk of it away to Uncle Sam rather than their loved ones.  

The first step of planning your estate is to recognize the importance of a good estate plan.  

Trump / Kiyosaki Videos

Check out the following, free, Trump / Kiyosaki videos: 

• Adversity  
  
• Art of the Deal
• The Power of Debt
• Increase Your Financial IQ
• Keys to Success
• Respect

It is refreshing to hear the insights of these financial literacy educators.  

http://www.richdad.com/RichDad/trump_kiyosaki3.aspx?utm_campaign=New%20Exclusive%20Trump/Kiyosaki%20Videos&utm_medium=Email&utm_source=VerticalResponse&utm_term=Watch%20the%20videos%20now.

Who can you blame for the financial crisis?

Time Magazine has identified 25 people to blame for the financial crisis.

Note that these people were supposed to be some of the smartest and best educated in the US. But their mistakes indicate that they did not have common financial sense, or they chose to personally profit by (mis)using it.

The article does not mention how much money they have made from their decisions and that they will not have to pay back this money even though they brought down the financial system and helped bankrupt their companies.

http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350,00.html

Lessons Learned From Madoff Fraud

The Wall Street Journal gives a listing of very prominent banks, investment funds, and rich investors who lost millions (sometimes billions) from Madoff's fraud:
http://s.wsj.net/public/resources/documents/st_madoff_victims_20081215.html

You should learn the following lessons from this fraud (and be better than these investors who didn't adhere to the following advice):

1. Never invest in something or someone just because of name recognition.

2. Always investigate for yourself if something is too good to be true.

3. Double, triple check. Get more than one opinion. Never trust just one advisor (broker, lawyer, accountant).

4. Never assume that just because a person has a degree/or is a specialist that they are competent, or have your best interest in mind.

5. Never assume that the specialist has done the correct planning/paperwork/advice for you.
Investigate for yourself what needs to be done.

6. For the average investor- Diversify, never invest a majority, or even a large minority, of your assets with one person, fund, stock, or company stock.

7. Most importantly, understand what you are investing in, or what you are doing at the advise of a broker/lawyer/accountant. If you don't understand it either: educate yourself about it, or don't go through with it.

Much Education Not Worth The Price

ABC News reporter John Stossel profiles the plight of many students:

• "Promised" a great job after graduation and pushed by high school/college advisors to take out massive amounts of loans, young people have large loans they can never get rid of and lack the job they were promised
• Do not get a major that is not directly relatable to a real world job
• Instead, many teenagers should recieve technical training at a trade school or community college for low cost that will give them real world skills and a good job with no loans

http://abcnews.go.com/Business/Economy/story?id=6654468&page=1

John Bogle Investing Advice

Advice from legendary Vanguard founder John Bogle for the middle class investor:

• Beware of bullish market forecasting
  
• Importance of asset allocation, and bond allocation based on age
  
• Be wary of mutual funds with short superior performance
  
• Low cost Index funds outperform actively managed funds
  
• Be wary of alternative commodity asset classes
  
• Be wary of financial innovation
  
  http://online.wsj.com/article/SB123137479520962869.html
  

Buy vs. Rent Calculator

This is an interactive tool from the NY Times to give you an understanding of whether it is cost efficient to rent or to buy a home. In graph form you can see the number of years to break even and average annual savings from owning or renting. You can also calculate:

monthly rent
home price
down payment
mortgage rate
property taxes
annual rent increase
annual house increase
summary costs of renting
summary costs of buying house
more advanced settings
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html#

The Story of Many in One Lawyer's Plight: Doing a Good Job is Not Enough

An ABA Law Journal article, "Laid-Off Lawyer Competes with Other Attorneys for Paralegal Jobs," describes how the economy has impacted one 43-year attorney in Los Angeles: 

• She lost her job. 
• Her husband, also an attorney, has been losing clients.
  
• They fell behind on mortgage payments.
• The stress caused trouble in their marriage, and they separated. 
• She is applying for paralegal jobs, and has been rejected: She said, "After a while with the paralegal jobs, the listings said, 'No attorneys.' I think it's because they figured attorneys would leave as soon as they found work as lawyers." 

The article says that things "have been looking better for her" because she landed consecutive temporary jobs.  This attorney pithily captures the spirit of the times: "I did a great job at work and I thought that was enough, and it's not anymore."

http://www.abajournal.com/weekly/laid-off_lawyer_competes_with_other_attorneys_for_paralegal_jobs

Tax Breaks In New Stimulus

The New York Times writes about new tax deductions/credits and expanded programs that are available under the stimulus bill . These include:

income tax credit
lower taxes on unemployment
subsidies for Cobra coverage and extended eligibility
car buyer sales tax deduction
increase pell grant
increased education tax credit
expanded 529 plan expenses eligibility
home buyer credit
amt patch
http://www.nytimes.com/2009/02/13/your-money/13money.html?ref=your-money

A Good Job Without College?

Check out this article form CNN Money: "Good jobs with a high school diploma."  

http://money.cnn.com/2009/02/06/pf/saving/toptips_findingwork_willis/index.htm?postversion=2009020613

Dave Ramsey Built His Business from Nothing

See this classic article on how Dave Ramsey built his business from nothing:

http://ftp.media.radcity.net/ZMST/daily/IS032405.pdf

Notice a few key traits that make Ramsey successful:

• He has a willingness to learn from mistakes.
• He approaches things from a blank slate, beginner mentality. He asks lots of questions and learns a lot.

See the history of Dave Ramsey's company, The Lampo Group Inc., here:

http://www.daveramsey.com/etc/cms/index.cfm?intContentID=2797

Lesson from Robert Kiyosaki: Assets Can Make Your Dreams Come True

The story behind Kiyosaki's new book with his sister, Rich Brother, Rich Sister: Two Different Paths to God, Money and Happiness, demonstrates how Robert Kiyosaki lives by the message he teaches.

With his sister in financial trouble, the renown author of Rich Dad, Poor Dad did not pay all of his sister's bills. He created an asset with his sister, a book. This answer can be the lifeline with her current problems. It can also help her fulfill her other dreams. Robert Kiyosaki's pitch to his sister captures the possibilities: "We'll promote the book on a world tour. Eventually, you can start your own book series. I can see the titles now: Karma. Reincarnation. Compassion."

Read the rest of the story here:

http://www.latimes.com/news/science/environment/la-me-beliefs9-2009feb09,0,1589137.story

Are law schools "exploiting" 80 - 90% of their students?

Criticism of Law Schools
Speaking at a January 9 program, sponsored by the Association of American Law Schools, the dean of New York Law School, Richard Matsar, said, "We should be ashamed of ourselves. We own our students' outcomes. We took them. We took their money. We live on their money . . . And if they don't have a good outcome in life, we're exploiting them. It's our responsibility to own the outcome of our solutions. If they're not doing well . . . it's gotta be fixed. Or we should shut the place down." (As transcribed on TaxProfBlog.)

Law schools may have many failures, but the shrinking legal market is showing that the failure of an education costing more than $120,000 to pay off for so many students might be the greatest one.

Some Questions to Consider
Does law school pay off as an investment?

• Is going to law school a "lottery" to be in the top 10%, as some critics are suggesting?
• Are monetary gains the only reason students go to law school? If there is another reason, are law schools the most efficient means to the goal?
• Assuming the recent criticism of law schools is justified, accurate, and correct, what can law schools do to remedy the problem? How can law schools get more students hired?

Brief Reflections
Criticizing law schools and higher learning institutions is easy. Thinking about ways to create better systems is much harder.

Ultimately, I believe that students and prospective students should be aware of the current problems and they should engage in a cost/benefit analysis to see whether the very expensive investment of law school will pay off by leading them to their goals.

Resources on the Criticism
The recent criticism is well summarized by the ABA Law Journal in "Law Dean Says Schools 'Exploiting' Students Who Don't Succeed."
http://www.abajournal.com/news/law_dean_says_schools_exploiting_students_who_dont_succeed/print/
TaxProf Blog succinctly excerpts the critical commentary and has interesting comments that follow the excerpts in "Is the Law Professor Gravy Train Over":
http://taxprof.typepad.com/taxprof_blog/2009/01/is-the-law-professor.html

The podcast of the AALS Committee on Research Program (Jan. 9, 2009), "Citations, SSRN Downloads, Carnegie, Bar Passage, Careers: Competing Methods of Assessing Law Schools" is available online:
http://www.aalsweb.org/fri/commresearch.mp3

H&R Tax Info

Confused about your upcoming tax return?
Confused about technical tax terms?
H&R Block has tax tips divided by topic and a more detailed index with helpful information including:

• credits and deductions
• college
• housing
• marriage and family
• investment income

http://www.hrblock.com/taxes/tax_tips/index.html

401k Hidden Fees You Pay

Read this article to understand the changes in 401k fee disclosure required and the types of administrative fees you may be paying beyond the expense ratio that a mutual fund charges.

Learn how to analyze what kinds of fees that you are paying and if they are reasonable.

http://online.wsj.com/article/SB122099798601116727.html

Technical Finance Vocabulary

Confused about the increasingly complex vocabulary that you heard in the news?
Have you heard technical terms on the news and want to know what their importance are?
Become more educated about what is causing the current financial crisis.

http://www.riskglossary.com/link_letter/link_a.htm

State Colleges Better Bang For Buck

SmartMoney and PayScale looked at the question: Are private colleges' high tuition worth it compared to state schools? They based their rankings on what the graduates earn in their early and midcareer vs. the debt they have to take on. They developed a "payback ratio" and here are their findings:

• The top state school has a three to one payback ratio compared to the highest private school
• State schools are a better deal than most of the private schools, including ivies.
• If you factor in loan costs, the private schools are at the bottom of the payback list.
• Many of the top state schools are attracting greater numbers of top quality students.
  

http://www.smartmoney.com/personal-finance/college-planning/the-best-colleges-for-making-money/

http://www.smartmoney.com/Personal-Finance/College-Planning/colleges-that-pay-off/?page=all

In the end, it's your money. So, the onus is on you to educate yourself about money.

A NY Times article -- "The 17th Floor, Where Wealth Went to Vanish" -- talks about a Ponzi scheme run by Bernard L. Madoff, which let to losses of around $50 billion for investors.
http://www.nytimes.com/2008/12/15/business/15madoff.html?pagewanted=1&_r=1&hp

Large banks and other firms entrusted their clients' money with Mr. Madoff: "Scrutiny is also falling on the many banks and money managers who helped steer clients to Mr. Madoff and now say they are among his victims."

It will be interesting to see what the investigation of Mr. Madoff unfolds, but there are three important lessons at the outset:

• Too many people, including wealthy people, lack financial literacy. They readily entrust their wealth to others, including large financial institutions, to manage it for them. If you work hard to make the money, you should work hard to preserve it. The onus is on you to educate yourself -- to gain financial literacy -- and to do due diligence about the people and institutions that are supposed to help you preserve and grow your money.
• If you don't gain financial literacy, you expose yourself and your friends to schemers.
• Don't trust all professionals! Professionals are made equal. Just because a professional has a degree or works for a large institution doesn't mean they have your best interest at heart.