Category: Personal Finance

What’s up with the economy?

Are you tired of watching your savings earn .02% per year and seeing your investments lose money each year? You’re not alone.

You probably feel a lot like this guy – you just want someone to “FIX IT!”

Let’s establish a few things up front:

  • The economy moves in cycles:

economy

We go through times of high unemployment, low savings rates, negative stock market growth, etc. and we go through times of low unemployment, great stock market growth, etc.

It’s all part of a cycle.

There are times, of course, when the recessions and troughs last longer than others, but overall that is how the economy works. No one knows how long or short any part of the cycle is going to be.

  • The “stock market” is made up of a lot of different components.
    There are individual company stocks, company and government bonds and money market savings. It also includes things like commodities (gold and silver), oil and real estate. You can invest in all of these.

  • Most people invest in the stock market through their employer (401(k)) or through another retirement account such as an IRA. Typically this is in the form of mutual funds, which is a collection of corporate and government stocks and bonds. Throughout the article when I refer to investing in stocks I am talking about stock mutual funds. Most people shouldn’t be purchasing individual stocks.

  • Past performance in the stock market doesn’t predict what it will do in the future, but it can give you an idea of trends.

So how do you make or lose money in the stock market? When the market is down in a recession or trough stocks generally lose money. This can be caused by many things. Most recently the drop in the market has been caused by economic issues in China and the low price of oil, along with a continuing sluggish economy in the U.S.

In the first two weeks of 2016 the stock market has lost about 8% of its value. 8% in two weeks! Everyone’s invested assets are taking quite a hit right now.

Let’s take a look at some historical data.

Dow Yearly Return Histogram

The graph above shows the Dow yearly return frequency. You can see that there are years that the return on your investments would have returned more than 70%, and years it would have lost more than 20%. About 25% of the time the market has lost money.

This next graph shows the range of returns for a portfolio of 100% stocks, 100% bonds and 50% stocks and 50% bonds between 1950-2013.

In a single year the stock portfolio returned between -37% and +51%.

If you invested for 5-years that range narrows to -2% and +28%

If you go out to 20 years, the range narrows even more to +6% and +18%.

range of returns

The average annualized returns for stocks during those 20-year periods is 11.1%.

You have to decide if you are willing to ride out the negative years in hopes of gaining in the good years, and how long your time horizon is.

Here are some things to keep in mind:

  • The further out your time horizon is the better chance you have of getting a positive return, with the stock market returning the most. If you don’t have at least 5 years, or even better 10 years, you shouldn’t be invested in stocks.

  • The shorter your time horizon is the more you should be invested in conservative assets such as bonds. That means that you can be invested in stocks the younger you are, and move your money to bonds the closer you get to retirement.

  • A good rule of thumb is that you should take 100 minus your age and that’s how much you should invest in stocks. If you are 40 years old you should invest about 60% in stocks (100 – 40 = 60%). If you are 55 years old you should invest about 45% of your money in stocks. Your risk tolerance level might be higher or lower than that, though. Here is a good free online tool that will help you determine your risk tolerance level: http://njaes.rutgers.edu:8080/money/riskquiz/. Because I have a higher risk tolerance I have more of my assets invested in stock mutual funds.

  • Remember that there are additional ways to invest your money. While most of our retirement money is in the stock market, we are saving up money to invest in some real estate as well. A diversified portfolio is best.

  • What you don’t want to do is invest in stocks, panic when it goes down and pull all your money out, then when the market goes back up move your money back in to stocks. That’s a losing game, and you will never get ahead that way. You are buying high and selling low, which is the opposite of what you should do. A lot of people do this, however, which is why there is a big difference between investment returns and investor returns. Investment returns assume you leave the money in the market, while investors move their money around when things get bad.This chart helps me to remember that I need to stay invested:

    missed opportunity

    This chart assumes you invested $10,000 between Dec 31, 1993 and Dec 31, 2013. During that time the stock market had some great years and rough years.If you kept it fully invested you would have ended up with just over $58,000. If you missed the 10 best days (which often come right after the worst days) your return drops to $29,000. If you missed the 40 best days your return is actually negative – your $10,000 drops to $8,147.

    People miss the best days all the time though because they switch from stocks to cash when the market goes down, miss the up-side, and invest when stocks are back at their most expensive.

I realize that all these charts and statistics don’t make you say, “Well, I’m sure glad my portfolio is losing money!” No one likes to see their portfolio drop for even a day, let alone for a few years in a row.

Every time it feels different, like we aren’t going to recover this time. I understand it. I get it. If you need help, find a financial planner who can help you set goals and stick to the strategy you outline together. Make sure it is someone you trust and has your best interests at heart. Someone who will teach you and encourage you and cheer you on.

As always, feel free to leave comments or ask questions below, on Facebook or in an e-mail.

3 day cooling off period

Our home still has the original windows in it with metal frames. It lets in a lot of heat in the summer, and a lot of cold in the winter. They are single-pane and incredibly inefficient, so we have been in the market for new windows.

We’ve had two door-to-door salespeople come by offering to do a quote. The first guy wanted 2.5 hours for the appointment, and never would give us an estimate until he looked at every window and pointed out all the problems (tip for that type of salesperson – we know we need all new windows, you don’t need to spend 10 minutes analyzing each one!). The second guy was really nice, but we fell for a marketing ploy. “We don’t do any type of advertising. In a 3-square mile area we pick two homes and you become our marketing home. We put a sign up in your yard for 60 days and direct people to look at your windows. For that, we give you a big discount.” He sold us on the virtuous of their 3-pane windows and lifetime warranty. (It turns out, by the way, that you don’t need 3-pane windows unless you live in a really cold or hot place.)

We needed new windows, so we decided to take the plunge and put 20% down and signed the contract. The windows would take about 8-weeks because they special order them for your home.

The salesman gave us a bunch of paperwork and we set it aside since this was just before Christmas. Christmas and New Years came and went and we started doing some research (well, asking friends on Facebook. That counts as research, right?). It turns out that those who had new windows put in paid about half of what we paid. We decided to get out of the contract. However, just above where we signed it said this:

“YOU, THE BUYER, MAY CANCEL THIS TRANSACTION BY DELIVERING WRITTEN NOTICE TO THE SELLER AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION.”

Oops….we were well past the third business day, but I figured I would contact the seller anyway since they hadn’t done any work yet and the windows hadn’t been ordered. I e-mailed the salesman and his regional manager and got an e-mail back basically saying, “Tough luck. You signed the contract and we’re going to make you stick to it.” We went back and forth – “do you really want your marketing home to be an unhappy customer? Let’s look at doing something different – maybe double-pane windows instead.” They basically said, “No, you are beyond the third business day. We’re holding you to it.”

I decided to do some actual research, though, to see if there was any way out of the contract. I first went to the Federal Trade Commission’s website and found an article about the FTC’s cooling off rule (http://www.consumer.ftc.gov/articles/0176-buyers-remorse-when-ftcs-cooling-rule-may-help). It basically says that as long as the sale was over $25 and not at the seller’s place of business the seller has to do three things:

1. The seller must tell you about your right to cancel at the time of sale
2. The seller also must give you two copies of a cancellation form (one to keep and one to send if you decide to cancel your purchase) and a copy of your contract or receipt
3. The contract or receipt should be dated, show the name and address of the seller, and explain your right to cancel

The seller had done two and three, but not the first one – he neglected to tell us about it. I sent the article to the regional manager and he said, “You are beyond the third day, but I’ll check with the company owner. You’re not getting out of this contract. We had a Utah lawyer write the contract and it complies with Utah law in all matters.”

While I was waiting for him, I did more research. I went to the Utah Division of Consumer Protection website (http://www.consumerprotection.utah.gov/) and it turns out that Utah law (http://www.rules.utah.gov/publicat/code/r152/r152-11.htm) states:

(a) The notice required shall:
(i) be a conspicuous statement written in dark bold with at least 12-point type on the first page of the purchase documentation; and
(ii) read as follows: “YOU, THE BUYER, MAY CANCEL THIS CONTRACT AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THE TRANSACTION OR RECEIPT OF THE PRODUCT, WHICHEVER IS LATER.”

I had something here – their contract neglected the words “OR RECEIPT OF THE PRODUCT, WHICHEVER IS LATER.” I called an investigator with the Utah Division of Consumer Protection Services, explained the situation and asked if “receipt of the product” is a receipt like you get at a store or physical receipt of the product. She confirmed it is physical receipt of the product. She said the company was in violation of Utah law because their contract didn’t have that provision on it and that we were entitled to a full refund until the windows are installed. She also said that she was going to investigate the company to be sure they add that to their contract, and that if they didn’t promptly refund the money her office would take over and get it back.

I sent this all in an e-mail to the company and shortly thereafter got a phone call from the regional manager. “Of course it’s no problem. We’re going to let you out of your contract and as a thank-you for helping us realize we didn’t have the correct wording on there we’re willing to take $2,000 off double-pane windows if you would like to do that.”

We aren’t taking them up on the offer.

We learned some important things:

1. We’re putting up a no soliciting sign. I know this won’t stop all salespeople, but it will help. In general, door-to-door salespeople use high pressure tactics and count on you not being able to do any research. They will have slick advertisements and endorsements convincing you to take action now. Our sign will say that youth are welcome to knock. After all, we still want some Girl Scout cookies =)

2. It pays to do your research. If you are in Utah you have until the physical receipt of the product to cancel. If you live outside of Utah check your own state’s rules (if you find it for your state, please put it in the comments below).

3. Don’t sign a contract without reading it in full.

4. Do some comparison shopping before you sign a contract.

5. Don’t be pressured by “you get 15% off, but only if you sign today” or “we only need one more marketing home in your area.” They know that three days is too short to really do any comparison shopping, so they will try to pressure  you to buy that day. Inform them that you are going to comparison shop and you aren’t worried about not getting the best price from them today. If you decide to go with the company insist they give you the discount they were going to give you that day.

6. Talk to your friends – Facebook is a great start – about companies they used and if they liked or didn’t like them. We have since received several referrals for window companies and will likely go with one of them.

We almost had to learn a really expensive lesson, but we will be sure to follow all of these from this point forward.

Remember, if you find your state’s rules, please post them in the comments below.

The Difference

For each attitude or behavior listed below indicate whether it describes you Very Well, Well, Slightly or Not at All.

Very Well Well Slightly Not at All
I feel stocks are worth the risk.
I devote money to personal savings each month.
I save regularly for emergencies.
I have invested for retirement.
I am significantly reducing or I have eliminated outstanding debt.
I have a goal to be financially comfortable during my working years.
I have a goal to retire comfortably.
I know what I want to do for a career and I am actively pursuing it.
I have a goal to accumulate $1 million.
I own a home (or plan to).
I am confident.
I am optimistic.
I am happy.
I am competitive.
I am a leader.
I have a college degree or I am actively working on getting one.
I socialize with friends at least once a week.
I exercise at least 2-3 times per week.
I read newspapers (or online news) regularly.
I am married (or plan to be married).

According to research conducted by Merrill Lynch, Harris Interactive and Jean Chatzky, these twenty attitudes and behaviors were the most critical in determining individuals varying levels of wealth.[1]

The initial question asked by Chatzky was, “Why do some people seem to move relatively easily from a paycheck-to-paycheck existence into comfort or wealth, while others get stuck or – worse – fall back?”

The study, which included hundreds of questions and was administered to more than five thousand individuals, identifies four levels of wealth, along with what percentage of the population falls into each category:

  • The wealthy – 3%
  • The financially comfortable – 27%
  • The paycheck-to-paycheck – 54%
  • The further-in-debtors – 15%

Chatzky and her team found that the wealthy can select at least twelve of the twenty attitudes and behaviors listed above as describing them “very well”, the financially comfortable have at least ten, while only half of those in the paycheck-to-paycheck group or further-in-debtors have more than three that describe them “very well”. In her book, The Difference, Chatzky stresses that most of the above factors are things that can be learned, and that moving up is not only possible, but inevitable if you focus on the right things.

There are, of course, other important factors. While these were identified as the top 20, Chatzky also discusses gratitude, giving, hard work, long-term thinking and others.

Here is Chatzky’s description of those who understand the difference their attitudes and behaviors make and have achieved success in life:

“They knew what they wanted, they plotted a course, and they arrived. They’re not stagnant. That wouldn’t do. Every day, they think about what’s next and set about achieving it with intention and purpose. And today, as a result, they are surrounded by people they care deeply about – and who return the favor. They wake up happy and go to sleep fulfilled. And they don’t lose sleep at night worrying about paying that next bill or any other financial matter.”[2]

It does take time, after developing the attitudes and behaviors listed above, to move from one group to the next. On average, it takes about seven to eight years to move from paycheck-to-paycheck to financially comfortable, and an additional eight to move to a life of wealth. In can be done faster – in fact there were some people that moved from paycheck-to-paycheck to wealth in a total of about ten years. The research also showed the number one reason people slipped from financial security to living paycheck-to-paycheck is overspending.

So where does all of this data leave us? First, Chatzky says, is that you need to make a decision that you want to change and achieve higher levels of wealth. “You choose The Difference,” Chatzky says, “it does not choose you.” Second, you have to take action. Look through the list above and select some things you can begin to work on. Maybe you can start building up your emergency fund, or start exercising more, or focus on your career goals. Any step in the right direction is a good step to take.

For further discussion on this topic, I encourage you to read Jean Chatzky’s book The Difference.

Ryan H. Law, M.S., CFP®, AFC®

[1] The study and findings are discussed in detail in Jean Chatzky’s book “The Difference”  ISBN: 978-0-307-40714-6
[2] Chatzky The Difference pp. 2


     

 

 

 

 

 

 

 

 

Meeting Jean Chatzky at a conference

Safe Holiday Shopping Online

Black Friday and Cyber Monday have come and gone and according to the stats, it appears it was (another) record-breaking weekend:

  • The National Retail Federation reports that we spend about $52 billion on Black Friday. [i]
  • IBM, who tracks online transaction sales, reported that we spend between $1.5 and $2 billion on Cyber Monday.[ii]

I personally am not a big fan of Black Friday, especially now that it is creeping onto Thanksgiving. It seems more and more companies put their sub-par products on sale for the weekend. I am also not a fan of standing in line for hours in the cold or being trampled or assaulted by people fighting over a phone or yoga pants, but that’s beside the point.

Today’s Tip is about the remaining shopping that you will be doing. A lot of people will shop online for gifts, and I want to make sure you do so safely.

Here are five tips for sale holiday online shopping:

  1. Be sure the website’s purchase page is secure. It doesn’t matter if the rest of the site is secure or not, but be sure the page where you enter your credit card is secure. Here’s how you can tell – the browser should say https instead of http, and you should see a lock icon somewhere on the page. Here is what the Amazon.com sales page looks like:amazonScreen
    You can see both the https and the lock icon, which means it is a secure page.
  2. Don’t purchase items from e-mails unless you can verify where they came from. I get deals in my inbox from Walmart, Target, Amazon and many other reputable companies. E-mail marketing is cheap and effective. However, I also get deals like this one:“Get the New 32GB iPad Sold for $31.08!”This is from an e-mail send by “Adison Greg” from some website that no one has ever heard of. When you get those emails don’t click any links in them, including the “unsubscribe” link. Delete them immediately! They are Spam and many have some kind of virus. If you don’t click on them you will be safe.
  3. Use your credit card to purchase online. Never trust a website that doesn’t accept credit cards, or that encourages you to pay using Western Union or something like that. Your credit card has protection built in, as do websites like PayPal. If you never receive the item, you can file a dispute and your credit card company won’t charge you for the item.
  4. This is a tip I almost learned the hard way – I got an email saying that my purchase of 2 Nexus 7 tablets being sent to California from Walmart had been cancelled because they couldn’t verify the shipping address.  Concerned, I logged into my Walmart account and sure enough, there was an order for two Nexus 7 tablets that were scheduled to be sent to some random address in California. After doing some research I found that this isn’t uncommon – hackers get into the databases of these websites and can try to order things using your account. This only works if your credit card is stored on the website. Walmart.com, for example, stores your card without asking if you want it stored – they do it automatically. I immediately changed my password and deleted my credit card from their system. I no longer store credit cards on any websites – it only takes a minute to enter the card number and I feel more secure that way. Each time I purchase on Walmart.com now I immediately go to my account and delete the credit card number.
  5. Consider purchasing pre-paid shopping cards to purchase online. I know some people don’t like to use their personal credit card online, so they purchase pre-paid shopping cards and use that for all their Holiday shopping. A bonus is that you can set your limit and not spend any more than that.

Like many of you I do quite a bit of online shopping and will continue to do so. If you will follow today’s tips (especially tips 1-4) you can shop online with confidence.

 

Revolving Savings

As Christmas approaches and the stores get more and more aggressive with their sales, far too many people are buying on credit without thinking about how much they are spending and the consequences of paying the minimum payment.

A 2013 survey from Credit Donkey (www.creditdonkey.com) showed the following stats for those who charge Christmas on their credit cards:

  • 52% will pay it off in full in January
  • 23% will pay by the end of tax season
  • 13% will pay if off by the end of the summer
  • 6% by the beginning of the next holiday season and
  • 6% past the end of the next holiday season

There’s a better way to do it. In fact, it will help you will all of your known, but irregular expenses. I call it my Revolving Savings account. It’s a simple concept, but it works!

First, let’s identify what some of those known but irregular expenses are:

  • Holidays
  • Birthdays
  • Car Registration
  • Car Insurance (unless paid monthly)
  • Life Insurance (unless paid monthly)
  • Tuition and books
  • Vacations

Those are the most common ones that I see, but you may have a few other things that would fit in there as well.

The next step is to make a list of each month, then go through and plug all your known, but irregular expenses in there along with how much you are going to spend. Your calendar might look like this.

JANUARY FEBRUARY MARCH APRIL
Books: $300 Spring Break: $200
MAY JUNE JULY AUGUST
Dad Birthday: $20 Mom Birthday: $30
Books: $300
SEPTEMBER OCTOBER NOVEMBER DECEMBER
Car Registration: $85 Christmas: $200

The next step is to add up the total – in this case the total is $1,135. You then take that $1,135, divide by 12, and you get how much you need to save up each month ($95). If that amount seems too high, you have a couple of options:

  1. Reduce how much you are spending on these categories, or
  2. Figure out a different way to fund some of the items

As an example of the second option you may consider times when you get extra money, such as a tax refund, to fund some items such as your Spring Break trip and Car Registration.

You then put that $95 in a separate account (I call this my Revolving Savings account) that you only use to pay for these expenses.

Each December my wife and I sit down and review the previous calendar and draw up a calendar for the next year. Not only does this make it less stressful as you approach each of these events, but you can actually save money by buying things when they are on sale.

If you have major expenses that come up early in the year you may want to run your Revolving Savings calendar on a different schedule (i.e. July-June of each year instead of January-December). In the calendar above the person is going to need $300 in January, but only have $95 if they run their Revolving calendar from January-December.  If they ran their calendar April-March they would have enough money by the time they hit each expense.

As I said above, this is a simple concept, but it works!

Ryan H. Law, M.S., CFP®, AFC®

The Importance of Personal Financial Planning for College Graduates

by Ryan H. Law

Over the past 6 weeks I saw more than 500 graduating seniors come through my office to receive student loan exit counseling. Exit counseling is required for all graduating students with federal student loans.

Seeing all these seniors come through our doors has caused me to reflect on my own graduation and some things I did well as well as some things I wish I had known or done upon graduation.

Today’s post will focus on some specific steps that I think all graduating seniors should take (but don’t worry – it’s good advice for everyone – even if you haven’t graduated yet or graduated years ago).

Become financially literate

Financial literacy in the United States is, unfortunately, not widespread. Most high school students fail a personal finance exam (less than 50% of questions answered correctly) and college students score just 62%[1]. One of the best things you can do for your future is to become financially literate. If you can take a college course in personal finance I highly recommend it. In a 3-credit personal finance class you will learn about everything on this list and you will be more financially literate by the end of the course than most people in America. If you don’t have the option to take one on campus look into one of the many excellent Open Courseware classes – you won’t get any college credit for it, but you can’t beat the price tag – free![2]

As a part of becoming financially literate I recommend you learn the fundamentals of how the U.S. economy works. Learn about the business cycle, unemployment rates, inflation and interest rates. All of these things affect your personal finances, so a basic understanding of them is helpful.

Don’t get your financial advice from amateurs

Financial advice can be found almost anywhere – it is prolific on the internet and on the bookshelves at libraries and bookstores. However, I would caution you to be careful that you are not getting your financial advice from amateurs. For example, a few years back there was a taxi driver who “figured out the system to wealth” – day-trading stocks. A lot of people lost a lot of money following his advice. Be careful of advice received from friends or family about the latest “hot tip” on a stock.

Establish financial goals and take action to achieve them

You need to start thinking about some short and long-term financial goals. How soon do you want to pay off your consumer debt? How much money do you need at retirement? Do you plan to buy a home eventually? Do you plan to have children and send them to college? What are your plans for increasing your earning potential? I recommend you take some time to sit down and make some decisions about where you are financially, where you want to be, and how you plan to get there.

Learn to budget

No company would go one day without a good, solid budget. They understand how much is coming in, how much is going out and exactly where those dollars are going. Just like a business, you should also have a budget. A budget is not a record of where your money went (though that is important as well); it is a plan for where you want your money to go. Learn the process for budgeting then discipline yourself to take action and stick to your budget[3]. A key component of your budget should be to spend less than you earn and to pay yourself first. As part of your budget you should work diligently to build up a 3-6 month emergency fund. Click here for more information about budgeting, particularly budgeting software.

Develop a net worth statement and update it annually

A net worth statement is a snapshot of a particular moment in time. It should list all of your assets (everything you own that is worth money) and all of your liabilities (debts). Subtract your liabilities from your assets and you will come up with your net worth. You should update this annually to see how you are doing. Over time this number should increase.

Care about your credit

You should know what your credit report contains[4], what your credit score is and what steps you can take to improve that score[5]. Your credit score determines what interest rate you pay on loans, what your auto insurance will cost, if you can rent certain apartments, and in some cases if you can even get a particular job. Click here for more information about credit scores.

Pay off consumer debt as quickly as possible

Carrying consumer debt, especially credit card debt, is toxic to your financial goals. Pay it off as quickly as possible by paying more than the minimum and refusing to take on additional unnecessary debt[6]. Click here for more information about creating a debt-elimination plan.

Start saving now for retirement and take advantage of employer-sponsored retirement plans such as a 401(k) or 403(b)

If your employer offers a tax-advantaged retirement savings plan, such as a 401(k) or 403(b), take advantage of it! You will save on taxes now and can often get free money through a company “match” of your savings.

Time is your best friend when it comes to saving for retirement. If a 23-year old saves $3000 a year at 8% interest until he or she is age 65 they will have about $912,000 in the bank. If a 33-year old does the same thing they will have about $402,000. That is the power of compound interest!

Understand taxes, insurance and basic estate planning

Even if you pay someone else to prepare your tax return for you, you need to understand your own taxes. You should know your average tax rate, your marginal tax rate, and some steps you can take to reduce your tax burden. You should understand the difference between taking the standard deduction and itemizing deductions.

You also need to understand your insurance products. We spend a lot of money on disability insurance, life insurance, auto insurance, renter’s or homeowner’s insurance and other types of insurance. You should understand what your policy covers, what it doesn’t cover and how much you are paying for each one. You should occasionally check around to see if you can get lower cost insurance.

Everyone needs to do some basic estate planning. Even if you are single with no dependents you at least need a basic will, healthcare directives and a power of attorney. As your situation changes you should review these documents and update them and add other important estate planning documents as necessary.

Start an uncomplicated financial record-keeping system

You and your loved ones should know where important financial documents are and what each one is for. For example, if I were to pass away today I would want my wife to know exactly where my life insurance policies are and how to begin the process of collecting that money. The system I use is a fireproof file box with the HomeFile Organizer system[7]. With this low-cost system I can file and find auto titles, insurance policies, medical records, warranties and any other financial documents. Click here for more information about my financial record-keeping system.

Give yourself an annual financial checkup

I recommend that you set aside a day each year to give yourself a financial checkup. Review your goals, your budget, your net worth, your insurance and estate policies, your savings and your debt level and determine some steps you can take to improve in each area. As part of the review I recommend you choose a new personal finance book to read over the next year. Take this opportunity to reassess where you are and determine a plan for how to get to the next level.

Conclusion

Hopefully you got some good ideas about improving your financial situation from this list. I recommend you choose just one or two things from this list that you can take action on today. As that becomes a habit you can incorporate another item until you have implemented all of them that fit your situation.

[2] If you are looking for an excellent course I recommend Alena Johnson’s Family Finance course from Utah State Open Courseware: http://ocw.usu.edu/Family__Consumer____Human_Development/Family_Finance/index.html. This is the course I took that convinced me to change my major and helped determine my life’s work.
[3] www.Mint.com is a great, free resource for budgeting. The software I personally use can be found at www.YNAB.com. It isn’t free, but I highly recommend it.
[4] www.AnnualCreditReport.com is the only place to get a free copy of all three of your credit reports annually
[5] www.MyFico.com has a great explanation of credit scores and is the most reliable place to purchase your score.
[6] www.PowerPay.org is a great free resource to figure out how you can pay your debt off quickly

Is Your Religion Your Financial Destiny?

by Ryan Law

Last year the New York Times[1] published an article titled “Is Your Religion Your Financial Destiny?”. I have come back to this article and discussed it with several people and finally decided to write about it. The graph about speaks for itself, but I have a few comments about it.

First, the graph:

If you have a hard time reading the graph in your e-mail, you can pull up a copy online here:

http://www.nytimes.com/imagepages/2011/05/15/magazine/15-Leonhardt.html?ref=magazine

A couple of notes – the y-axis shows the percentage of households with an annual income above $75,000 in each religion listed. The x-axis shows the percentage of college graduates from each religion listed. For example, among Anglicans/Episcopalians, approximately 52% have an income above $75,000, and about 52% are also college graduates. The national average of all households in America that make over $75,000 is about 30%, while about 27% of all households in America have graduated from college.

On the low end of the graph we have Jehovah’s Witnesses, with less than 20% of households making over $75,000 and less than 10% college graduates, while at the other end about 65% of Hindus make over $75,000 and about 74% have a college education.

As you look at the graph, do you notice a trend? Does it almost look like you could draw a line that would slant up and to the right and hit almost every point? With the exception of a few in the middle, and a slight dip at the end, you almost could draw a straight line. What does this mean?

First, and this is definitely worth noting, religion does seem to have a factor in how much money people make. The study, conducted by the Pew Research Group, shows that religion plays a greater role in predicting your income than the differences among states or even racial groups.

Second, college education and wealth go hand-in-hand, and some religions place a high emphasis on education.

I would be interested to seeing where atheists fit on the graph. We have one titled “unaffiliated religions” but nothing for atheists.