Sunday, May 23, 2010

“Personal Finance: Money discussions help a marriage ... - Sacramento Bee” plus 3 more

“Personal Finance: Money discussions help a marriage ... - Sacramento Bee” plus 3 more

Personal Finance: Money discussions help a marriage ... - Sacramento Bee

Posted: 23 May 2010 10:40 AM PDT

Even after three years of marriage, Anne and David Schmidt still act like newlyweds. They giggle, they cuddle, they glance adoringly at each other – a lot.

But when it comes to their finances, they're clear-eyed and focused.

Once a month, the young Sacramento couple pencil in time for a "money date." They sit down with a glass of wine, pop open their laptop computer and pore over their finances. Using one of the many software programs that track personal finances, they look at what they spent that month on groceries, gas, dinners out, the mortgage. And how much went into their retirement and savings accounts.

"It started while we were still dating," says Anne, a state government policy analyst. Talking about finances "was one of those on-the-road-to-marriage talks. I was really proud that I didn't have any debt."

Far from being a chore, their monthly money dates are liberating, say the couple, both in their early 30s. When the unexpected pops up – like the $200 repair bill after their car was broken into or flying to Southern California for a family event – they know they can quickly adjust financially.

Doesn't sound romantic? It's what more couples should be doing, say financial experts and marriage counselors.

This June, the traditional month when millions of couples blissfully head to the altar, having a serious "money chat" with a spouse-to-be is just as essential as discussing what flowers are in the bouquet or what colors go on the cake.

But most couples don't.

Only 24 percent talked about finances and created a budget before getting married, according to a February survey of more than 2,000 adults by financial website Zendough.com. More than half had a money conversation, but didn't take it any further. Nearly 18 percent said they "didn't think about discussing finances" before getting wed; another 1.8 percent thought about it but "avoided the topic."

That's a huge mistake, say experts, considering that money is among the top causes of marital tension and divorce.

"So much of marriage stress is created unnecessarily because of a reluctance to discuss money," said Barry Paperno, consumer education manager for FICO, the San Rafael-based credit scoring company. "If six months into a marriage, you're now discovering one of you has poor credit, there's going to be feelings of distrust, wondering, 'What else are they hiding?' "

Knowing and understanding each other's financial histories, spending patterns and current credit status, he noted, "is going to determine much about your future together: renting an apartment, buying a car, buying a home, even the types of credit cards you qualify for."

But Paperno stressed that disclosing things like credit card debt or large unpaid student loans shouldn't be seen as a negative, just a starting point for clearing up financial debris.

For instance, he said, a spouse with a poor credit score can begin repairing it by becoming an "authorized user" on the credit card of a spouse with a clean credit history.

When's the right time to discuss finances? "Not on the first date, but when couples are in a serious, committed relationship, it's appropriate to talk about money," said Sharon Kedar, a San Francisco chartered financial analyst and co-author of "Get Financially Naked: How to Talk Money With Your Honey."

Too many couples, she said, "avoid the topic altogether and then end up fighting."

That's echoed in a survey last February by researchers with the University of Pennsylvania's Wharton School and Northwestern University. In their study, "Fatal (Fiscal) Attraction," the authors noted that "tightwads and spendthrifts" are often drawn to one another, seeking someone with the opposite of their own spending patterns. But those emotional differences toward spending almost ensure money conflicts, resulting in "diminished marital well-being."

In other words, if he's buying big flat-screen TVs and you're clipping coupons, there are bound to be issues.

What to do? Talk it through.

After they got engaged and merged finances, Kedar and her fiancé often clashed over "how many pairs of black pants" she was buying. As a young working professional, Kedar said she felt insulted he would question her purchases. But once they talked through their finances and established mutual goals, the issue got resolved. They established a set amount – $250 – below which neither questions the other's purchases.

Nearly 10 years of marriage and two kids later, Kedar said in her book that she can't imagine having "a basic financial system in our home that is (not) based on mutual trust."

Ultimately, sorting out finances as a couple can create a healthier, less stressful relationship.

For the Schmidts, it means financial security and shared goals, like the three-bedroom house in Sacramento's Land Park they bought last year.

It's especially important to Anne, who's expecting the couple's first baby this week, to be financially secure. When David was unexpectedly shipped off to Kuwait for a year in 2008 with a U.S. Army Reserve unit, she realized that "anything could happen and I wouldn't necessarily know what to do." Inspired, she started reading personal finance books, attending free investing workshops at the Sacramento Public Library and getting more hands-on with the couple's finances.

Today, she feels confident about her financial skills; the couple say they don't always agree on every financial strategy, but they talk everything through to find a compromise.

That's the key to financial harmony, said Kedar: "If you have your personal finances in order as a couple, you can live the life you want. Money is not the key to happiness, but it's an enabler."

For more how-to tips, see the accompanying box, "Talking money with your honey."

© Copyright The Sacramento Bee. All rights reserved.

Have a personal finance question? Contact The Bee's Claudia Buck at (916) 321-1968.

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Eileen Ambrose: Personal Finance - Baltimore Sun

Posted: 23 May 2010 01:29 AM PDT

8:03 PM EDT, May 10, 2010

Regulators trying to figure out what caused last week's stock market free-fall

Within two hours of the Dow Jones industrial average plunging nearly 1,000 points Thursday, the call volume jumped about 40 percent at Baltimore's T. Rowe Price Associates.

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8 Personal Finance Lessons from Recession - The Money Times

Posted: 23 May 2010 01:43 AM PDT

While on our way towards growth, let's ponder over the money lessons that the economic meltdown has taught us. The teachings might seem obvious, and similar to what our parents, and grandparents taught us but most of us forget our lessons. As a result, we had to bear the brunt of recession.

Let's remember the important lessons from the economic meltdown so that they serve us well in the years ahead.

1. Forget Keeping up with the Joneses
Matching your neighbor, in terms of social status, might have been self-satisfying over the years, but the recent economic crisis has definitely made many of us ponder over our spending habits.

For years, many of us have indulged in conspicuous consumption just to keep up with the Joneses. In fact, we bought more than what we could afford, and now we've also seen the repercussions of reckless spending.

Let's take housing for instance. Many of us failed to meet our liabilities. As a result millions of homes have been auctioned, and many more are on the brink of foreclosure. It's not wrong to say that the Americans had bit off more mortgage than they could chew.

When it comes to property, never skip mortgage payments, and buy a home that you can afford.

2. What is Borrowed has to be Repaid
Many of those who believed that the lenders or their banks were worthy of trust and admiration are still in shock seeing their lenders jack up interest rate, cutting credit limits, and issuing default notices.

If your banks had once convinced you are worthy of a loan does not mean that you can afford to pay it back. This irresponsible buy-now-and-pay-later culture is responsible for more than half of economy's problems.

Borrow only what you can repay. Analyze whether you can meet your monthly obligations and afford to repay, and accordingly determine if you are worthy of a loan.

3. Never Bank on Housing Wealth
Many Americans had been relying on the appreciating value of their real state as long term gains, but the recent economic downturn saw a drastic fall in the value of properties nationwide.

Mistaking housing bubble for a boom, many believed that real estate was a safe investment to make. By the time realization dawned on them, it was too late to make amends.

Learning the lesson from this, never base your future on housing wealth. In fact, treat your property as a cushion and not an income to be entirely depended on in future.

4. Experts are not Always Right
Remember that only a few analysts had warned of recession. Majority of the economists failed to predict the financial crisis.

Though some experts warned of the housing bubble, most of them failed to forecast the damage the bursting of the bubble would cost.

The optimistic outlook offered by bankers, real estate companies, etc. did not amount to much when financial crisis gripped the nation.

So ensure never to completely believe what experts say. Use your judgment to ascertain that your interests are secure.

5. It Pays to Plan your Finances
It is not difficult to live within one's means. Anyone can avoid debt by just learning some money management.

At the time of economic downturn, many Americans were laid off from work with no savings to sail through the tough time.

Such a situation can definitely be avoided by planning your finances, tracking spending, and ensuring there is enough saving to tackle emergencies.

Set up a tentative budget complete with income, expenses, and savings. This will help you prioritize your expenses and ensure that you do not spend recklessly.

For more information on how to prepare a budget, click here to read '5 Pointers to Plan Your Budget'

6. No One is Safe
The recent economic downturn has affected all the sectors. Though initially some industries were assumed to be recession proof, it was eventually realized that everyone in all the sectors, from an industry mammoth to a small local shop, suffered the same financial fate.

The business is only as rich as its clients.

7. Nothing is Risk-Free
Until the crash of the stock market during recession many investors thought that stock markets were only supposed to go up. Even if the shares dropped for a while, they were ultimately supposed to recover.

In fact, those who put their hard earned money in investment accounts and forgot about it have been hit the worst.

Now when we know that everything involves risk, let's not learn the wrong lesson and decide not to take risk at all.

Instead, invest but opt for securities that are relatively safe like FDIC-insured back accounts and certificates of deposit, among others.

Further, keep a track of your investment accounts, and consider re-balancing them on a quarterly basis.

8.What has Passed may Occur Again
There is no doubt that the world economies are recovering from recession, jobs are being created in different sectors, and there are better times ahead. But this does not mean that we will not suffer the economic downturn again.

Despite still reeling under the effects of recession, consumers are being encouraged to spend, spend, and spend, and they will behave like they always do.

Let's not forget the past experiences. Though we may have found our way out of recession, it may recur.

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Personal Finance: How computer trading affects buy-and ... - Philadelphia Daily News

Posted: 23 May 2010 12:03 AM PDT

Just as investors were starting to feel a little braver about stock mutual funds, a 1,000-point market plunge and concerns about wild computers tinkering with stock prices gave them pause once again. The question is: Are individuals being fed to the wolves?

And the answer is: Yes, and it can happen day in and day out, but the effect is more subtle than this month's giant drop.

Here is how computers that frantically buy and sell can affect the buy-and-hold investor:

When you invest in an actively managed mutual fund, a fund manager decides what stocks to buy and sell. To maximize your returns, the fund has traders who must be on their toes to buy stocks identified by the managers at the most attractive price.

But that's a moving target when the stock's price is constantly rising and falling - by pennies or dollars. Money can be lost by buying or selling. For example, if many sellers pile in while a mutual fund is selling stock, the fund might end up getting $48 a share rather than $50.

This process of buying and selling at the most advantageous price has always been tricky. But it has been made more so now that investors such as hedge funds use computers to constantly sniff the market for stocks moving up and down by pennies. If the computers detect that a mutual fund is trying to buy thousands of shares of a stock, a hedge fund might buy that stock first. When that happens, your fund will have to pay more for the stock than it would have. So you will make less money than if your fund's movement had been more inconspicuous.

While your fund was buying the stock for a long-term gain, the hedge fund that jumped ahead of the purchase simply was seeking a quick profit by scooping up the stock and selling it to your fund at a higher price.

Because buyers and sellers are always trying to snoop on one another so they can beat the other to the punch, mutual funds are not without their defenses. But while they also try to hide what they are doing with technology, the computers used by high-frequency traders are much more sophisticated. They can sniff out trading in an instant, causing a stock to rise or drop.

In fact, said Illinois Institute of Technology lecturer Ben Van Vliet, some are set to pick up on certain words in news stories and buy and sell based on whether that word would send a stock price up or down.

Does this matter? People who think they can get in or out of a stock or exchange-traded fund before the computers react to a shock are deluding themselves. And for mutual fund investors, the effect on the price you pay to get in and out of stocks can hugely alter the total gains your fund delivers to you.

"Looking at expenses is important," said Jay Keeshan of Mutual Fund Governance Consulting, of Stamford, Conn. "Three to 5 percent could be lost at the trading desk." In response, Keeshan said, mutual fund directors should pay more attention to "best execution," or buying and selling stocks while minimizing costs.

The Investment Company Institute, a mutual fund industry trade group, asked the Securities and Exchange Commission to consider more regulation of high-frequency trading before the plunge.

While the organization told the SEC that the trading practices can add liquidity to the market, or provide opportunities to find a ready buyer or seller quickly, it faults high-frequency traders for practices such as confusing investors with fake orders, or "pinging."

Gail MarksJarvis is a personal-finance columnist for the Chicago Tribune. E-mail her at gmarksjarvis@tribune.com.

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