mon·ey
Check our New Trivia Contest “Buzz Word” Page 5!
[muhn-ee] n·ies, adjective noun, plural mon·eys, mo –noun including exchange, any circulating medium of and deposits. coins, paper money, and dem
paper money.
ed as a medium ny article or substance us a alth, or means of exchange, measure of we and deposit or of payment, as checks on dem cowrie.
mination of a particular form or deno currency.
nt. $$$$money of accou ed, or
capital to be borrowed, loan oney. invested: mortgage min terms of money
Money Matters
in pieces of wealth considered old, silver, or other metal g by public auconvenient form stamped dium of exthority and issued as a me e. change and measure of valu The Quarterly Financial Newsletter from Fleet and Family Support Centers Mid-Atlantic Region
In this Issue Financial Trends ››››››››››
› Superheroes fighting for your financial solvency › Car buying made affordable! › Looking at someone else’s credit report › Ncatch ationally, the Roth option has been slow to on › Where do your financial loyalties lie? › Financial Literacy Survey
June | July| August 2012
Think you know the answer??
Financial Trends ››››››››››
Superheroes fighting for your financial solvency
Resources ››››››››››
› Your Social Security benefit: Thinking › ›
about it a little could save you a lot BUZZ WORD Trivia My Money Matters
Bits and Pieces of Interest ›››››››››› CFS Bookshelf ››››››››››
› The Real Cost of Living: Making the Best Choices for Your Life and Your Money
Financial Town hall meeting Financial Preparation for Deployment
June 20th
8:30 a.m. FFSC dam Neck Deployment specialist, Pat Henderson, will join us and offer tips on how to keep your money organized while you are on deployment. Call 433-2912 for information or directions.
Help me Sp
iderm
an! Save me fr om the evil...em bezzler(?).
This may not be your parent’s superhero cartoon plot, but here it is. Marvel Comics and Visa Inc have joined forces to release a 16-page comic book in which Spider-Man and The Avengers learn about personal finance while matching wits with a bank embezzler called ‘Mole Man.’ The two companies have timed things to take advantage of the excitement surrounding the blockbuster summer flick. The hope is to teach kids about basic money concepts. The episode which is entitled “Avengers: Saving the Day,” begins with a clueless SpiderMan asking the Avengers to explain the various functions of a bank.
Marvel comic book editor Bill Rosemann has been quoted as saying “In an uncertain world, understanding how to save and properly budget your hard-earned money is one of the keys to personal success.” Want to check it out? Um…for your kids that is. Here’s the website: http://www.practicalmoneyskills.com/resources/free_materials/. In print and online, the comic book will be available in eight languages. “Who the hell wants to hear actors talk?” ~H.M. Warner, Warner Bros., 1927
CFS Material Website http://www.cnic.navy.mil/norfolksta
This website contains the electronic Financial Planning Worksheet and other training materials. Reproduction of this publication in whole or part is authorized and encouraged in PODs and unit bulletin boards.
1 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
Financial trends ›››››››
Car buying made affordable! You are going to replace your current car; it is just a matter of time. When that time comes, you can either pay cash or get a car loan. We’d like you to consider a few numbers as you look out into the future and imagine your next ride. According to www.cars.com, the average price of a new car is up to $28,000. First, the cost of financing a $28,000 car for five years at 6%: $542 (monthly payment) X 60 months (length of loan) = $32,520 (total amount repaid with interest) Is there is a better way? Let’s say you recently paid off your last car and resolve to keep it another 5 years before replacing it. What would it cost you to save up and pay cash for your next car? $455 (monthly deposit to savings) X 60 months (number of deposits) @ 1% (interest on savings) = $28,000 (TOTAL COST TO YOU IS 455 X 60 = $27,300) So, if you saved up for five years instead of financing the car for five years you would have spent $5,220 less: $32,520 (cost of financing a car) $27,300 (cost of saving for a car) $5,220 (how much less you spend on the same car!) We all know there is another car in your future, so why not start saving? It’s only going to make your purchase more affordable.
Looking at someone else’s credit report We all know we can get a peek at our own credit report, but are you allowed to look at someone else’s credit file? The answer is yes. There are several situations where it’s a good idea. Those situations generally fall into two categories. We’ll call it the casual approach and the more business-like approach. First the casual approach. You suggest to another that they go to www.annualcreditreport.com to get their credit report at no cost and you go over it with them. This approach is fine for non-business relationships, such as before you become married. In his book ‘Financially Ever After’, author Jeff Opdyke suggests that a couple go over each other’s credit report before the big day as a way of finding out about the financial tendencies of your betrothed. Other examples include reviewing a teenagers credit file with them and to make sure their identity has not been stolen, or doing the same for an aging parent. Some circumstances call for a more businesslike approach. If you plan to hire someone to work as a nanny or do other jobs in your home. What if you plan to take in a roommate? How about when you are considering someone as a business partner or just lending them some money?
Permission and Purpose
To obtain another person’s credit file, you have to follow certain rules. First, you need that person’s permission. Get them to sign a piece of paper explicitly agreeing to give you access. You also need a purpose, which means a legitimate business reason. You will also need some detailed information about them such as full name, social security number, date of birth, address (including previous), etc. Once you have the above, you can go to any of the three credit reporting agencies (Transunion, Experian and Equifax), register and obtain the report. You should know there is a $15 charge (more if you want the score). As an alternative, the other party can go to the credit agency site, pay the fee and arrange for a secure copy to be sent to you. Either way, be advised there are Fair Credit Report Act rules you need to live by that apply to protecting privacy. If you obtain someone’s credit file without taking the steps to get their permission, you could be in for a nasty lawsuit.
e n Ja e o D
“When a person says it isn’t the money, but the principle of the thing, it’s the money.”
2 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
~Frank Hubbard
Financial trends ›››››››
In the market for a car? Ever wondered what it is like to be part of the fast and furious action at an auto auction? Quarterly, Naval Station Norfolk and Gene Daniels Auction conduct an auction on all vehicles impounded on local bases. This usually involves anywhere from 50 to 70 cars and trucks. A couple of weeks prior to each auction, the list of cars, including VIN numbers, are published by the Flagship newspaper and available at www.genedanielsauctions.com. The cars are available for viewing for a couple of days prior to the auction at building SP314 near gate 4 onboard Norfolk Naval Station. All cars are sold “as is” and no test drive is possible prior to the auction. It can be a risky approach. To bid on a car, a person needs a state issued form of identification (your military ID won’t do). If you are the successful bidder, you’ll need to put a minimum of 10 percent down on the day of the auction and have the balance paid in full within five days. Payment can be made via cash, major credit card or certified check. Once payment is made, you will receive paperwork that will enable you to obtain a clear title for your new ride.
“Inflation hasn’t ruined everything. A dime can still be used as a screwdriver.” ~H Jackson Brown
Nationally, the Roth option has been slow to catch on The Roth IRA became available in 1998. Eight years later, tax laws were altered to allow the Roth 401(k). So far it has not been quick to catch on. A February 2012 Wall Street Journal article pointed out that Fidelity Investments, which administers retirement plans for 12 million workers in several companies, found that only 6% of plan participants with the option of enrolling in a Roth 401(k) choose to do so. At Charles Schwab Corp., that figure is 15%, and at Vanguard Group it is 9%. Participation rates in the traditional pre-tax 401(k) generally run two to three times higher. There are several possible explanations for the slow adoption rate. Since the traditional pre-tax 401(k) has been around much longer (since 1978) they are better understood, hence more likely to be embraced by the employee. Also, many companies have begun automatically placing employees into the available retirement account. For companies that offer both a Roth and traditional 401(k), the traditional option is almost always chosen as the default account. Any matching contribution would go to the traditional 401(k), not the Roth.
Finally, older employees tend to make the highest contribution because doing so drops their taxable income significantly. This tax-effect is something they have become accustomed to. A switch to the Roth option will raise the current tax bill and could even place them in a higher tax bracket. A 2010 AON Hewitt Associates study found that the greater the age of the worker, the less likely they were to contribute to a Roth. Their review of 20 different retirement plans found sixteen percent of workers in their 20’s contributed to Roth 401(k)s while those in their 50’s did so at only four percent. Despite the relatively anemic participation in Roth accounts, their availability in company retirement plans is now about forty percent. Actual participation continues to inch up as younger employees increasingly choose the Roth option.
“The question isn’t at what age I want to retire, it’s at what income.”
3 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
~George Foreman
Financial trends ›››››››
Where do your financial loyalties lie? Let’s say you’re running short of money, but you still have three payments to make this month: the mortgage, the car and the credit card. If you could only afford one, which would you pay? This is a question that credit reporting agency, Transunion, studies annually. The answers have been evolving in the last few years. Traditionally, the mortgage gets paid above all. Not only do you need a place to sleep, the reasoning goes, but the home has been seen as a solid investment that should be preserved. But, when real estate values fell like rain and the foreclosure process slowed to a crawl, loyalties shifted. Two years ago, the credit card payment took over as the debt most likely to be paid, with the mortgage second and car loans third. To reach these conclusions, Transunion studies the credit reports and payment histories of people who have all three of the payments and look to see which are most likely to be delinquent. They found that consumers were most loyal to the car loan. The mortgage was a distant third.
Specifically, they found for a consumer who had all three with one past due, the auto loan was past due 9.5 percent of the time, 17.3 percent were delinquent on a credit card and a whopping 39.1 percent were behind on their mortgage. The shift in the payment hierarchy was seen across the board in all 50 states. In general, the researchers found that the “auto first” effect was strongest in states such as Florida and Michigan where real estate values have plunged the most and weaker in Texas where the housing market suffered less. The researchers speculated that a return to normal payment hierarchy patterns is unlikely until housing values stabilize.
“You cannot establish sound security on borrowed money” ~Abe Lincoln
Financial Literacy Survey April was national financial literacy month. To mark the occasion, the National Foundation for Credit Counseling is unveiling the 2012 financial Literacy Survey results. This is the sixth year in a row for the survey. Rather than “You’ve come a long way,” it may be more appropriate for this year’s theme to be “Wow, we have a long way to go.”
A few highlights:
• 56% don’t have a budget • 77 million don’t pay their bills on time • 39% carry credit card balances month-to-month • 39% have no retirement savings • Only 34% have seen their credit report in the last year There are some disturbing trends out there. Perhaps the most disturbing is that all of the above noted conclusions are worse than the year prior. That is, fewer have a budget, more are behind on bills, and a greater percentage of respondents have credit card balances. Much of this is understandable since the country seems to be grudgingly emerging from a deep recession. The unemployment rate is still over eight percent. We remain hopeful about next year.
“Mutual Fund investors are confident they can easily select superior fund managers. They are wrong”
4 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
~John Bogle
Resources ››››››› Your Social Security benefit Thinking about it a little could save you a lot. Ever think about Social Security? That is, beyond whether it will be around when you finally qualify to collect benefits. Recent news releases from the Social Security program’s trustees have the giant retirement program running out of money earlier than previously estimated. Even if retirement is 25 or 30 years away, it may be worth it to ponder what your Social Security check may look like and especially when you will begin receiving it. With some exceptions, the longer you delay taking the benefit, the more you’ll get. If you were born between 1955 and 1960, your full Social Security benefit begins between age 66 and 67, creeping up incrementally. If your birthday falls after 1960, your full benefit begins at 67. You should know that most don’t wait for the full benefit. During the recent recession, applications to begin Social Security spiked. Presently, a full 70 percent of recipients signed up to receive Social Security before their full
retirement age according to the Social Security Administration. About half of those who qualify begin taking the payments at age 62, usually because they needed the money. The full benefit is reduced by about 25 percent when starting at 62. Why wait? Because the benefit grows about eight percent every year you delay, until age 70. The average monthly Social Security payment today is $1,232. So, a person taking the early benefit would receive only about $924. Waiting until age 70 would boost it to approximately $1,552 per month in today’s dollars*. At what point does it make sense to wait? This is where you roll the dice: if you live to 82, you will come out ahead by waiting. Live until 85 and you will have received almost $25 thousand more in benefits. If you are in poor health or desperately need the money, you may have no choice but to be-
efits
n JOhn Be
gin early. This is where financial planning enters the picture. Your ability to squirrel enough away to forestall Social Security payments as long as you can could enable you to live a long and healthy life with less chance of running out of money. * Social Security payments are indexed for inflation.
“A third of people age 65 and over rely on Social Security for 90% or more of their income” ~Social Security Administration
Think you know {BuzzzW } } d oorrodr } d the answer? {Buzz WW
{Buz
Trivia
Founded in 1956 by an engineer named Bill and a mathematician named Earl for an initial investment of about $800, this company tried to sell its product to 50 large financial companies, but only one, American Investments, responded and bought the product. Based on the principle that “data, used intelligently, can improve business decisions” their idea eventually caught on, exploded in popularity, and today is ubiquitous in the lending industry.
All I did was answer the question! You can too!
Best known by the abbreviated version of its name, what is the company and what was the product? Think you know the answer? Enter our contest for an FFSC Gift Basket give away. LOTS OF FUN STUFF! Submit a correct response no later than June 22, 2012 and you are in the running to win. * Please email responses to wally.barstow.ctr@navy.mil *If you win, you will need to come by the Norfolk FFSC to pick up the gift basket. Good Luck!
John Crowell
Do you or someone you know want to be included on the email distribution list to receive this publication?
Then contact Wally Barstow at 444-2102 or by email wally.barstow.ctr@navy.mil and start receiving “Money Matters” today! 5 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
Resources ›››››››
My Money Matters TSP’s dynamic duo Most of us have heard the conventional wisdom out there about the path to riches: pay yourself first, start early, be consistent, don’t try to time the market, etc. It is relatively uncommon that someone actually follows through on all of it. How about a wife and husband team that both took it all to heart? Meet Christian and Caleb Garner. Both began TSP at a 10 percent contribution rate when they entered the Navy, both have TSP PIN’s, enabling them to spread their money around the available fund options (which they have), both have been consistent throughout their careers
in keeping the contributions at or above their initial contribution percentage. We won’t divulge the sizable sum these financially savvy first class Sailors have amassed thus far, but we don’t mind speculating what it will eventually become. If we apply the historical yields of the asset areas in which the money is invested, consider the amount accumulated so far, and the rate of ongoing contributions the total comes to about $1.2 million dollars by the time they are 62. Will these investment partners reach their goals of early retirement and financial independence? The smart money is on the Garners.
Christian & C aleb Garner “It is not circumstances, but the way we react to them, that determines our feelings.” ~Dale Carnegie
Last Issue
Buzz Word Trivia Answer! Question:
Everyone with earned income is required to have payroll taxes (Social Security, Medicare) deducted. Income taxes are different. The amount you ultimately pay is determined by the tax code. Certain taxpayers, because of credits and deductions, pay no income tax at all. According to the Congressional Committee on Joint Taxation, what percentage of Americans paid no federal income tax in 2010? a. 12% b. 23% c. 51% d. 58%
Answer: C. 51%
20
The average number of months American consumers wait before they upgrade their phone. The average cost? $60 for a cell phone, about twice as much for a smart phone. About 60% of consumers now own smart phones. Source: consumer marketing research company - NPD Group
6 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
bits and Pieces ›››››››
We’re number 3!
Parade Magazine recently released their list of the hardest working cities in the country. The rankings were based on such factors as ‘Hours worked per capita’, ‘Willingness to work during personal time’ and ‘Dual income households.’ Dallas, TX was number one, but coming in a respectable third place: Norfolk, VA.
This is bad
comes to financial issues, the majority of the time mom is the go-to person for advice. Also, about three-quarters of parents said they’re not always honest with their children about their finances, with 43 percent saying they haven’t told the truth about how worried they are about money. Finally, more parents think it’s more likely that life exists on other planets than think that Social Security, in its current form, will be available by the time either they or their children retire.
Charles Scwab and Associates recently conducted a phone survey in which 35 percent of respondents aged 18 – 34 said they didn’t know what an IRA is. 53 percent said they were not sure about some details of an IRA such as tax deductibility, and deferred earnings. Many did not know the ‘R’ in IRA stood for retirement.
How much is that baby in the window…
This is worse
Cerulli Associates and Phoenix Marketing International conducted a joint survey in which they asked investors who were actually using a financial advisor how much they were paying for the advice. 31 percent of investors were not sure how their advisors were compensated, while another 33 percent actually thought they were getting the advisors’ services for free. That’s right: nearly two-thirds of investors polled didn’t understand what the financial advice was costing them. Hint: There is no free lunch. “The more you talk about something, whether it be problems or solutions, the bigger it gets. Which of the two would you want to enlarge?” ~Bill O’Connell
Mother knows best
T. Rowe Price Investment Group has done some polling on the issue of kids and money. Here’s a sampling of what they found: when it
Your pet and your money
According to Petside.com, vet visits cost pet owners an average of $505 last year, and those whose pets faced serious illness spent more than $1,000 on average. Eight in ten pet owners took their animals to a vet in the past 12 months. Cost was cited as the main obstacle for a third of those who did not visit the vet. Most pet owners trust that vets aren’t suggesting unneeded treatments.
Stock market investing trends
Bankrate.com recently conducted a phone survey, a portion of which dealt with stock market investing. Seventy percent of respondents said they have become less likely to invest in stocks over the course of the last year (2011 was generally a pretty flat year for US stocks). However, income seems to be playing a role. For those earning over $75K no such stock market inhibitions seemed to exist.
“A successful man is one who makes more money than his wife can spend. A successful woman is one who can find such a man.”
Ever wondered how much baby care costs? Check out the Baby Cost Calculator link at www.babycenter.com. Expenses are generally broken down as either ongoing costs (daycare, diapers, formula, college savings acct,…) or one-time costs (car seat, stroller, crib,…). The website offers a comprehensive list of things for which you are going to spend money.
How do you measure up?
Financially that is. At ING’s new interactive website, you can plug in information about yourself and find out how you compare to others in terms of your relative preparation for retirement. For example: at your age, income level and salary, how much have you accumulated compared to others of the same age group? The results offer an interesting comparison to people just like you. No need to input any personally identifiable information. www.ingcompareme.com.
You better start saving for it
Like to spend money? Ever thought about how much you are going to spend in your entire life? A recent analysis by the U.S. Bureau of Labor Statistics estimates that on average, people spend $1.5 million by the time they turn 50, an additional $1.4 million if you make it to 81, and a total of $3.5 million if you go all the way to 100. “Nothing is more expensive than a missed opportunity”
~Lana Turner
7 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic
~H Jackson Brown
FFSC Financial Classes
Financial Bookshelf›››› The Real Cost of Living
• The Art of Money Management • Banking and Financial Services • The Basics of Retirement Planning • Car Buying Strategies
Making the Best Choices for Your Life and Your Money
• Consumer Awareness • Command Financial Specialist Training • Command Financial Specialist Forum • Command Financial Specialist Refresher • Credit Management • Developing Your Spending Plan
By Carmen Wong Ulrich
• Division Officer Financial
Leadership Seminar • Don’t Bet Your Life On It • Financial Responsibility in the Military
In 2006, Carmen Wong Ulrich published Generation Debt, a book about the debt patterns and solutions for 18 to 34 year olds. It was a huge success for her with several themes resonating loudly with her target audience. Since then, she has become a favorite financial contributor for everything from the Dr. Oz Show to Oprah’s XM radio program as well as several magazine titles. With her second book released in 2010, she attempts to broaden her audience and hits on a variety of topics left out of the first book. The insight is keen and often spot on. While most financial advice books go in succession from developing a budget, beginning to save, establishing credit, investing, etc., the approach here is quite different. Chapter one, entitled The Real Cost of Home, deals head on with purchasing a home in the wake of the housing crisis. As with other topics, the analysis goes beyond the objective reasoning involved in most financial decisions and brings up the personal aspects. For example, she explains that accelerating the repayment on a mortgage rarely works out in favor of the homeowner (investing the money would be more productive), but acknowledges that for many the home represents much more than just another investment, hence paying off the mortgage can become the most important goal. For those in the military, she is adamant: if your plan is to relocate within five years, don’t buy a home, rent instead. This, she feels, is the least we should have learned from the housing meltdown. All chapter titles begin with “The Real Cost of ” with subject matter dealing with marriage, family, college, bad habits, credit cards, and finally savings and investing.
• Homeownership • How to Survive the Holidays
Financially • Identity Theft Protection • Insurance • Million Dollar Sailor • Savings and Investing • Smart Start Finances for Newlyweds • TSP-Your Key to Financial Independence
For each topic, the reader is urged to consider the personal aspects of their behavior. How did it develop, what drives it, the pros and cons of changing. At times it’s easy to forget you’re reading a financial book as she reviews habits such as smoking, drinking, caffeine addiction and even distracted and reckless driving. The approach is similar to that taken by Tisdale and Kennedy in The True Cost of Happiness, and by Vicki Robin in Your Money or Your Life. A thoughtful, emotion-based discussion on financial decisions. The final chapter is on the subject of investing. Here, she joins the chorus of financial authors advocating a long term, low cost, index fund approach as a way of putting the odds in your favor over time. So, if you are looking for an escape from the dispassionate, ledger style format of most financial advice books in favor of one that might speak your language, this may be it.
For class schedules and to register for classes, call an FFSC near you, visit our website or scan this mobile code with your smart phone.
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“A person with an experience is never at the mercy of a person with an argument” ~CS Lewis
www.cnic.navy.mil/navylifema Do you have comments about this publication, a topic you would like to see covered or a book to be reviewed? Contact Wally Barstow at (757)444-2102 or wally.barstow.ctr@navy.mil
8 | Money Matters A Quarterly Financial newsletter From Fleet and Family Support Centers Mid-Atlantic