Here is some advice from an attorney free of charge. This should help you protect yourself from theft and fraud involving your personal and financial information.
This guest article by Jane
Bryant Quinn appeared in the AARP Bulletin on April 1, 2010.
Jane Bryant Quinn is a financial columnist. I have read this article
carefully and do not agree with all of her advice, especially the answers to
steps 1, 4, 7, 8 and 10. I recommend you get far more and better information
in regard to her suggestions on these steps.
Tim Berry has a Juris Doctor Degree and is affiliated with TrustMakers Financial Services in New York City. He can be reached at (888) 916-7070. If you have assets, as many of my readers do, what Berry has to say is worth reading.
I am a huge fan of John Dietz, a qualified (CWPP and CAPP) Senior Advisor at Trustmakers Financial Services in New York—(888) 916-7070. Read this guest article on Asset Protection Trusts by Dietz and you will see why.
Ed's Note: This article is by Puai T. Wichman, Managing Director of Trustmakers Financial Services in New York. Trustmakers is an asset-protection consulting firm not licensed to practice law. They are the best at what they do, and can be reached at (888) 916-7070. I post this guest article on my blog because I am interested in asset protection concepts and have many readers who are as well.
Ed's Note: A lot of my blog readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article on giving depositions by Randall Edwards of Trustmakers Financial Services in New York, NY. Edwards can be reached at (888) 916-7070.
A lot of my blog readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article by John Dietz of Trustmakers Financial Services in New York, NY. Dietz can be reached at (888) 916-7070.
Editor's Note: I subscribe to Trustmakers' email newsletter which I received yesterday with the following article by Roccy M. DeFrancesco, Jr. Roccy has a lot of acronyms after his name, including JD, CWPP, CAPP and MMB to be exact. Financially savvy people know what these mean, but you do not need to be a financial whiz to understand the clarity of what he has to say about how to keep more of the money you earn. I have some readers with huge liquid assets who might be very interested in Roccy's article, and therefore am posting it here. For those readers who have assets and want to keep them, and those who would like to keep more of their assets when they acquire them, read on.
Federal spending in 2008 is estimated to top $2.7 trillion. Knowing that $1 trillion is really $1 billion 1,000 times, and that $2.7 trillion is really $1 billion 2,700 times, and $1 million 2,700,000 times, it is mind-boggling to wrap your mind around. No wonder we are called the richest nation in the world. We may also be the most foolhardy. Find out why.
George Clason's book "The Richest Man in Babylon" reveals the fastest way to become financially savvy. It works today because money is governed today by the same laws that controlled it when prosperous men thronged the streets of Babylon 6,000 years ago. Here is a synopsis of The Richest Man in Babylon and the important financial lessons it teaches. The moral to the story The Richest Man in Babylon teaches this lesson: Proper preparation is the key to our success. Part 1 of 2.
George Clason's book "The Richest Man in Babylon" reveals the fastest way to become financially savvy. It works today because money is governed today by the same laws that controlled it when prosperous men thronged the streets of Babylon 6,000 years ago. Here is a synopsis of The Richest Man in Babylon and the important financial lessons it teaches. The moral to the story The Richest Man in Babylon teaches this lesson: Proper preparation is the key to our success. Part 2 of 2.
I have become so sick and tired of online gurus offering scam products and opportunities that I must reveal the truth about what I have discovered. It is simply this: In virtually every ad I have read and responded to online a sinister tactic has left me disappointed and dismayed. All of the solutions I had been promised left me unable to achieve any real success whatsoever. Learn the sinister tactic being used.
The following commentary by former New York City Mayor Ed Koch takes a more serious look at our government's recent $700 billion bailout plan. This sort of commentary may or may not interest you. It is intended for those who would be interested in another take on this bailout funded with taxpayers' money.
Social Security benefits for 50 million people will be go up 5.8 percent next year, the largest increase in more than a quarter century, according to the Associated Press. The increase, which will start in January, was announced Thursday (10-16-08) by the Social Security Administration. It will mean an additional $63 per month for the average retiree. Read the article to learn more.
Everyone wants to know what caused the recent financial debacle in the United States, and who was most responsible for the events that have happened. Here is one opinion by Ed Koch, former New York City mayor. I print this as I received it via email.
As gas prices continue to soar in the United States, this article offers some inside advice about buying and pumping gas from a pipeline worker in California.
Credit card lenders have spent an inordinate amount of their time making the rates and fees they charge hidden or confusing to understand, probably because if card users knew the truth they might think twice about how they are using their credit card. Now the Federal Reserve wants to clean up the mess by forcing lenders to clarify their rates and fees by disclosing them on our monthly credit card statements. This is an improvement for consumers that cannot happen too soon.
The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left. Why you should be aware.
The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left. Why you should be aware.
While there are predators all around us, we generally do not think of our financial providers as predators. When Ed Bagley receives a postcard in the mail advertising a $5,000 loan you can receive tomorrow with only your signature as collateral, he digs a little deeper, uncovering the source of the loan and the fine print terms of the loan. What he discovers is shocking, and fair game for exposure so that unwitting borrowers know the score.
A client of mine received a "Smart Watch Report" from her mortgage lender the other day, and asked me to evaluate it for her. The report was really an invitation to refinance her current mortgage loan and use her equity interest to either get cash now or sell her home and use the equity to buy a new home. It was a great deal for the mortgage lender and a terrible deal for my client. Find out why.
This guest article by Leslie Pepper was originally posted in the AARP Bulletin on April 28, 2010.
The recent legislation to help curb credit card provider abuse sounds better than it is. Yes, there are some restrictions, but there are many more important restrictions the bill does not cover. Find out why the bill is really a hollow bill without genuine substance, and why congressmen allowed it to happen.
The following security information comes from an attorney who had his identity stolen and credit cards misused in the process. My editorial comments in parenthesis follow the attorney's advice:
What is it with some big corporations in America today? Too many of them lull you to sleep and then rip you off while acting like this is business as usual and acceptable. The latest example comes from the three big credit reporting bureaus—TransUnion, Experian and Equifax. They are luring consumers to several web sites claiming to give away a free credit report but only do so if you agree to buy one of their lame services, such as credit monitoring. Learn the truth about what is happening.
A sharp rise in the delinquency of subprime mortgages has caused lenders to tighten up their standards and actually reject applications. Should you attempt to refinance your present mortgage or seek a new mortgage, your credit score has become more critical to your loan approval. Can it make a difference? Yes, it can make a significant difference in payment. Find out how and why.
The three top credit reporting agencies were too cheap to offer a toll-free line and better service on their own, and would not even continue to maintain the toll-free line system they were ordered to implement unless faced with prosecution by the Federal Trade Commission. Here are 6 things you can do to help protect yourself and your credit score.
For years young adults with no credit history, limited credit history or blemished credit history have worked around the problem by having someone with good credit—usually a parent, spouse or good friend—added as an authorized user to their credit card. All of this is about to end as Fair Isaac (the developer of the FICO credit score) will create a new scoring formula to eliminate the authorized user tactic. Learn what you can do to protect yourself.
Two seemingly unrelated stories caught my attention yesterday. One was about corporations stockpiling cash and the other was about consumer savings rates, which moved into negative territory for the first time according to the U. S. Commerce Department. American corporations are doing well at the moment while the consumers that feed them profits are saving zero dollars and paying high interest rates. Credit card companies have no legal limits on what they can charge for interest and fees.
Like a 4-year-old child at the checkout counter in a supermarket, American consumers want just one more impulse buy to make their buying day complete, and apparently the more expensive it is, the better. Like a dog in heat, if we have it we tend to spend it in America. All of this impulse buying is detailed in a recent USA Today article with this headline: "Spending is hotter than the 4th of July". And indeed it apparently is, but is this good cash management?
When I had some pains in my chest my internist decided I should have a stress test. It sounded like a good idea to me. I enjoy living and am not the least bit interested in the alternative. While I do not understand the technical terms involved, I was readily able to recognize the cost of the procedure. Try $2,485. All of this took about 4 hours and the physician was involved for all of probably 20 minutes. I had insurance but still will end up paying $593. My insurance company will pay $813. It is not difficult for me to understand why people wonder if they have medical insurance or not.
This article, apparently true, should remind all criminals—assuming they are literate, can read, comprehend and retain information for their own good—of why it is not a good idea to mess with former Marines or senior citizens, many of whom put their life on the line during wartime to protect these two robbers who radical liberals will probably make out to be innocent victims of their own, stupid misfortune.
It came as absolutely no surprise to me that so-called financial guru Wade Cook and his wife Laura were recently convicted of income tax evasion and sentenced to jail. Cook was nothing more or less than a cab driver who decided to get rich by preying on people looking for an easy solution to becoming rich. Wade Cook was so good at the avoidance of income tax issue that he will now spend more than 7 years in prison for income tax evasion by defrauding the Internal Revenue Service.
Buyer beware. If it sounds too good to be true, it probably is too good to be true. People who actually make money using a new market theory would never, and I mean NEVER, tell anyone unless they are brain dead or born stupid. They understand that the pie is only so big and the more pieces that are eaten, the less there is to go around. You do not, repeat DO NOT, see Warren Buffett writing books about what stocks to invest in, how much, when to buy and when to sell.
The arrest of 27-year-old Robert Alan Soloway last week was an important step in trying to reduce the amount of spam mail you are receiving these days. Last week a federal grand jury returned a 35-count indictment against Soloway charging him with mail fraud, wire fraud, e-mail fraud, aggravated identity theft and money laundering. If you think Soloway just might be a rights taker rather than a rights observer you are right. What should we do with predators like Soloway should he be convicted on all of the counts he has been charged with? Here is one answer.
The FBI has recovered the long-lost manuscript of Pearl Buck's Pulitzer Prize-winning novel The Good Earth. The daughter of one of the author's former secretaries tried to put it up for auction. Missing for four decades, the original 400-page typed manuscript turned up at a Philadelphia auction house that notified authorities. Some estimates put the manuscript's value at $150,000.
Writing a will isn't the most pleasant of tasks. After all, by doing so you're not only acknowledging your own inevitable demise but actively planning for it.
That might explain why so many adults avoid this cornerstone of estate planning. According to an AARP survey, 2 out of 5 Americans over the age of 45 don't have a will.
But creating a will is one of the most critical things you can do for your loved ones. Putting your wishes on paper helps your heirs avoid unnecessary hassles, and you gain the peace of mind knowing that a life's worth of possessions will end up in the right hands.
"A will is an important way you can stay in control over who gets what of your property," says Sally Hurme, an attorney with AARP, "and by planning in advance you can also save your family time and money."
The laws governing wills vary from state to state. If you aren't familiar with them, consider consulting a knowledgeable lawyer or estate planner in your area. Before you do, brush up on these 10 things you should know about writing a will.
What Is a Will?
A will is simply a legal document in which you, the testator, declare who will manage your estate after you die. Your estate can consist of big, expensive things such as a vacation home but also small items that might hold sentimental value such as photographs. The person named in the will to manage your estate is called the executor because he or she executes your stated wishes.
A will can also serve to declare who you wish to become the guardian for any minor children or dependents, and who you want to receive specific items that you own — Aunt Sally gets the silver, Cousin Billy the bone china, and so on. Someone designated to receive any of your property is called a "beneficiary."
Some types of property, including certain insurance policies and retirement accounts, generally aren't covered by wills. You should've listed beneficiaries when you took out the policies or opened the accounts. Check if you can't remember, and make sure you keep beneficiaries up to date, since what you have on file when you die should dictate who receives those assets.
What Happens If I Die Without a Will?
If you die without a valid will, you'll become what's called intestate. That usually means your estate will be settled based on the laws of your state that outline who inherits what. Probate is the legal process of transferring the property of a deceased person to the rightful heirs.
Since no executor was named, a judge appoints an administrator to serve in that capacity. An administrator also will be named if a will is deemed to be invalid. All wills must meet certain standards such as being witnessed to be legally valid. Again, requirements vary from state to state.
An administrator will most likely be a stranger to you and your family, and he or she will be bound by the letter of the probate laws of your state. As such, an administrator may make decisions that wouldn't necessarily agree with your wishes or those of your heirs.
Do I Need an Attorney to Prepare My Will?
No, you aren't required to hire a lawyer to prepare your will, though an experienced lawyer can provide useful advice on estate-planning strategies such as living trusts. But as long as your will meets the legal requirements of your state, it's valid whether a lawyer drafted it or you wrote it yourself on the back of a napkin.
Do-it-yourself will kits are widely available. Conduct an Internet search for "online wills" or "estate planning software" to find options, or check bookstores and libraries for will-writing guides. Your state's departments of aging also might be able to direct you to free or low-cost resources for estate planning.
And while you're working on your will, you should think about preparing other essential estate-planning documents.
"When you create or update your will, that's also a good time to think about other advance-planning tools like financial and health care powers of attorney to ensure that your wishes are carried out while you're still alive," says Naomi Karp of AARP's Public Policy Institute.
Should My Spouse and I Have a Joint Will or Separate Wills?
Estate planners almost universally advise against joint wills, and some states don't even recognize them. Odds are you and your spouse won't die at the same time, and there's probably property that's not jointly held.
That's why separate wills make better sense, even though your will and your spouse's will might end up looking remarkably similar.
In particular, separate wills allow for each spouse to address issues such as ex-spouses and children from previous relationships. Ditto for property that was obtained during a previous marriage. Be very clear about who gets what. Probate laws generally favor the current spouse.
Who Should Act as a Witness to a Will?
Any person can act as a witness to your will, but you should select someone who isn't a beneficiary. Otherwise there's the potential for a conflict of interest. The technical term is a disinterested witness. Some states require two or more witnesses. If a lawyer drafts your will, he or she shouldn't serve as a witness.
Not all states require a will to be notarized, but some do. Check. You may also want to have your witnesses sign what's called a self-proving affidavit in the presence of a notary. This affidavit can speed up the probate process because your witnesses likely won't be called into court by a judge to validate their signatures and the authenticity of the will.
Who Should I Name as My Executor?
You can name your spouse, an adult child, or another trusted friend or relative as your executor. If your affairs are complicated, it might make more sense to name an attorney or someone with legal and financial expertise. You can also name joint executors, such as your spouse or partner and your attorney.
One of the most important things your will can do is empower your executor to pay your bills and deal with debt collectors. Make sure the wording of your will allows for this, and also gives your executor leeway to take care of any related issues that aren't specifically outlined in your will.
How Do I Leave Specific Items to Specific Heirs?
If you wish to leave certain personal property to certain heirs, indicate as much in your will. In addition, you can create a separate document called a letter of instruction that you should keep with your will.
A letter of instruction, which isn't legally binding in some states, can be written more informally than a will and can go into detail about which items go to whom. You can also include specifics about any number of things that will help your executor settle your estate including account numbers, passwords and even burial instructions.
Another option is to leave everything to one trusted person who knows your wishes for distributing your personal items. This, of course, is risky because you're relying on this person to honor your intentions without fail. Consider carefully.
Where Should I Keep My Will?
A probate court usually requires your original will before it can process your estate, so it's important to keep the document safe yet accessible. If you put the will in a bank safe deposit box that only you can get into, your family might need to seek a court order to gain access. A waterproof and fireproof safe in your house is a good alternative.
Your attorney or someone you trust should keep signed copies in case the original is destroyed. Signed copies can be used to establish your intentions. However, the absence of an original will can complicate matters, and without it there's no guarantee that your estate will be settled as you'd hoped.
How Often Does a Will Need to Be Updated?
It's possible that your will may never need to be updated — or you may choose to update it regularly. The decision is yours. Remember, the only version of your will that matters is the most current valid one in existence at the time of your death.
With that in mind, you may want to revisit your will at times of major life changes. Think of pivotal moments such as marriage, divorce, the birth of a child, the death of a beneficiary or executor, a significant purchase or inheritance, and so on.
Your kids probably won't need guardians named in a will after they're adults, for example, but you might still need to name guardians for disabled dependents. A rule of thumb: Review your will every two or three years to be safe.
Who Has the Right to Contest My Will?
Contesting a will refers to challenging the legal validity of all or part of the document. A beneficiary who feels slighted by the terms of a will might choose to contest it.
Depending on which state you live in, so too might a spouse, ex-spouse or child who believes your stated wishes go against local probate laws.
A will can be contested for any number of other reasons: it wasn't properly witnessed; you weren't competent when you signed it; or it's the result of coercion or fraud. It's usually up to a probate judge to settle the dispute.
The key to successfully contesting a will is finding legitimate legal fault with it. A clearly drafted and validly executed will is the best defense.
Seniors Get Screwed Again
In the Future, There Will Be No Social Security Checks Mailed to Eligible Citizens
(Ed's Note: This article by Tim Grant originally appeared in the Pittsburgh Post-Gazette in July of 2010.)
By Tim Grant
In the not-so-distant future, Social Security
checks will no longer be in the mail.
The paper version of Social Security payments will go into full retirement by March 1, 2013, and anyone who receives federal benefits after that date will be required to accept those payments electronically.
While the shift to direct deposits will save trees and be a great convenience to many Americans receiving Social Security and other federal benefits, it also could open the door for creditors to freeze bank accounts belonging to the growing number of senior citizens in financial trouble.
"In the cases I've had, these bank accounts were frozen by judgments usually brought on by credit card companies," said Catherine Martin, an attorney with Neighborhood Legal Services Association in Pittsburgh, a free legal service for low-income residents.
"Usually I just call the
bank and, if they've made a mistake, typically the bank will correct it. If
they didn't immediately correct the problem, I didn't want to delay the
solution so I'd file court papers."
Courts are supposed to schedule a hearing within 5 days of someone filing a claim involving a frozen bank account holding Social Security benefits, but very often it takes longer, Ms. Martin said.
Guess Who Lets It Happen
Although federal law restricts creditors from garnisheeing Social Security, Supplemental Security Income and veterans benefits to fulfill debts, financial institutions have continued to allow it to happen.
At a Senate Finance Committee hearing in September 2007 titled "Frozen Out: A Review of Bank Treatment of Social Security Benefits," senators heard from one man whose bank account was frozen by creditors for 23 days, denying him access to his Social Security funds.
A study conducted by the U.S. Inspector General one year later, which looked at 12 of the largest banks in the country and a sample of smaller institutions, concluded that 70 percent of them had garnisheed funds from accounts where only Social Security benefit payments were deposited.
The inspector general
estimated at that time that about $178 million each year was being illegally
garnisheed from exempt bank accounts.
More senior citizens are under more financial pressure now than at any other time in history.
Americans age 55 or older experienced the sharpest rise in bankruptcy filings during the 16-year period between 1991 and 2007, according to a report released by AARP. The rate of personal bankruptcy filings among those ages 65 or older grew by 125 percent, while the bankruptcy rate of seniors ages 75 to 84 jumped a stunning 433.3 percent.
The American Bankers Association responded to the Senate study in a May 2008 memo explaining that banks often are caught in the middle when a consumer account containing federal benefit payments is garnisheed.
Banks Find It Too Hard to Figure Out
"On the one hand, a creditor having received a court order entitling it to payment expects a bank to comply with that order or risk incurring liability for the full amount of the judgment," the memo said. "On the other hand, a debtor [who] receives benefit payments that are exempt from garnishment expects the bank to refuse to pay the creditor funds that are protected."
These situations typically involve commingled funds, according to the bankers association. When funds from more than one source are combined in one account, it is impossible for a bank to know what funds deposited in the account are exempt from being garnisheed and what should be paid to the creditor.
Frequently, the situation is complicated even further by the use of joint accounts and by laws that create exceptions to the exemption from being garnisheed. For instance, Social Security and other federal benefits are allowed to be garnisheed for the collection of child support and alimony.
The government mails more than 135 million benefit checks each year, at a cost of more than $125 million. About 10.5 million people receive Social Security and SSI payments by paper check each month.
Today, 85 percent of federal benefit recipients receive their payments electronically, either through bank deposits or a debit card issued by the Treasury Department. Once all paper checks are replaced, it is expected to save 12 million pounds of paper in the first five years alone.
No Switch and No Check Time
New enrollees in the Social Security system will have to switch to electronic deposits beginning on March 1, 2011, and existing check recipients must make the switch by March 1, 2013.
"To protect Social Security benefits, a person should have the Social Security check routed to a separate bank account from all other assets and income," said Amy Corwin Sagen, director of program services for the National Association of Social Workers Pennsylvania Chapter.
She said opening a dedicated Social Security bank (OOTC:SBKCQ) account might give beneficiaries some protection from being garnisheed unless they are in trouble with a federal agency for child support, alimony or unpaid taxes.
"In the long run, this step ... will save you headaches and protection from creditors, mortgage companies and other loan companies looking for repayment of loans and lines of credit through your Social Security funds," Ms. Sagen said.
Meanwhile, new rules are being either instituted or considered to protect Social Security recipients before the system goes 100 percent paperless.
Senators Herb Kohl, D-WI, and Max Baucus, D-MT, have introduced legislation to halt the direct deposit requirements until stronger protections against account garnishment and freezing have been established.
Among other suggestions, they have recommended that financial institutions be granted safe harbor when they protect funds in exempt accounts.
Also, they are proposing that creditors should not be permitted to challenge the rule and recipients should have full unlimited access to their accounts, meaning banks should not be allowed to limit a beneficiary's access to funds to only a single bank branch.
Read and Heed This Advice
A Corporate Attorney Tells You How to Help Protect Your Personal and Financial Information
(Ed's Note: Here is some advice from an attorney free of charge. This should help you protect yourself from theft and fraud involving your personal and financial information.)
Read this and make a copy
for your files in case you need to refer to it someday. Maybe we should all
take some of his advice. A corporate attorney sent the following out to the
employees in his company:
1) Do not sign the back of your credit cards. Instead, put "Photo ID Required".
2) When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the 'For' line. Instead, just put the last 4 numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.
3) Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary. But if you have it printed, anyone can get it.
4) Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.
I also carry a photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a name, address, social security number, credit cards, etc.
5) We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.
6) File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).
7) Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name.
The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.
By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert.
Since then, no additional
damage has been done, and the thieves threw my wallet away this weekend
(someone turned it in). It seems to have stopped them dead in their tracks.
Now, here are the numbers you always need to contact about your wallet, if it has been stolen:
1) Equifax: 1-800-525-6285.
2) Experian (formerly TRW): 1-888-397-3742.
3) Trans Union: 1-800-680-7289.
4) Social Security Administration (fraud line): 1-800-269-0271.
12 Steps That Can Help You Become More Financially Secure in Today's Troubled Economy
(Ed's Note: This guest article by Jane Bryant Quinn appeared in the AARP Bulletin on April 1, 2010. Jane Bryant Quinn is a financial columnist. I have read this article carefully and do not agree with all of her advice, especially the answers to steps 1, 4, 7, 8 and 10. I recommend you get far more and better information in regard to her suggestions on these steps.)
By Jane Bryant Quinn
Safety nets fray when times get hard. Retirements that once looked secure are hanging by a thread. The message for those in their 50s is clear: Mend the nets while there's still time. Those in their 60s and 70s have fewer options.
Still, there are ways of making sure your money lasts for life.
Here's how to do it in 12 easy steps:
1) Get rid of debt. Nothing is more destructive of retirement than carrying debt when your paycheck stops. If you are in your early 50s, start debt reduction now. Try to prepay your mortgage, too, so you will own your home free and clear.
If you are retiring now and
prepaying would use up too much cash, consider the other extreme: Reduce
your payments by taking a new, 30-year mortgage. It is counterintuitive, but
it works. Or use your equity to buy a smaller place that will leave you with
no house payment or a much smaller one.
Don't fall prey to the slimy promises of commercial debt consolidators. Here are two legitimate and low-cost places to go for help with debt reduction: The National Foundation for Credit Counseling <http://www.nfcc.org> (1-800-388-2227) and the Association of Independent Consumer Credit Counseling Agencies <http://www.aiccca.org> (1-866-703-8787).
In the worst case, consider bankruptcy. Never tap retirement accounts to cover unpayable debts. IRAs and 401(k)s are protected in bankruptcy. You will need those funds for a fresh start.
2) Build a better budget. When you are thinking about retirement, nothing is more important than knowing how far your income will stretch. What will your
expenses be? How much income will you have, including prudent withdrawals from your savings?
Get your spending under
control sooner rather than later. The longer you kid yourself, the greater
your chance of running out of money.
3) Increase your savings. Save, save, save—even if it means changing your lifestyle or not helping your grandchildren with tuition. The kids have a lifetime to repay their student loans, but you are running out of time. If you arrive at retirement with too little money, you are cooked.
4) Wise up on investments. Among older people, there is a stampede to safety. Money poured out of stock-owning mutual funds after the panic of 2008-09, and into funds invested in bonds. Many older investors still do not want to take a risk in stocks.
But inflation and taxes will cut the real returns on your bonds and bond funds down to practically nothing. In your 50s and 60s—with 30 or 40 years of retirement ahead—you need to keep some money invested in stocks for long-term growth.
I do not mean individual stocks. For safety reasons, get rid of them—every single share. You have no idea what is going on inside companies, including the one you work for. Even blue chips can be laid low—look what happened to the country's leading banks.
Are you holding on to
individual stocks to avoid paying tax on capital gains? That tax is probably
lower today than it ever will be. Bite the bullet, sell now and diversify.
As a first step, divide your nest egg into three parts:
One, Money you will need within 4 or 5 years. Keep it in a bank or a money market fund—and account that is readily accessible when the need arises.
Two, Money you will not have to touch for 15 years or more. Keep it in well-diversified stock index funds, which track the market as a whole rather than trying to pick individual companies. Low-cost stock index funds are offered by Vanguard and Fidelity Investments. T. Rowe Price has index funds, too, but they cost a little more.
Three, In-between money. Keep it in bond mutual funds. When interest rates rise (as most people expect to happen in coming years), the value of bond fund shares will fall. But managers will be snapping up those new, higher-interest bonds, so the income from your fund will rise.
When rates fall again, in
the next recession, the value of your shares will go back up. If you
reinvested your dividends, you'll have more shares working for you, too.
5) Keep your job, if possible. Or get one, if you have already retired. Every extra year of work improves your Social Security benefit, increases your savings (assuming you save) and reduces the number of years that your nest egg has to last. It might bring you health insurance, too.
Public schools, hospitals
and government agencies offer benefits. Some private companies—including
Costco, Home Depot and Wal-Mart—give benefits even to
part-timers (usually with a waiting period).
6) Do whatever you can to keep health insurance. If your company offers retiree coverage, do not even think of moving to another city or state until you find out if you can take your coverage with you. Most plans will not follow you or will charge you more at a new location.
If you need individual coverage, check with local health insurance agents who can round up plans suitable for you (you can find an agent through the National Association of Health Underwriters <http://www.nahu.org> ).
For the lowest premium, pick a policy with a high deductible. You may pay
more out of pocket if you become sick, but you're protected from
catastrophic, bankruptcy-inducing costs. Once you have signed up, you are in
the insurer's PPO network, which gives you discounts of up to 50 percent or
so, even on bills you pay yourself.
Health care reform would be helpful for those not yet in Medicare. Any new law is likely to bar rejection for preexisting conditions (at my age, life is a preexisting condition) and provide faster access to generic drugs and subsidies to help cover costs. Those on Medicare will likely see the "doughnut hole"—which requires them to pay some Medicare Part D costs—close over the next few years.
7) Be smart about Social Security. Draw from your 401(k) or IRA first, and claim Social Security benefits later. If you can wait until 70, your check will be about 76 percent higher than if you had started at 62, and will improve the protection for your spouse as well.
8) Be smart about retirement funds, too. If you are with a large employer, consider leaving your 401(k) money in your company plan, provided that it offers flexible withdrawal options. Your money will be managed at a much lower cost than you will find elsewhere, and the funds have been chosen carefully for people in your situation.
If you have a traditional
pension and take it as a lump sum, do not hand it to a broker or planner who
wants to sell you products. Choose index funds yourself or work with a
fee-only financial planner (see below).
9) Put off reverse mortgages. When you turn 62, salespeople come out in force, urging you to strip the equity out of your home to support your spending now. Do not do it. The fees and effective interest rates are high, and the proceeds are low. Save the reverse mortgage option for your late 70s or early 80s, when other money might be running low.
10) Annuities. When you are retired, there is nothing like receiving a regular check. One way to get it is with an immediate annuity. You take a sum of money and use it to buy an income for life. Your state of health does not matter.
The fixed payments are based
entirely on your age and the type of benefit you want (for cost comparisons,
But fixed payments will be whittled away by inflation, so do not buy an
annuity too early. Buy in your late 70s or early 80s, when they will not
have to last as long.
Stay away from the fancy, tax-deferred annuities that make big promises about future income benefits. They are too complicated to dissect here, so I will say only that the cost is much higher than you think and the odds are good that they will not perform as you expect. My personal rule is, "if it's complicated, forget it." Deferred annuities with income benefits fit that bill.
11) Work with a financial planner. Planners are very helpful in working with budgets and projecting how much you can afford to spend when you retire. But work with fee-only planners, who do not sell products and who charge only for their advice.
Planners who take
commissions on products could steer you wrong (for example, by selling you
those awful, complex annuities). Three places to find a fee-only planner
near you: GarrettPlanningNetwork.com, the Alliance of Cambridge Advisors <http://CambridgeAdvisors.com>
, and the National Association of Personal Financial <http://www.napfa.org>
12) Move in with your kids. The last resort, if all else fails. That should be motivation enough to get moving on your own plan for financial success.
Why Should Anyone Pay the U. S. Government $100 Million for an Estate Tax Debt?
(Ed's Note: Tim Berry has a Juris Doctor Degree and is affiliated with TrustMakers Financial Services in New York City. He can be reached at (888) 916-7070. If you have assets, as many of my readers do, what Berry has to say is worth reading.)
By Tim Berry
I read a case today that really got my
A married couple fled Uganda in 1972 with only a few items of personal property. It seems that when Idi Amin came to power, he forced all Ugandans of Asian descent to leave, and the government proceeded to seize all their assets.
The couple resettled in Belgium and lived there until the husband passed away in 2002. Evidently the couple did good for themselves, for when the husband passed away, he had acquired 250,000 shares ($11,790,000 worth) of Citigroup stock.
I gotta tell you, when I hear stories like this--people leave a country with nothing and go on to do good if not great things with their lives--I am inspired and feel pride. Think about it: People kicked out of their home country merely because they are the "wrong" race, who go on to accumulate millions in assets. Typically I think what a great American story; these people deserve a medal or some other form of special recognition.
However, I can't really do that in this case. You see, both members of the couple involved were not, and never were, United States citizens; in fact, they weren't even residents of the U.S. The entire reason I am writing this, and why my blood is boiling, is that our U.S. tax laws effectively expropriated their assets just as their former homeland had done.
How? The United State's estate tax code says the U.S. has the right to tax each and every nonresident not a citizen of the United States (cumbersome I know, but it is the phrase used by the code) who has property within the United States. Now logic would tell you that if someone owned the stock via a Belgian bank located in Hong Kong, the property wasn't within the U.S.
Never put logic in the same sentence as "the tax code".
Why? The U.S. estate tax code has a very interesting provision: "Shares of
stock owned and held by a nonresident not a citizen of the United States
shall be deemed property within the United States only if issued by a
Remember the $11 million of Citigroup stock? That was stock issued by a domestic corporation. Since the stock was issued by a domestic corporation, our millionaire nonresidents who are not citizens have to pay taxes on the U.S. stock they have accumulated. Wow!
Basically the U.S. has the right to tax anyone in the world who owns shares of U.S. corporations. Think that one through; let it percolate down to your senses of justice and fair play. The U.S. says it has the right to tax non-U.S. citizens, non-U.S. residents, if those people were stupid enough to purchase U.S. securities. Nothing like biting the hands of the investors that feed us.
Before I start with some cold, hard numbers of this case, you might want to run and get a bucket.
Remember the value of the stock with our nonresident not a citizen of the United States died? He had 250,000 shares of Citigroup, valued at $11,000,000, when he died. This court decision was filed on Sept. 14, 2009. Citigroup closed at $4.52 a share on the 14th. It appears the estate paid an initial $2,070,000.01 and the court awarded the IRS an additional $2,070,000.01 (I'm not joking about the one cent), plus a late filing penalty of 25 percent. Those of you who are engineers, whip out your calculators. How much is that portfolio worth today? About a million dollars. Summing it up, the estate will have to pay over $4,000,000 and penalties for a stock portfolio worth only $1,000,000 today.
OK, enough of my righteous indignation. What can you, your relatives, or anyone you know do to alleviate the problem? Don't hold stock in your personal name.
The rules are pretty much the same for a "non-resident not a citizen of the United States" as they are for a U.S. citizen. Don't own your assets in your personal name; own them via an entity like a trust . Trusts don't die. If they don't die, they don't owe estate taxes. Just that one simple step would have saved this guy a few million dollars in estate taxes.
Let's go further with this simple concept. There is a very old quote/truism, "The power to tax is the power to destroy". Our government has the right to tax our wealth. In effect it has the power to destroy our wealth, our achievements, and our success as well.
Last year I sat down with an individual who had to pay the IRS more $100,000,000 to settle his father's estate tax debt. $100 million. Please give me some rational explanation of why someone should have to write a $100,000,000 check to the government?
Yes, I know all the philosophical
arguments about this country had the infrastructure to help him build his
company, and the military to protect his company etc., but at a cost of
The power to tax is the power to destroy.
Consider this an impassioned plea to take control of your family's financial situation. Too many of us idly sit back and think, "I really need to do something" and yet 2 days later have been caught up in the vortex of life and don't take action. As this case shows, the tax code is very unforgiving if you don't engage in any planning, and yet at the same time, the tax code can be very lenient if you just take some simple steps. Think about it, and then take action.
Has the Meltdown of the American Economy Rendered Asset Protection Trusts Useless?
(Ed's Note: I am a huge fan of John Dietz, a qualified (CWPP and CAPP) Senior Advisor at Trustmakers Financial Services in New York—(888) 916-7070. Read this guest article on Asset Protection Trusts by Dietz and you will see why.)
News can and does sway public opinion. A real crisis can have a liberating affect as people tend to throw away old precepts in favor of new and improved ideologies. The financial crisis of the last 12 months has brought with it a mindset of "all is bad". In fact, I believe the only thing that was not called into question was—you guessed it—Twitter.
Getting to the Point—Asset Protection Trusts (ATPs)
Is the Asset Protection Trust still considered the workhorse of Asset Protection Planning, or did it meet an untimely demise in the financial crisis of 2008/09? I was prompted to consider this question when an advisor recently called me about a client who needed Asset Protection. As we were walking through planning ideas, the advisor said: "Based on all the problems of 2008, are you guys still using these APTs for Asset Protection?"
Bad times can and do change a thing or
two, but the stalwart of Asset Protection is still the Asset Protection
Trust. It may have more names than it did before—Asset Protection Trusts,
Offshore Asset Protection Trust, Foreign Asset Protection Trust,
International Asset Protection Trusts, and various other names including
acronyms—however, each name can be put into the definition below. Here are
What Is an Asset Protection Trust?
An Asset Protection Trust is any trust utilized to insulate assets from creditor attack. An Asset Protection Trust is normally established in an offshore jurisdiction, although the assets will more often than not remain in the United States under the indirect control of the person establishing the trust (the "settlor").
These trusts are normally structured so that they are irrevocable for a term of years so that the settlor is not a current beneficiary. Even though they are "foreign trusts", they can be structured so they are treated as domestic grantor trusts for tax purposes. With a properly drafted and timely settled trust, the creditors of the settlor cannot reach the assets of the trust.
An Asset Protection Trust is also
normally structured so that the undistributed assets of the trust are
returned to the settlor upon termination of the trust provided there is no
current risk of creditor attack, thus permitting the settlor to regain
complete control over the formerly protected assets.
An Asset Protection Trust is:
• An effective tool to settle or discourage litigation.
• A means to keep the ownership of assets absolutely confidential.
• An alternative to traditional pre-nuptial agreements.
• A hedge against potential exchange controls.
• A device to protect otherwise unprotectable pension assets.
• A means to give an insolvent debtor a fresh start.
• A preferred technique to avoid forced heirship laws (common in Europe).
• A way to avoid probate.
• A way to internationalize investment and hedge against governmental instability.
The bad times may be better for Asset Protection. The reality is no longer dangling somewhere in the back of your mind, but playing out on the front page of the newspaper everyday!
How Asset Protection Works
There are literally hundreds of different techniques to protect different categories of assets. Some are appropriate for everyone and are based on common sense (e.g. not flashing your money around or never entering into a general partnership) and others are appropriate for wealthy or soon-to-be-wealthy people (e.g. foreign Asset Protection Trusts). Asset Protection techniques also vary depending on both the type and location of property.
All Asset Protection techniques have one thing in common: They each make it more difficult for a creditor to either find or take assets. By implementing a properly crafted Asset Protection Plan (which may include an Asset Protection Trust as well as other entity formations) an individual can legitimately put a significant portion of his assets out of the reach of judgment creditors and still retain control over these protected assets.
A properly implemented Asset Protection Strategy reduces the size of the target the plaintiff's attorney is shooting for. Once the plaintiff's attorney is convinced that any judgment will be difficult or impossible to collect, his motivation fades because he is unlikely to be paid for his work. The effect of Asset Protection Planning is the destruction of the economic incentive to litigate.
When thoughtful and careful planning is put in place, the results have been nothing short of astounding. Who knows how our future economy will look 5 years out, but I suspect that litigation will still be with us for quite some time, and therefore, the need for Asset Protection.
If you have questions about these types of trusts, please email email@example.com .
Cook Islands Launches Legislation for a More Asset-Protected LLC Structure
(Ed's Note: The following article is by Puai T. Wichman, Managing Director of Trustmakers Financial Services in New York. Trustmakers is an asset-protection consulting firm not licensed to practice law. They are the best at what they do, and can be reached at (888) 916-7070. I post this guest article on my blog because I am interested in asset protection concepts and have many readers who are as well.)
LLC legislation has recently been promulgated in the Cook Islands. The Cook Islands International Limited Liability Companies Act 2008 ("the Act") follows the model adopted in a number of U.S. States. It goes further, however, to give statutory certainty on several key issues of concern to U.S. attorneys using domestic U.S. LLC statutes. The Act also introduces several unique Asset Protection features, consistent with the importance of this industry in the Cook Islands.
The Act provides a broad foundation to structure an LLC according to its own rules, rather than have them directed by statute. The operating agreement may contain any provisions for the conduct of its business as long as they are lawful. Certain provisions (designed to protect the interests of its members) are mandatory.
Like most LLC jurisdictions, a creditor of a member is permitted to apply for a charging order against a membership interest. The Act goes a step further however, setting out the availability of other remedies, the nature and extent of that charging order, and the rights of the creditor against that membership interest.
S 45 of the Act is the starting point. A creditor is defined as any person whose judgment is recognised by the High Court of the Cook Islands, and includes any person who claims to have a general assignment of a member’s property whether arising from an intestacy, bankruptcy or otherwise.
S 45 (6) specifies that the sole remedy for a creditor against a membership interest in a LLC, is the right to apply for a charging order.
(6) The charging order remedy given by this section shall be the sole and exclusive remedy available to a Creditor in respect of a member's membership rights.
Similar provisions in other jurisdictions have been interpreted by courts (in the absence of a sufficient definition of the exact nature of a charging order), to include rights similar to those of a mortgagee in possession, of an assignee, and of a lienholder. These have created uncertainty as to the extent of protection offered by an LLC. Any uncertainty in the Cook Islands has been removed by clear provisions including subclauses (7) & (8) of section 45 providing as follows:
(7) For the avoidance of doubt and without limiting the generality of subsection (6):
(a) a charging order shall not be construed to constitute a lien on a member’s interest in a limited liability company;
(b) the Creditor in whose favour a charging order is issued pursuant to this section shall not thereby become an assignee of any membership interest or any part thereof, nor shall that Creditor hold or be entitled to exercise any membership rights in relation to that interest.
(c) any member holding any membership interest subject to a charging order shall continue to exercise all his membership rights, and obligations in relation to those rights, in all respects as if the charging order had not been issued.
(d) subsection (6) shall apply whether the limited liability company has a single member or multiple members.
(8) For the avoidance of doubt and without limiting the generality of subsection (6) and subsection (7), a person in whose favour a charging order has been issued shall have no right to:
(a) interfere in the manager’s management of the limited liability company including any sale of its assets.
(b) liquidate or seize the assets of the limited liability company;
(c) restrict the business of the limited liability company; or
(d) dissolve, or cause the dissolution of, the limited liability company"
Exemplary, pecuniary and aggravated damages are not recognised in the Cook Islands, and accordingly are not able to be recovered under a charging order.
For the purposes of assessing the sum which may be subject to, and recoverable pursuant to, a charging order the Court shall disregard and exclude any amount which constitutes an award of exemplary, vindictive, retributory or punitive damages (by whatever name), or is an amount of damages arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for loss or damage.
What the charging order does provide, is for the creditor to receive distributions of capital or income which would, but for the charging order, have been received in the hands of the member.
If the limited liability makes a call on members for capital in accordance with its rules, the company may use a distribution due to the member to meet that capital contribution notwithstanding the charging order. This is consistent with the charging order being seated at the member side of the equation rather than the company. The distribution never reaches the member so the creditor has no claim upon it.
An interim charging order may be applied for ex parte, but will only have a life of a maximum of 30 days. The applicant will need to ensure the defendant is served with the proceedings and must deal with the application expeditiously if a full charging order is to issue. Otherwise, a charging order, once granted, is good for five years.
Importance is given to the member and the LLC being separate legal persons in relation to interlocutory applications. An action against a member is not sufficient to support discovery orders or injunctions being issued against the LLC in which the member holds a membership interest.
Foreign judgments given in relation to the availability of a membership interest to satisfy a creditor, (unless consistent with Cook Islands law), cannot be recognised or enforced in a Cook Island court.
LLCs are not required to have their members benefit from this regime and these provisions apply subject to the operating agreement. This allows the formation of LLCs whose members are happy to put their interests at risk or to mortgage their interests. However, what they cannot do is to change their minds later. This is the one provision in an operating agreement which cannot be altered. This requirement is aimed to avoid any involuntary amendments to the terms of the operating agreement affecting the applicability of that section.
LLCs may transfer their domicile from the Cook Islands to another jurisdiction and LLCs from other jurisdictions may seek registration in the Cook Islands under the legislation. However, LLCs wanting to escape existing corporate debts would do well to avoid the jurisdiction.
The Act specifically provides that with redomicilation the LLC takes its prior debts with it and any action against the company, whether already filed or not, prior to redomiciliation, may be continued and any judgment entered shall be enforceable against that LLC in the Cook Islands.
The usual confidentiality provisions apply. Proceedings are heard in camera and information may be divulged in only limited circumstances.
The new legislation provides a comprehensive but not cumbersome framework for the operation of LLCs. It is believed LLCs will provide a useful addition to attorneys and financial advisers in conjunction with the establishment of trusts in the Cook Islands.
Depositions – The Most Important Asset Protection Factor in the Discovery Process
(Ed's Note: A lot of my readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article on giving depositions by Randall Edwards of Trustmakers Financial Services in New York, NY. Edwards can be reached at (888) 916-7070.)
By Randall K. Edwards
(There is one aspect of) Asset Protection that usually does not often get a lot of attention. This is because when one thinks of protecting one’s assets, it is usually framed in terms of avoiding a lawsuit altogether. I would like to address an issue that arises when the lawsuit has already been filed and discovery—the process by which each side is allowed to get information from the opposing party—has begun.
Some important discovery tools are written interrogatories, requests for production of documents and requests for admissions. In my book, however, there is nothing more important to your case than your deposition—your sworn oral testimony in response to questions from your opponent’s attorney. Proper preparation for this important step in your lawsuit is vital.
I have taken and defended hundreds of depositions of clients, witnesses, company representatives, experts and others. I cannot overemphasize their importance. Deposition testimony is crucial to any case, and always results in each side in a lawsuit re-assessing their case as a result. Cases are often won or lost on the strength or weakness of a single client or witness deposition.
A deposition is usually taken at an attorney’s office. Despite the fact that there is no judge present, you will be sworn to tell the truth as if you were testifying in court, because the deposition is a formal judicial proceeding. Your testimony will be recorded by a court reporter and transcribed into a written book, which can be used against you if your testimony changes.
Present at the deposition will be the opposing counsel, your lawyer and a court reporter. Parties to the lawsuit also have the right to attend all depositions, unless barred for some reason by a court order.
Your attorney has the right to make objections to questions that you are asked. These objections are generally made "for the record"—so that if your deposition is used in a later proceeding, the judge can rule on whether the question was proper and should be stricken from the record. Unless your attorney instructs you not to answer—usually because a question requests information protected by an evidentiary privilege, such as attorney-client communications—you will be required to answer the question, regardless of the objection.
Depositions are often high-stress and unpleasant ordeals. Having a hostile attorney ask you questions that you may suspect are more designed to trick you than to find the truth is sometimes like trying to balance on a high wire without a net. Nonetheless, depositions can be handled in such a way that your case is strengthened by your testimony.
Here are some tips for your deposition, based on my years of experience.
Dress Appropriately for Your Deposition
Dress in clothes that would be appropriate if you were testifying in court. Your testimony may be videotaped and played before a jury in the trial of your case. You want to look your best in such a case. Even if your testimony is not recorded by video camera, you want to use the same degree of care in your appearance as you would if you were testifying before a judge and jury. This will project you as a confident and capable witness who takes your responsibilities seriously.
Always Tell the Truth
You are under oath—the same oath as if you were sworn into the witness box in court. If you are shown to be anything less than truthful, you may be guilty of perjury. At the least, if you can be shown to be lying on any point, everything that comes out of your mouth will be suspect. It is far better to tell the truth, regardless of how painful, than to testify falsely.
It has been my experience that in most cases, the truth, in all its horror or glory, comes out in a lawsuit—sometimes in ways that you can never anticipate. When that happens, it is better that you have fully told the truth on your terms than to let someone hostile to you try to tell your story for you.
I once saw an entire case unravel at trial because a party had shaded the uncomfortable truth in their deposition, and had been confronted with the lie while on the witness stand. The opposing counsel made the best of it, arguing to the jury, "If he is willing to lie once under oath, he will be willing to lie again. In fact, you can never know when a liar is telling the truth about anything. You cannot trust a thing this guy says." The jury took the argument to heart and the punishment in the verdict was swift and sharp.
Do Not Get Angry
It has been my experience that the first person to lose his temper in a lawsuit also loses the case. If you speak out of anger, you are more likely to say something you will regret later, and you also show that you can be manipulated. Hard as it may be, you should always remain calm, even (especially) in the face of heated questions from an opposing lawyer whose goal appears to be to "get your goat".
In this regard, you should always treat the opposing lawyer with respect –even if you do not feel that respect is deserved. There is no advantage to you in mistreating opposing counsel. In fact, your dislike for an opposing counsel can so taint your view of the case that your ability to present your side will be severely compromised.
Make Sure You Understand the Question Asked of You
Do not answer a question you do not understand, and do not speculate as to what the opposing lawyer is asking. If you do not understand what you are being asked, tell the lawyer to rephrase the question. Do not guess at what the meaning of a question is.
Do Not Volunteer Information
Once you have answered the question, stop talking. There is no good to be gained, and much harm to be done, by giving more information than you are asked (to answer). While it is important to be completely truthful and to answer all questions honestly, it is not necessary to say anything more.
I had a client once volunteer information in a deposition about an embarrassing situation in their earlier life—something completely irrelevant to the case and not asked for by the other lawyer. It caused immense problems in the case and wasted a lot of attorney and client time before the case finally resolved. There is no need to give any information that you are not asked about.
In this regard, if you can answer a question with a simple "yes" or "no", do so. Think of every word that comes out of your mouth as a bullet the other side in the lawsuit can use to shoot you. The fewer bullets you hand over, the fewer wounds that can be inflicted on you. Do not give a long narrative answer. Do not be lulled into a relaxed conversation where you might let your guard down. There is nothing casual in the deposition process—ever.
If You Do Not Know the Answer, Say "I Do Not Know"
There is no crime in not remembering something months or years after something occurred. It is far preferable to simply say "I do not remember" or "I do not know" if you cannot recall than to speculate on something that you feel you should remember. On the other hand, if you do remember something, do not try to hide the truth behind the ruse of "I do not remember" or "I do not know" answers. Being honest about a painful truth is always better than looking evasive when you do know the answer.
In connection with this, try to avoid saying "always" or "never." Since there are no exceptions to such characterizations, it is easy for an opposing counsel to search for an exception to your statement and make you out as being untruthful.
Also avoid saying "I am not lying to you" or "in complete honesty". Use of such phrases makes it appear as though you might lie on occasion or speak with less than complete honesty.
Do Not Be Afraid to Ask the Opposing Lawyer for a Document That Might Refresh Your Recollection
Depositions are not memory tests. If the opposing lawyer has a document in his possession that you do not have – or that you have not seen for some time—it is unfair for that lawyer to try to play "gotcha" with it.
If you are aware that a lawyer has a document that might refresh your recollection, do not be afraid to ask the lawyer to let you take a look at it. If he will not, it will reveal that the lawyer is playing games rather than trying to get at the truth.
Do not Interrupt the Question Before It Is Fully Asked
In everyday conversation, we often interrupt one another as soon as we understand the direction the talk is going. Depositions are not everyday conversation, however. They are important interrogations, the results of which will be on the record forever. Thus, it is important that you listen carefully to the complete question and pause to formulate your answer. This not only gives you a chance to calmly give the information that is asked for, but it also gives your lawyer the ability to interpose any appropriate objections to the question.
Ask for a Break If You Need One
If you need to take a break for whatever reason, ask for one. A deposition is not an endurance contest. If you need a bathroom break or simply a chance to get up and stretch your legs, feel free to ask for a break. Breaks are a good time to converse with your lawyer and to assess your testimony so far.
Be Careful of Agreeing With Opposing Counsel’s Characterization of Your Testimony
For example, if the other lawyer says something like, "Would you agree with me that …" or "Now what you are saying is …," you need to think carefully about whether your testimony is being accurately summarized. If you disagree with a statement about your testimony, feel free to correct or clarify that statement. Remember, it is your deposition, not the opposing counsel’s deposition.
Depositions are rarely simple or easy. Nonetheless, great good for your case can come from your deposition testimony. It is truly Asset Protection in the trenches. With adequate preparation, you can be confident and collected in giving a deposition.
5 Lessons on Asset Protection and Estate Planning During the Current Recession
(Editor's Note: A lot of my blog readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article by John Dietz of Trustmakers Financial Services in New York, NY. Dietz can be reached at (888) 916-7070.)
There is an old Chinese saying by Confucius:
When the student is ready, the master will appear.
Lately, hosts of people want to "learn" about asset protection. I think what the Chinese really meant was that the term master refers to a "readiness" and openness to obtain knowledge. Having fielded many of the questions of our subscribers at Trustmakers, it seems to me that there is a global impetus to learn about asset protection (and I don’t think that we have to explain to anyone "why").
Of course, asset protection means to safeguard one’s wealth against those who may take claim to it. That definition is correct, but it leaves behind the nuances to the "living" side of asset protection and estate planning and still another side, which is transfer upon death by a testament (transfer by will) or by some other means of transfer.
Within these "other means" category are a multitude of options, many of which offer tax mitigation. Many others offer asset protection. Some offer both tax mitigation and asset protection.
However, not all estate planning is asset protection. Your estate plan protects your assets in illness and upon your passing. Asset protection defends your assets from the threats you face now and in the future, known and unknown. For this reason, you can’t just buy an LLC, dump your assets into it and believe that you are protected from creditors or that your taxes will be reduced.
If it sounds complicated, that’s because it is. Trying to figure out why the IRS Code has to be so complicated or why the laws are constantly changing won’t do anything for you or your estate.
Months ago I wrote a newsletter about the global economy and stated that (like it or not) you are a part of it. This certainly has been the case as we have seen the turmoil on Wall Street, plunging hedge and pension funds and international banking trouble. They are all interconnected.
Due to the vast number of things out of your control, you should do what you can within your control. Even if the task feels too complicated, start by sorting out a few facts and definitions and taking it one-step at a time; get education first to create a foundation. Next week’s newsletter and special attachment will build on these definitions.
Trustmakers offers our subscribers a fantastic way to start your estate planning with foundational material from a guest author with an advisor who stands as an authority on the subject.
Here are some of the basics that you will need to understand to benefit from the upcoming newsletter on estate planning.
Asset protection cannot prevent lawsuits. It does not hide assets and it is not a way to avoid paying taxes. Asset protection must be within legal means. Asset protection protects assets from creditors: taking into consideration title of assets, ownership and benefits, future revenue and taxation. It concentrates on the "life" side of your finances.
Estate Plans are not "per se" protection from lawsuits or creditor attacks. Traditional estate plans arrange for the end of a person’s life, including alternative solutions in the event that a person may become disabled before they die. It concentrates on the "passing" of assets upon death and sometimes during life with techniques such as gifting.
Asset protection plans need to be reviewed frequently; family situations change, laws change, IRS Code changes and economic conditions change. All of this is a consideration of asset protection. Often asset protection plans change. They must be prepared for changing situations.
Estate plans have similar considerations. Changing laws, tax codes, and ownership conveyance may affect circumstances surrounding estate plans regarding transfer of possessions or assets.
Estate plans and trusts can be revocable or irrevocable.
Irrevocable – Unalterable, committed beyond recall. - Black’s Law
Revocable – Capable of being withdrawn or cancelled. - Black’s Law
Asset protection is not accomplished by starting a company. There are many ways for creditors to seize company assets. Many assets are seized due to faulty titling or the use of the wrong entity for protection. Asset protection plans are made to hold up when challenged by any outside entities.
Estate planning is not accomplished by having a will. A will can be challenged. If you do not have a will, your estate will be placed in probate where the courts decide the outcome, expenses and taxation of the estate. With a pourover will, the assets left outside the estate plan are placed into the trust upon the death of the owner. (There is also a pourover trust where assets outside a trust are placed into a trust upon death.)
The term used for describing the circumstances of conveyance during life (as opposed to death) is: Inter vivos – (Latin for "between the living") Of or related to property conveyed not by will or in contemplation of imminent death, but during the conveyor’s lifetime. – Black’s Law
Asset protection does not prepare for your medical care during disability. Asset protection keeps your assets out of harm’s way while you are still alive.
Estate plans have documents with preparation for disability and incapacitation, such as long-term medical care and Medicaid protection. Estate plans do this by using Power of Attorney, sometimes referred to as "advanced directives."
Advanced Directives, Medical Power of Attorney, Health Care Power of Attorney - an empowerment of an attorney-in-fact or proxy, to make health-care decisions for the grantor, including sustaining and terminating care. – Black’s Law
In almost every trust, a person gives up "legal ownership" of the asset or property to a "trustee," but retains "beneficial ownership" as beneficiary.
Ownership - The right to posses, use and convey.
Trustee – One who, having legal title to property or assets, holds it in benefit for the right of another and owes fiduciary responsibility to that beneficiary.
Beneficial Owner (Beneficiary) – One recognized with the right to equity and enjoyment because the title or deed maintains this right. – Black’s Law
This month we have decided to emphasize what is within your strength and power. Many of our questions lately have focused on what can be accomplished during recession and turbulent financial times. The answer? Many of the same things that can be accomplished in great economic times.
Estate planning and asset protection concentrate on you and your assets! You won’t want to miss next week. Our goal is to help you start the New Year with the right perspective.
You will get the answers to these questions to lead you into 2009:
In addition, to end simply with one question, ask yourself, "Am I prepared?" Your thought, "for what?"…and that second thought is our job at Trustmakers, to prepare you!
May 29, 2008
Financial Lessons in Life
IRA Rescue Using Home Equity Management: How You Can Remove Your IRA Money Tax-Free
Copyright © 2008 Ed Bagley
(Editor's Note: I subscribe to Trustmakers' email newsletter which I received yesterday with the following article by Roccy M. DeFrancesco, Jr. Roccy has a lot of acronyms after his name, including JD, CWPP, CAPP and MMB to be exact. Financially savvy people know what these mean, but you do not need to be a financial whiz to understand the clarity of what he has to say about how to keep more of the money you earn. I have some readers with huge liquid assets who might be very interested in Roccy's article, and therefore am posting it here. For those readers who have assets and want to keep them, and those who would like to keep more of their assets when they acquire them, read on.)
By Roccy DeFrancesco
In my last newsletter, I discussed how you can solve the double tax trap (upwards of 85% for readers with an estate tax problem) of money in a qualified plan or IRA by using the very simple concept of liquidate and leverage (L&L). While a simple strategy, it’s one that can significantly increase the amount of after tax wealth you can pass to your heir at death.
For this newsletter, I thought I would give an alternative strategy to L&L that involves proper "home equity management".
Let me ask you a few questions:
1) If you die with an estate tax problem and money in an IRA, what will be the tax on the money in the IRA? Answer: 70-85% for most readers.
2) Do you or do you plan on having debt on your home when in retirement or at death? Answer: Most client readers with wealth will not have debt or not much debt on their home at death (especially if they use the simple Home Equity Acceleration Plan to aggressively pay down debt.
3) Do you plan on selling your 3-4-5 bedroom empty nester home (big home with no children left)? Many readers will sell their large home in retirement and downsize into a smaller home or a condo (having a big home when you are 70+ years old can be draining due to house upkeep and cleaning).
4) Do you plan on buying that vacation home/condo in another part of the country? Sure, many readers, once in retirement, will buy a condo in a nice vacation spot and split time between that condo and the primary place of residence.
While you might have thought the “L&L” concept was beneficial, you can improve the finances of the concept if you incorporate Home Equity Management.
This concept I’ll be discussing in this newsletter is very simple on its face (although fully understanding the math can get a bit complicated). IF you can create a deductible home mortgage payment, you can remove money from an IRA to pay for the mortgage without paying taxes on the money removed from the IRA.
Why? Because the taxable dollars removed from the IRA will be allocated to a deductible home mortgage interest expense (IF set up correctly).
The following example is very specific. It deals with a couple who wants to sell their home. If the clients simply want to re-finance the home, the interest might be deductible up to the first $100,000 of debt or not at all.
Let’s use our Dr. Smith again. Assume he is now retired and has a paid-off home worth $1,000,000 dollars and has $500,000 in his IRA. Let’s assume he would like to downsize the current house now that the children are all grown up and that he wants a vacation home in another part of the country.
Assume Dr. Smith buys a new, smaller home or condo locally (where he lives) for $400,000 and a new home or condo in a nice vacation spot for $400,000. Assume he puts down approximately $158,000 on each property and has a deductible mortgage expense on each property with the same $242,000 mortgage at 6.5%.*
With two interest-only mortgages at 6.5% with a total amount of deductible debt of $484,000, the interest expense on the mortgage payments will be approximately $31,500 a year.
*As you can see, I’m manipulating the numbers to fit a particular example. This is exactly what you will do in the real world when calculating how much money you want to draw out of the IRA every year. Some people will want to draw out X amount so that the IRA balance is zero at age 100, 90, or 85. Others will not want to draw down the IRA balance to zero for fear that they will need some of the money.
For this example, I’m assuming the money in the IRA grows annually at 6% and that Dr. Smith can take withdrawals of $31,500 from age 60 to 98½.
If Dr. Smith removes $31,500 per year from the IRA to pay the mortgage payments, there will be no taxes due on the withdrawn money because he can deduct the $31,500 of IRA income on his tax returns due to the fact he has a corresponding home acquisition debt payment for the same amount.
Repositioning the Money for Estate Planning
After Dr. Smith removes the money from his IRA tax free, he then needs to do something with the profit from the sale of his house (his available cash from the sale is $684,000 after putting down the two $158,000 payments on his two new houses or condos).
I’m going to assume that Dr. Smith would like to maximize the size of his after-tax estate that will be passed to his heirs. Just like the “L&L” solution, Dr. Smith will choose to gift money to an Irrevocable Life Insurance Trust (ILIT). In this example, I’m going to assume Dr. Smith will use $484,000 of his $684,000 profit from the sale of the home to gift to an ILIT.
Once the money is in the ILIT, a large death benefit life insurance policy will be purchased on his life, which will pass the maximum amount of wealth to the heirs, income-tax and estate-tax free.
One main issue Dr. Smith will have to deal with is the gift tax problem of repositioning the $484,000 into the ILIT. Dr. Smith and his spouse can gift $12,000 per spouse per child to the ILIT every year without gift taxes. They have two children and four grandchildren, and, therefore, they can gift up to $144,000 a year to the ILIT every year without incurring gift taxes.
In this example, at $144,000 a year, Dr. Smith can gift the money into the ILIT in just over three years.
How much death benefit can Dr. Smith purchase with a $484,000 premium? $3,000,000.
Therefore, if Dr. Smith dies tomorrow, next week, next year, or when he’s 85 or more years old, $3,000,000 will pass income-tax and estate-tax free to his heirs.
Remember the numbers from the earlier do-nothing scenario? If Dr. Smith did nothing, the $500,000 IRA balance would grow and be taxed at 80%. If Dr. Smith died at age 70, the heirs would receive $189,830 after taxes. Whenever Dr. Smith dies in this example, his heirs will receive $3,000,000 after taxes.
There is no doubt that readers who have “trapped” money in IRAs can use this type of solution to significantly increase the size of their after-tax estate for the heirs.
The goal with these types of newsletters is part educational and part motivational. Millions of Americans have money in their IRA or qualified plans and estate tax problems. If they “do nothing,” 70-85% of that money will go to the IRS at death.
By working with a team of advisors who are familiar with all the various ways to remove money from an IRA in a tax advantageous manner or in a manner so as to maximize your after-tax estate, you will do the best job possible to pass the maximum amount of wealth to your heirs and will certainly do much better then most client’s default position which is to “do nothing.”
(Editor's Note: You can reach Roccy and Trustmakers Financial Services at (888) 916-7070.)
May 26, 2008
Talk About Poor Examples
If USA Families Ran Finances Like Their Government, They Would Go Bankrupt
Copyright © 2008 Ed Bagley
It does not seem that long ago that federal spending in the United States of America was $627 billion in 1965, according to The Heritage Foundation, which keeps track of these and other numbers of interest. Federal revenue in 1965 was $620 billion, so our government was $7+ billion in the hole for 1965.
Even then, knowing that $1 billion is really $1 million 1,000 times and that $628 billion is really $1 million 628,000 times, it seemed like a lot of moolah.
Federal spending in 2008 is estimated to top $2.7 trillion. Knowing that $1 trillion is really $1 billion 1,000 times, and that $2.7 trillion is really $1 billion 2,700 times, and really $1 million 2,700,000 times, it is mind-boggling to wrap your mind around. No wonder we are called the richest nation in the world.
We may also be the most foolhardy nation in the world as our national debt has now topped $9.4 trillion against an estimated annual federal revenue of $2.5 trillion for 2008. It may be difficult, but think about servicing $9.4 trillion in debt with $2.5 trillion in revenue.
Perhaps the relationship between the two figures it is easier to think of this way: Your annual income is $100,000 and you have to service $376,000 in debt, or your annual income is $50,000 and you have to service $188,000 in debt. What if the $188,000 in debt was credit card debt? Would you ever get out from under?
There are a lot of families in America with annual income well in excess of $100,000 that are servicing more than $1 million in debt, but does all of the wonderful lifestyle make your feel any more secure?
Is our federal spending out of control in the United States? It is a fact that federal spending has grown 334% since 1965, that is 9 times FASTER than our median income, which rose just over 35% during the same period.
If you think that statistic is scary, try this one: Discretionary spending, the portion of the federal budget subject to annual review and debate, has risen 152% since 1965 while mandatory spending, consisting mostly of Social Security, Medicare and Medicaid which continue on automatic pilot, has risen 759% since 1965.
In other words, mandatory spending is rising 5 times FASTER than discretionary spending. Mandatory spending has grown from $169 billion in 1965 to $1.45 trillion in 2007, taking up more than 58% of the federal budget.
Our government has a real stupid plan when it cannot meet our taxpayer obligations—the government prints more money. When doing so, our government simultaneously increases inflation and reduces the value of our American dollar. This is the same plan that South American dictators use when pressed for cash to pay bills. Do it enough, and pretty soon it takes a wheelbarrow full of dollars for a citizen to buy a loaf of bread.
If you lost your job and your income was cut in half or two-thirds, you would use some good old-fashioned Yankee ingenuity (common sense) to cut back your expenses until you found another source of revenue. If we as citizens printed money to cover our expenses, our government would prosecute us and send us to jail.
The people who run our government are citizens like you and me, with one big difference: they can authorize the printing of money to cover their mistakes and we cannot. It also helps that none of them are forced to live in a dumpster behind a trash store. Trust me when I say that they are hardly living near poverty level.
In other words, there are so many millionaires running into each other in the nation's capital they can hardly get anything done that will actually help the people they are representing, which would be us. The plain truth is that politicians have done more to help themselves get on in life than help us, and they have done this because we put them in a position to do so.
Our elected officials in Washington have such a good self-image they refuse to be part of our Social Security System, which is plenty good enough for the taxpayers who elect and support their spending habits, but certainly not good enough for them. Their retirement system is not nearly as shabby and cheap as ours; their retirement system continues their salary for the rest of their life when they retire.
But enough carping about our elected politicians who basically could really care whether we drop dead or get on in the world. Do not believe all of the drivel coming out of their mouths this presidential election year.
Put simply, Barack Obama wants to be the first African American president, Hillary Clinton wants to be the first woman president, and John McCain wants to be the oldest president ever elected. All are U. S. Senators, and all are multi-millionaires or married to multi-millionaires. Their chief interest in being a politician is to line their pockets at our expense.
If nothing about our country being $9.4 trillion in debt bothers you, perhaps you should know that the $9.4 trillion is the actual debt at this very moment—the federal debt INCREASES $1.2 billion per day into the future.
And, just for the record, our actual federal obligations into the future are a whopping $55 trillion and counting. This figure includes "off balance sheet" items like Social Security, Medicare, etc. that we the taxpayers are obligated to pay by being taxed even more in the future.
Most of us who are less prosperous than the millionaire politicians who represent us would do well to work at becoming debt free so we can ultimately survive even if our government cannot.
Read my editorial comments on key issues and concerns, including "Facts About the Second Most Controversial Topic in America – The First Is Abortion", "So Why Should I Subsidize Any Banks Because of Their Greed and Incompetence?", "A Disturbing Trend in Our Society – The Lack of Trust in Our Institutions" and "Washington's Hottest Political Issue Pits PI Attorneys and the Insurance Industry". Find these articles and more in my Lessons in Life link.
February 22, 2007
Clason's "The Richest Man in Babylon" Reveals the Fastest Way to Become Financially Savvy – Part 1
Copyright © 2007 Ed Bagley
book "The Richest Man in Babylon" reveals the fastest way to become
financially savvy. It works today because money is governed today by the
same laws that controlled it when prosperous men thronged the streets of
Babylon 6,000 years ago.
Here is a synopsis of The Richest Man in Babylon and the important financial lessons it teaches:
A self-employed chariot builder becomes discouraged when, after years of hard work, he realizes that he will never become rich. He labors hard to build the finest chariots in the land, soft-heartedly hoping that some day the Gods will recognize his worthy deeds, and bestow upon him great prosperity.
He now realizes that the Gods could give a care about the work on his excellent chariots. He longs to be a man of means, and have the lifestyle of the richest man in Babylon, who was a childhood friend.
He confers with his best friend, a musician, who reminds him that it is not enough to have a fat wallet, as a man’s wealth is not in the wallet he carries, because a fat wallet quickly empties if there be no golden stream to refill it.
The chariot builder decides to confront the richest man in Babylon, who he knew in his youth, and learn how he became so rich.
The chariot builder shares his lament with the richest man in Babylon, knowing that both he and the richest man in Babylon were once equal, played the same games in childhood, studied under the same masters, had equal talent and ability, and worked just as hard; now he works just as hard but his childhood companion has become the richest man in Babylon, while he still struggles.
The rich man replies, “If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.”
The richest man then explains that he had learned how to become rich from a moneylender, for whom he had provided a service in exchange for the moneylender’s secret to success.
The moneylender said, “I found the road to wealth when I decided that a part of all I earned was mine to keep, and so will you.”
The money lender tells the rich man, who was then a scribe in the hall of records, to set aside one-tenth of all he earns as his portion to keep.
A year later the young scribe comes back to the money lender, who asks him if he has kept a tenth of all he earned.
When the scribe replies yes, the moneylender asks him what he has done with it.
The scribe says he has given it to a bricklayer who was going to foreign lands to buy jewels, which he and the bricklayer would sell for profit when he returned. The scribe ends up with nothing, as the bricklayer is sold worthless glass rather than fine jewels.
“Every fool must learn”, says the money lender, “but why trust the knowledge of a bricklayer about jewels? Your savings are gone,” continues the moneylender, “you have jerked up your wealth-tree by the roots. But plant another. Try again. And, this time, if you would have advice about jewels, go to the jewel merchant.”
Another year passes, and again the scribe goes to the money lender, to tell him that he had saved one-tenth and given it to a shield maker to buy bronze, and each fourth month the shield maker pays him rental.
“That is good,” says the moneylender, “And what did you do with the rental?” “I had a great feast and bought a beautiful scarlet tunic,” replies the scribe.
“You squander your savings,” admonishes the moneylender. “How do you expect your savings to work for you, and generate more savings to work for you? Get yourself an army of golden slaves to work for you, then many a rich banquet you may enjoy without regret."
Two years later the scribe again goes to the money lender, to tell him that he still saves one-tenth, invests it more wisely and now continues to do so. “Each time I loaned money to the shield maker, I loaned back also the rental he had paid me. Therefore not only did my capital increase, but its earnings likewise increased.”
“You have learned your lessons well,” says the moneylender.
“You first learned to live upon less than you could earn. Next you learned to seek advice from those who were competent through their own experience to give it. And, lastly, you have learned how to put money to work for you.
"You have taught yourself how to acquire money, how to keep it, and how to use your money to prosper. You are now competent for a responsible position.”
The scribe goes on to become the richest man in Babylon.
It was apparent that no one could do for the scribe what the scribe had done for himself. Each man has to work out his own understanding of what needs to be done, and then prepare himself to take advantage of the opportunity to succeed in a big way.
The moral to the story The Richest Man in Babylon teaches this lesson: Proper preparation is the key to our success.
February 23, 2007
Clason's "The Richest Man in Babylon" Part 2 - The 7 Cures for a Lean Wallet and The 5 Laws of Money
Copyright © 2007 Ed Bagley
Part 1 of this
2 Part series ends the synopsis of George Clason's book "The Richest Man in
Babylon," but Clason raises an important question: Why should so few men be
able to acquire so much gold?
The answer is because they know how.
One may not condemn a man for succeeding because he knows how. Neither may one with justice take away from a man what he has fairly earned, to give to men of less ability.
And so it was that the good king of Babylon sought out the richest man in Babylon to teach to others in his kingdom the secrets of his success.
This is a synopsis of what the richest man taught to the people of Babylon:
The Seven Cures for a Lean Wallet
1) Start your wallet to fattening. Save one-tenth of all you earn. Remember that a part of all I earn is mine to keep. Do this faithfully. Do not let the simplicity of this escape you.
When I ceased to pay out more than nine-tenths of my earnings, I got along just as well. I was not shorter than before, and, money came to me more easily than before.
2) Control your expenses. How is it that all do not earn the same yet all have lean wallets? Here is the truth: That which each of us calls our “necessary expenses” will always grow to equal our incomes unless we protest to the contrary.
Confuse not necessary expenses with desires. We all have more desires than our earnings can gratify. Examine which of the accepted expenses of living can be reduced or eliminated. Let your motto be 100% of appreciated value demanded for every dollar spent.
Budget your expenses so that your actual necessities are met without spending more than nine-tenths of your earnings.
3) Make your money multiply. Protect your growing treasure by putting it to labor and increasing. Money in your wallet earns nothing. Money that we earn from our money is but a start; it is the earnings generating earnings that builds fortunes.
When the richest man in Babylon loaned money to the shield maker to buy bronze, he said this: "Each time I loaned money to the shield maker, I loaned back also the rental he had paid me. Therefore not only did my capital increase, but its earnings likewise increased."
4) Guard your money from loss. Everyone has an idea of how to make quick money; few, however, have the evidence of making money to justify their idea, scheme or offer of quick riches. The first sound principle of investment is security for your principal.
Before you loan your money to any man assure yourself of his ability to repay your loan, and of his reputation to do so. Make no one a present of your hard-earned treasure.
Consult the wisdom of those experienced in handling money for profit. Such advice is often freely given for the asking, and may possess more value than the amount you are about to invest.
5) Make your home a profitable investment. When you can set aside only nine-tenths of what you earn to live, and can use a part of that nine-tenths to improve the investment in your housing, do it; owning your own home is also an investment that grows with your wealth.
Your family deserves a home they can enjoy and call their own. It builds a sense of stability and well-being.
6) Ensure a future income. Build income-producing assets that do not require you to work forever. We will all grow old and die.
You should prepare a suitable income for the days to come when you are no longer younger and cannot work as hard, and to make preparations for your family should you no longer be with them to comfort and support them. Provide in advance for the needs of your growing age, and the protection of your family.
7) Increase your ability to earn. Desire precedes accomplishment, and the desire must be strong and definite. When you have backed your desire for saving $1,000 with the strength and purpose to secure it, you can then save $2,000.
Desires must be simple and definite. Desires defeat their own purpose when they are too many, too confusing, or too difficult to accomplish. Cultivate your own powers to study and become wiser, more skillful, and more productive.
Here is more sage advice from Clason's masterpiece on financial matters:
The 5 Laws of Money
If you had to choose, would you choose tons of money or wisdom? Most men would take the money, ignore the wisdom, and waste the money. Here is the wisdom:
1) Money comes gladly and in increasing quantities to any man who will put aside not less than one-tenth of his earnings to create an estate for his future and the future of his family.
2) Money labors diligently and contently for the wise owner who finds for it profitable employment, multiplying unto itself in infinity if kept working diligently. Money multiplies itself in surprising fashion.
3) Money clings to the protection of the cautious owner who invests it with the advice of men wise in its handling.
4) Money slips away from the man who invests it in businesses or purposes that he is not familiar with, or which are not approved by those skilled in its keep. The inexperienced handler of money who trusts his own judgment, and puts his money in investments which he is not familiar, always pays with his money for his experience.
5) Money flees the man who would force it to impossible earnings, or who follows the alluring advice of tricksters and schemers, or who trusts it to his own inexperience and romantic desires in investment.
Here is the hard lesson of the 5 Laws of Money: You cannot measure the value of wisdom in bags of money. Without wisdom, those who have it quickly lose money, but with wisdom, money can be secured by those who have it not.
This ends the condensation.
October 8, 2007
There Is No Other Way
The Only Way to Become Financially Free in America Today: Start Your Own Business
Copyright © 2007 Ed Bagley
I have become
so sick and tired of online gurus offering scam products and opportunities
that I must reveal the truth about what I have discovered. It is simply
In virtually every ad I have read and responded to online a sinister tactic has left me disappointed and dismayed. All of the solutions I had been promised left me unable to achieve any real success whatsoever.
And the sinister tactic being used? Let me simply call it the sin of omission in the solution being offered for my hard-earned money and time.
As strange as it might seem to a man, think about baking a cake that has 5 ingredients. What I have been getting from online gurus is generally 4 of the 5 ingredients, or 80% of the knowledge and application it takes to make the big bucks like the gurus.
Without the 5th and final ingredient the cake making process and the cake are a flop. Worse yet, the gurus know this and purposefully withhold the final ingredient, knowing that if you knew it, you would then join them in the success circle.
They nonetheless advertise and sell their information as if they are giving you all of the ingredients and the full story. In the process, I was being really cheated out of my investment in their products and opportunities.
They were literally lining their pockets at my expense while acting like successful online entrepreneurs willing to share their success information for a price.
The online business of selling information to unsuspecting prospects without giving the prospects all of the information and help they need to succeed has become a multi-million dollar industry.
These online gurus are worse than spin doctors in politics. They will literally steal you blind and act like they are doing you a real service; there is apparently no end to their righteousness and profits, not to mention their disingenuousness.
Enough is enough. I am sick and tired of all their lies and ad copy that drones on for 50-plus pages, spewing out their "exclusive" knowledge, how "easy" it is to succeed like they do, all the "evidence" of their newfound wealth, all the "testimonials" of the common folk and superstars who worship at their feet, all the "crap" you are going to get (minus the real information you need to succeed), how their information is "worth" thousands, how "you can buy it" for hundreds, and how you must "act immediately" to take advantage of their time-sensitive offer.
All of it crap. I have never had a single one of these gurus help me with sincerity at my point of need. They are only interested in selling me more of their personal and company products, books, tapes, seminar tickets, etc., all of which they make money at my expense.
Here is what I believe you need to know before you begin a journey toward becoming financially free:
1) Unless you are a famous rock star, professional athlete or chief executive officer of a major corporation, you have no chance of becoming financially free. You cannot be hired help as an average worker and become financially free in America.
You should have figured out by now that you are not going to get generous raises each year, get more time off, and get better medical, dental and associated benefits. You are an employee, not the owner of the company.
2) As long as you are hired help, you are going to pay too much of your earnings in taxes. Workers are taxed to death. You should know by now that even if your government taxed the rich three times as much, the combined middle class taxpayers still pay far more taxes.
Take the middle class out of paying taxes and the United States would collapse. There would not be enough money to pay all of bureaucrats who regulate our lives and our incomes.
3) Your government does not reward you for being financially responsible, your government punishes you. Your government taxes you on your savings. Your government restricts the amount of tax-free money you can contribute to your retirement accounts. Your government encourages you to go farther into debt by giving you a bigger mortgage interest deduction for a bigger house with a bigger mortgage payment.
4) Very few Americans can save enough for retirement because their incomes are too low, their taxes are too high, and by the time they pay their bills, too many live month-to-month, unable to save enough for retirement.
So what is the answer? Let me share with you not what I think, but what I know.
5) First, you need to go into business for yourself. Do not quit your job, simply start a part-time business on the side so you can begin to generate some income, and accumulate more legal tax deductions. The tax deductions will enable you to lower your taxable income. Then you can take the tax savings and invest in your retirement and/or expand your business.
6) Second, this is not rocket science. You do not need a college degree or special advice from your banker or financial expert, 95% of whom will lie, cheat and steal to take your money while trying to convince you that they are your best friend and helping you. If you doubt this, just start reading the real life articles I write in the Lessons in Life section of my Blog.
7) Understand that as hired help you have so few legal deductions you can count them on one hand. As a business owner, you have a minimum of 200 deductions and hundreds more if you are a major corporation. You simply cannot continue to pay the taxes you are paying as hired help and get ahead.
8) Do you know that as a business you can legally arrange your affairs so that virtually all of your business travel expenses are 100% deductible? This lowers your net taxable income, and reduces the net taxable income your business generates.
9) Do you know that if you have children ages 8 to 18 you can hire each of them to work in your business, and pay them approximately $5,000 a year? Do you know that this income for each of your children is tax free to them, and you can take the combined employment expense as a 100% business deduction?
10) Do you know you can start a legal business for a one-time investment of as little as $200, and maintain your business for as little as $20 a month? Yes you can. I do it, and I can show you how to do it.
Reading Can Act as a Catalyst
How Two Sentences in a Book Led Me To Retire $269,000 and Become Debt Free
Copyright © 2007 Ed Bagley
When I first thought about becoming an Internet Marketer, I thought about becoming debt free. I did not like the idea of paying hundreds of dollars a month in interest on my obligations.
I was reading one day and came across this quote from a British author that seemed to capture my feeling exactly: "Money is like a sixth sense without which we cannot make a complete use of the other five." Nothing before or since has made more sense to me.
I realized I
could not reach my full potential without becoming debt free and financially
independent once and for all.
But how? I was led by the myEcon business opportunity to buy a copy of Rich Dad, Poor Dad, Robert Kiyosaki's book about financial intelligence.
I read the
book, then read the book a second time and was impressed by Kiyosaki's
personal financial advice, but I got stuck on two of his thoughts:
1) The first thought was "making more money will not solve your personal financial problems if cash flow management is the problem."
understood that either I needed to get in control of my personal finances,
or spending, increasing debt, and paying interest on debt would be in
control of me.
2) The second thought was "you really need to become debt free BEFORE you start investing."
I then understood that if I was paying 18% to 21% on my credit card
debt, for example, and not earning squat on my investments, I was going
backwards about a 1,000 miles an hour.
Both of these thoughts were upsetting to me because I knew he was right as right can be.
If I did what everyone else did, I would have what everyone else has, and for most people, what they have is years of hard work, unfair taxes and a lifetime of debt. And let me tell you, I had some debt.
It is not
unusual today for a middle class family to have $100,000, $200,000 or
$300,000 in personal debt, if for no other reason than many middle class
families are making payments to the bank while owning their home.
I then understood that I needed to change my thought process about what I was doing financially, and why I was doing it.
I realized that if I lacked the will for change, there was no one who could show me the way.
So I became determined to get in control of my cash flow, and eventually retired $269,000 in debt to become a free man.
I became very thankful that I was led to Robert Kiyosaki's book.
Unless you have done it, you cannot imagine how off-loading $269,000 in debt feels.
Getting rid of the interest I was paying on $269,000 in debt was an incredible blessing. And how did I do it? Well, that's another story. Any situation can be unique. My solution may not be your solution.
The important thing is that I acted on the information that I read.
Former New York City Mayor Ed Koch's Take on the Recent $700 Billion Bailout
(Editor's Note: This following commentary by former New York City Mayor Ed Koch takes a more serious look at our government's recent $700 billion bailout plan. This sort of commentary may or may not interest you. It is intended for those who would be interested in another take on this bailout funded with taxpayers' money.)
The I more think about it, the more I believe we were had when the federal government proposed that $700 billion bailout to primarily deal with the liquidity crisis.
At the time, nobody seemed to know what to do. When Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke jointly proposed the bailout in an attempt to avoid a repeat of the Great Depression, nearly everyone threw up their hands and concluded there was no alternative.
At first, some members of Congress -- both Republicans and Democrats -- balked at the huge bailout package. They said at the very least there should be some minimal safeguards since the legislation was drawn to give the Secretary of the Treasury what appeared to be total power to determine how the bailout would be structured.
These concerns were addressed to some extent in the revised bailout bill which, among other things, staggered the bailout payments and provided for some Congressional lending oversight for half of the $700 billion rescue package. Congress apparently assured that having waited and then passing the legislation on the second time it was presented to the House, it was in fact improved and would prevent our being ripped off by Wall Street for a second time.
We were told over and over by the experts in the news media and government that the real problem was in fact liquidity – banks were just not willing to lend, even to creditworthy applicants. I decided to write a letter to both Treasury Secretary Paulson and Federal Reserve Chairman Bernanke stating my concerns about the use of the federal guarantees and loans.
The letters (written to Henry Paulson and Ben Bernanke on Oct. 9, 2008) follow:
"As you have pointed out, the meltdown occurring in the United States is taking place in large part because of a lack of available liquidity, meaning that lenders – commercial banks in the lead – are not lending to applicants seeking to borrow in order to purchase housing, cars and other big ticket items that the economy relies on to flourish, as well as denying loans to small businesses and local governments seeking to borrow to pay their bills with municipal bond markets largely closed to them.
"One of the purposes of the $700 billion recently made available as a result of legislation enacted by the Congress is to give additional liquidity to commercial banking institutions so that they can once again perform their leading raison d’etre – lending money. The major reason for lack of liquidity – availability of loans – is fear, as you have stated, fear that the money will not be repaid either by individuals, governments or institutions, e.g., other banks.
"Again, as you have stated, another reason offered by the banks for not lending monies is that much of their assets are now labeled "toxic." It is these assets which, as a result of your efforts, the newly-enacted legislation addresses, freeing the banks of them by having the federal government buy them at a price below their original value, substituting cash to the banks.
"If I have accurately stated the facts, why not by order of the United States Treasury and Federal Reserve direct the commercial banks to immediately commence loaning money to "creditworthy" applicants and at a scale comparable to loans individual banks entered into last year? If the banks refuse to abide by such order, they would not be eligible among other punitive measures to sell their "toxic" securities to the Treasury. If the banks require a definition of "creditworthy," your offices will supply it for the various situations that apply.
"If the proposal makes sense, it can immediately be implemented and provide the credit needed. If it does not, I would appreciate knowing the reasons why.
"All the best. Sincerely, Edward I. Koch"
Chairman Bernanke’s response dated Oct. 16, 2008 follows:
Dear Mr. Koch:
"I am responding to your letter of October 9, 2008, in which you recommended that the Treasury or bank regulators direct commercial banks to lend to creditworthy borrowers. You further suggested that banks that did not comply with such a directive would be ineligible to participate in the Treasury’s Troubled Asset Relief Program (TARP).
"We at the Federal Reserve firmly agree that an unfreezing of financial markets and a resumption of lending activity is essential. Credit is the lifeblood of an economy, and continued economic growth will require that substantial credit flows be restarted.
"But requiring directly that banks extend specified amounts of credit to creditworthy borrowers would entail many complications. For example, bank regulators would need to create an objective definition for determining which borrowers were creditworthy. Moreover, because the volume of banks’ credit activities can fluctuate over time for a variety of reasons, including those over which they have no control (such as the rate of economic growth in their geographical regions), determining appropriate targets for individual banks’ lending activities would be complex and potentially arbitrary. In addition, because of the very large number of banking institutions in the country – more than 8,000 – administering such a program would be extremely resource intensive.
"However, we believe that the plans recently announced by the U.S. Treasury, the FDIC, and the Federal Reserve to bolster the capital of banking institutions and to guarantee certain liabilities of banking firms will be effective in strengthening the banking system and in fostering the extension of credit to sound borrowers. The purchases of mortgage-related assets under the Treasury’s Troubled Asset Relief Program will also contribute to a recovery of the credit intermediation process by reducing the amount of opaque and difficult-to-value assets from the balance sheets of financial institutions. Moreover, the Federal Reserve continues to provide large amounts of liquidity to the financial system through its standard lending program as well as through a wide range of new liquidity facilities, and these activities should further support credit intermediation.
"To be sure, even with these substantial actions by the government, the recovery of our financial markets will take time. Strains on financial markets and institutions are likely to remain considerable and will act as a drag on economic growth for the foreseeable future. However, I believe that the government has now put in place an important array of tools that will enable us to address over time some of the most significant difficulties in our financial system. As a result, with continued focus and effort to resolve these issues, we can look forward to a gradual restoration of lending activities and sustainable economic growth. I hope these comments are helpful. Please let me know if I can be of further assistance."
Chairman Bernanke responded, but Secretary Paulson has not. On November 7, The New York Times in its masterful style published an article authored by Steven Erlanger and Katrin Bennhold putting into context the problems we and other countries are facing. The article states, "But there is a fundamental problem that is not easily solved by the usual economic policy tools: how to persuade rattled banks to start lending again – an essential first step to restoring economic health."
It was shocking to learn, "Treasury Secretary Henry M. Paulson, Jr. had to gather the chief executives of the nine biggest American banks and cajole them into accepting about $25 billion each in new capital. But having pleaded with the banks to take the money, and putting no government officials on bank boards, the government had little power to tell them how to spend it. Treasury officials also refused to tell banks to reduce their dividends or to increase their lending by any specific amounts."
I find it incredible that this is happening and no one is calling foul. Where are all the hotshots who supported Paulson in his psyching us all out by conveying that if we did not follow his plan, we would find ourselves in another Great Depression? Why aren’t they at the very least denouncing what is now happening? We are keeping alive, in addition to banks, other institutions that have done a terrible job and were greedy. Those companies should be permitted to declare bankruptcy so that someone in the private sector can buy them at a discount, if they are worth purchasing.
Everyone is lining up to get their federal handout. AIG has come back for more and is to receive a total of $150 billion. The three American car companies, General Motors, Chrysler and Ford, have received $25 billion and want another $25 billion of taxpayers’ money. Why not let them be bought by others in bankruptcy?
There are those who say we are bailing out companies in order to prevent massive layoffs. In my view, those layoffs will come sooner or later anyhow because those companies are run by incompetents and no longer able to compete, while foreign companies like Toyota, manufacturing their cars in the U.S., are selling them and not seeking to be bailed out. They make cars Americans want to buy.
In the meanwhile, the vast majority of Americans have lost upwards of 50 percent of their savings including in the stock market and their 401ks. Particularly heartbreaking are the financial futures of those already in retirement who are dependent on their now lost or greatly reduced savings, as well as the millions more who hoped to retire soon.
Plans should be made to organize to bring to Washington hundreds of thousands if not millions of Americans? We should carry pitchforks to scare the hell out of government, particularly the newly-elected members of Congress as well as all of those reelected recently, for failing us so miserably.
Senior Citizens Take Note:
2009 Social Security Benefits Will Have the Highest Annual Increase Since 1982
(Editor's Note: The following article is good news for anyone who receives
Social Security benefits, and also tells the status of the program's
funding, and who will also benefit from increases in 2009.)
Social Security benefits for 50 million people will be go up 5.8 percent next year, the largest increase in more than a quarter century, according to the Associated Press.
The increase, which will start in January, was announced Thursday (10-16-08) by the Social Security Administration. It will mean an additional $63 per month for the average retiree.
The increase is the largest since a 7.4 percent jump in 1982 and is more than double the 2.3 percent rise that retirees got in their monthly checks starting in January of this year. The typical retiree's monthly check will go from $1,090 currently to $1,153.
The benefit change is based on the amount the Consumer Price Index increases from July through September from one year to the next.
The 5.8 percent rise in the cost of living adjustment is a sharp departure from recent years. The COLA increases have been below 3 percent for all but three of the past 15 years as the Federal Reserve waged a successful campaign to keep inflation under control.
Even with the big increase, the COLA is well below the gains of the late 1970s and early 1980s when the country was in the grips of a decade-long bout of high inflation. The biggest cost of living benefit on record was a 14.3 percent increase in 1980. Social Security benefits have been adjusted every year since 1975.
In one break for most retirees, the cost of living increase will not be eaten up by higher monthly premiums for the part of Medicare that pays for physician services. Because of gains in the Medicare Part B trust fund, that premium will hold steady at $96.40 a month, although higher-income people including couples making more than $170,000 annually will see their premiums increase.
Next year's cost of living increase will go to more than 55 million Americans. More than 50 million receive Social Security benefits while the rest get Supplemental Security Income payments for the poor.
The average couple, both getting Social Security benefits, will see their monthly check go up by $103 a month to $1,876.
The standard Supplemental Security Income payment for an individual will go from $956 per month to $1,011.
The average monthly check for a disabled worker will go from $1,006 to $1,064.
If no changes are made, the Social Security trust fund is projected to deplete its reserves in 2041 and will begin paying out more than it collects in benefits even sooner, starting in 2017.
In addition to the cost of living adjustment, the government announced Thursday that the maximum amount of earnings subject to the Social Security tax will increase next year to $106,800, up from $102,000 this year. Of the 164 million workers who will pay Social Security taxes in 2009, about 11 million will pay higher taxes as a result of this increase.
Former New York Mayor Ed Koch Weighs In on Our Financial Disaster
(Editor's Note: Everyone wants to know what caused the recent financial
debacle in the United States, and who was most responsible for the events
that have happened. Here is one opinion by Ed Koch, former New York City
mayor. I print this as I received it via email.)
It is surprising that with all the financial pain felt by the U.S. population including the many individuals with 401K plans invested in the stock market, there have been no street protests demanding more immediate and effective action from our representatives in Congress and the White House.
When the war in Vietnam dominated our political lives in the 70s, angry crowds marched in every big city and raging rallies were held in Washington, D.C. Every member of Congress was visited by protesters. I was there in the Longworth building actively opposing the war receiving anti-war constituents nearly every day.
Until recently, there were regular demonstrations in the streets and on college campuses demanding that the troops in Iraq come home.
The absence of protests now when our economy has been driven into the ground by greed on Wall Street and in Washington is a mystery.
We saw some of that greed uncovered when the CEO of Lehman Brothers, Richard Fuld, Jr., was interrogated before the House Oversight Committee chaired by Henry Waxman. I served with Waxman when I was in the Congress from 1969 to 1977, and there could be no better legislator to make public what happened.
According to Fox News, “Richard S. Fuld Jr., chief executive officer of Lehman Brothers, declared to the committee ‘I take full responsibility for the decisions that I made and for the actions that I took.’ He defended his actions as "prudent and appropriate" based on information he had at the time. ‘I feel horrible about what happened,’ he said.”
The New York Times reported that “…in response to a question from Dennis J. Kucinich, who wanted to know how Mr. Fuld’s public statements could be valid in light of efforts by JPMorgan Chase to secure $5 billion in extra collateral from Lehman in the final days,” Mr. Fuld stated, “’No, sir, we did not mislead our investors. To the best of my ability at the time, given the information I had, we made disclosures that we fully believed were accurate.”
Really? The Times also reported, “At one point on Monday, Mr. Fuld was confronted with an internal memo dated June 8 that included warnings about Lehman’s condition and asked the question, ‘Why did we allow ourselves to be so exposed?’ Mr. Fuld, after a long scan of the memo, said, ‘This document does not look familiar to me.’”
Does anyone believe him? I think few, if any, do. Will he be punished? Some say he had an estimated fortune of $3 billion which has been reduced to $30 million, and that is punishment enough. I do not agree. I believe that if Fuld deliberately misled the investing public, he should be pursued criminally and civilly, and is only one of many who should be held accountable.
I don’t know whether Fuld is criminally responsible for the debacle. But all of us are aware of the financial void into which we have fallen. According to CNN, “…the Dow ended its worst week ever Friday, capping a staggering eight-session sell-off that resulted in a 2,400-point loss. It's not just the size of the loss keeping investors on edge, it's also the gyrations.
On Friday (10-10-08), the Dow whipsawed, falling as much as 697 points in the first minutes of trading before quickly climbing back into positive territory, only to turn lower shortly after.”
What bothers people, in addition to the pain of seeing their hard earned retirement funds disappear, is not to see those who caused it identified and, where grounds exist, criminally pursued. Surely, some of those CEOs, CFOs and directors committed fraudulent acts.
What the public demands is that those who engaged in crimes be punished. In all likelihood, nothing will happen to them. It is reminiscent of the cigarette company CEOs who testified under oath before Congress that they did not believe there was any connection between cigarette smoking and cancer. Millions of smokers died from cancer, but none of those CEOs were charged with perjury.
I am surprised that no civic leaders or political parties have been able to stir the public to take to the streets in peaceful protest. Ought there not be a public rally in every city, particularly New York, Chicago, Los Angeles and Washington, D.C., led by respected, responsible civic leaders who will convey the anger and fears of the electorate to the Washington lawmakers and demand the kind of leadership provided by FDR back in the days of the Great Depression?
People are really hurting. Those living on fixed incomes, including retirees, are wondering how they will be able to pay their bills, while those nearing retirement are doubting whether they will be able to afford to retire,
Millions of Americans who have recently examined their stock statements have found their assets depreciated by as much as 42 percent from their high. Last week, the S&P was 35 percent below its 200 day moving average. The last time that occurred was when Franklin Delano Roosevelt was president.
Yes, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke appear to be taking action, but apparently, not enough. The public is frightened and wants to know where were our leaders when the debacle was unfolding.
The public wants to know when will those who are politically responsible for our agony be held accountable and when will those criminally responsible be facing judges and juries.
Even if the measures recently taken by governments around the world begin to work and restore confidence and the stock markets rally, those responsible for the debacle should be held accountable.
July 2, 2008
Watching Your Budget:
Smart Tips on Pumping as Gas Prices Continue to Soar
Editor's Note: Here is some inside advice about buying and pumping gas from
a pipeline worker in California:
I do not know what you guys are paying for gasoline, but here in California we are paying a lot more than the national average price per gallon. After 31 years in the petroleum industry, here are some tricks to get more for your money when buying and pumping gasoline.
Here at the pipeline company I work for in San Jose (CA), we deliver about 4 million gallons in a 24-hour period. One day it is diesel and the next day it is jet fuel and gasoline, regular and premium grades. We have 34 storage tanks here with a total capacity of 16,800,000 gallons. Here are some helpful tips you can use when pumping gas.
Only buy or fill up your car or truck in the early morning when the ground temperature is still cold. Remember that all service stations have their storage tanks buried below ground. The colder the ground the more dense the gasoline; when it gets warmer gasoline expands, so when buying in the afternoon or in the evening, your gallon is not exactly a gallon.
In the petroleum business, the specific gravity and the temperature of the gasoline, diesel and jet fuel, ethanol and other petroleum products plays an important role. A 1-degree rise in temperature is a big deal in this business, but the service stations do not have temperature compensation at the pumps.
When you are filling up, do not squeeze the trigger of the nozzle to the fast mode. If you look, you will see that the trigger has 3 stages of release: low, medium and high. In slow mode you are pumping on low speed, thereby minimizing the vapors that are created while you are pumping.
All hoses at the pump have a vapor return. If you are pumping at the fast rate, some of liquid that goes to your tank becomes vapor. Those vapors are being sucked up and back into the underground storage tank so you are getting less gas for your money.
One of the most important tips is to fill up when your gas tank is HALF FULL or HALF EMPTY. The reason you should do this is that the more gas you have in your tank, the less air occupies its empty space.
Gasoline evaporates faster than you can imagine. Gasoline storage tanks have an internal floating roof. This roof serves as zero clearance between the gas and the atmosphere, so it minimizes the evaporation. Unlike service stations, here where I work, every truck that we load is temperature compensated so that every gallon is actually the exact amount.
Another reminder: If there is a gasoline truck pumping into the storage tanks when you stop to buy gas, DO NOT fill up--most likely the gasoline is being stirred up as the gas is being delivered, and you might pick up some of the dirt that normally settles on the bottom.
Gas rationing in the 80's worked even though we grumbled about it. It might even be good for us! There are Middle Eastern countries that are boycotting American goods. We should return the favor. An interesting thought is to boycott their GAS.
Every time you fill up the car, you can avoid putting more money into the coffers of these Middle Eastern sources. Just buy from gas companies that do not import their oil. Nothing is more frustrating than the feeling that every time I fill-up the tank, I am sending my money to people who are trying to kill me, my family and my friends.
I thought it might be interesting for you to know which oil companies are the best to buy gas from, and which major companies import Middle Eastern oil.
These companies import millions of barrels of Middle Eastern oil: Shell, Chevron/Texaco, Exxon/Mobil, Marathon/Speedway and Amoco. Citgo gas is from South America, from a dictator who hates Americans. If you do the math at $30 a barrel, these imports amount to more than $18 billion, and oil is now $90 to $100 a barrel and climbing.
Here are some large companies that DO NOT import Middle Eastern oil: ARC0, Sunoco, Conoco, Sinclair, BP/Phillips and Hess. If you go to Sunoco.com, you will get a list of the station locations near you.
All of this information is available from the Department of Energy and each is required to state where they get their oil and how much they are importing. But to have an impact, we need to reach literally millions of gas buyers. It is not easy to spread the word, but it is possible if you agree with the cause of reducing our dependence on foreign oil.
August 5. 2007
It Cannot Happen Too Soon
Federal Reserve Wants to Clarify Credit Card Rates and Fees by Using Monthly Statements
Copyright © 2007 Ed Bagley
Credit card lenders have spent an inordinate amount of their time making the rates and fees they charge hidden or confusing to understand, probably because if card users knew the truth they might think twice about how they are using their credit card.
Now the Federal Reserve wants to clean up the mess by forcing lenders to clarify their rates and fees by disclosing them on our monthly credit card statements.
This is an improvement for consumers that cannot happen too soon.
Credit card lenders, and all lenders for that matter, have used legalese to obfuscate the fact that they routinely line their pockets at the consumer's expense. The more they can keep the consumer in the dark the brighter and more profitable their financial statements look.
The Federal Reserve's proposal, according to an Associated Press report, would call for a table summarizing credit card changes to appear on the statement above the list of transactions, placed clearly where people are most likely to notice the changes.
Credit card companies currently give only 15 days notice before making certain changes to the terms of the account. Creditors need not even inform a customer in advance if the interest rate to an account increases due to default or delinquency.
The Feds want the notice moved to 45 days prior. These changes would include slapping on a higher penalty for default or delinquency.
Proposals for change would include:
1) Itemizing interest charges for different types of transactions, such as purchases versus cash advances, and providing separate totals for fees and interest for the month and year.
2) For solicitations and applications, putting information about events that trigger penalty rates and important fees in a summary table.
3) Having account-opening disclosures appear in a table summarizing the key terms of the account.
Action by the Feds comes as a result of consumer complaints about confusing bills and poor or obscured credit card disclosure terms for items that make credit card lenders huge profits at the expense of cardholders.
All of this should have been solved years ago, but legislators have spent so much time taking huge donations from credit card lenders that it was profitable to throw the money into their reelection campaign to ensure their own future at the expense of the consumers they represent.
That would be the almost politically correct way to say it. Mark Twain might have said, "The legislators were bought like common prostitutes to screw cardholders by providing a service to their financiers."
Do not even bother to flatter yourself if you think that what I say here is for effect or untrue.
When I came to the State of Washington (only slightly less corrupt and slimy than Washington DC) the legal limit for interest charged on any credit card was 12%. Credit card lenders did not even want to do business in Washington.
That all changed as credit card lenders bought off politicians like buying cotton candy at the county fair. Now rates here in Washington are as high as the bluest skies you've ever seen in Seattle. It should be noted that all of this did nothing to alter the righteousness of the politicians and credit card lenders involved.
December 12, 2006
Why Bankers and Lenders Are Not Your Friends - Part 1
Copyright © 2006 Ed Bagley
The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. If your banker is an attractive woman, then you are even more susceptible.
I have grown over the years to appreciate a certain breed of bankers as one of the lower life forms that inhabit planet Earth. What I am about to share with you is even more true of certain mortgage brokers, secondary lenders and financial predators. They operate as sleazy parasites under the guise of helping the least creditworthy consumers who have virtually no savvy in financial matters.
Rather than pick on the worst of this collection of lenders who will help relieve you of your money without any conscience, I have targeted bankers. Before the banking industry was deregulated there were many people who considered bankers worthy of some trust and admiration. Those days are over.
Bankers still enjoy the best reputation (such as it is) among these lenders, but they have no problem patting you on the shoulder while picking your pocket and telling you how much they have helped you. I do not intend to indict the entire lending industry, just 95% of it. Here is an example:
My 24-year-old son wanted to refinance his first mortgage and was about to go to a leading lender in the market to look at its loan proposal. I decided to tag along because I know how lenders operate, especially when dealing with younger clients and senior citizens who have not handled the finances in their family.
His present loan had a principal balance of $123,773 with 7.458% interest at a 30-year fixed rate.
The proposed re-fi was for $134,999 with 9.9% interest (10.28% APR) at a 30-year fixed rate. The re-fi would cover the $123,773 principal balance due and provide a $10,409 home equity loan. The lender was actually smiling when he outlined what a good deal this was for my son.
I had coached my son to simply listen to the proposal, commit to nothing, take the paperwork with him, and tell the lender he would study the proposal and let the lender know if he wanted to proceed.
Once away from this flytrap I took my son to lunch, and we discussed the great deal he was given.
First, I had him look at the 3% discount fee on the Good Faith Estimate of the closing costs. (The discount fee is the amount you are paying for the privilege of getting the loan.) The discount fee was listed at $312.
What the lender was not telling him was that the 3% discount fee was figured on the $10,409 home equity loan and not on the $134,999 for the total loan which was $4,050, a slight difference of $3,748 in their favor.
If you called the lender on this discrepancy, he would probably say, "Oh, you're right, that's a mistake. That's the figure for the home equity loan. Jeez, I'm sorry."
When the day comes to close the loan, you see the bloated figure and object, and then the lender multiplies the $134,999 loan times 3% and viola, it comes up correct. You are dazed and confused, feel under pressure, want to get this over with and sign on the dotted line. This happens every working day in America when loans are closed.
Long after you are gone, the lender is quietly snickering, counting up the additional funds he will earn, and welcoming the next dumb bunny who comes through the door while you will be stuck with making payments for 360 months on a lousy loan.
For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left.
Always remember that for every liability you have, you are someone else's asset. For every liability—such as a mortgage, credit card, car loan or school loan—you are an employee of the company lending the money.
If you take out a 30-year mortgage loan, you have become a 30-year employee of the company which lends you the money. This is a very sobering thought when you are paying attention, as you should be. I am not talking about anything important in this article, just your financial health.
Part 2 of this article will take the financial details of the loan apart and show how not taking the loan will save my son $157,495.
December 13, 2006
Why Bankers and Lenders Are Not Your Friends – Part 2
Copyright © 2006 Ed Bagley
I told my son that normal closing
costs for a re-fi of $148,638 at 6.5% for 30 years is $2,500. Total closing
costs for his $134,999 proposed loan were $5,412, only $2,912 more. So I
asked him "Could you be paying too much for closing costs?" Answer: Yes.
Then we looked at his original principal balance owing of $123,773 versus his new principal amount owing of $134,999 should he accept the loan. I pointed out that he is losing $11,226 before he even starts servicing the new loan. Yes, he is getting a home equity loan of $10,409, but what is he really gaining? Answer: Nothing. He is losing again.
Then we calculated the closing cost recovery rate of $5,412 using a financial planning program. He learned it would take 30 months of payments just to recover his closing costs. I pointed out that until you recover your closing costs you have not saved a cent in the transaction.
He had already made 12 payments on his existing $123,773 loan, reducing his principal amount owing to $122,623. He had earned $1,150 in equity by making 12 payments at $862 a month.
Then we looked at what his principal amount owing would be when he reached his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.
Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus the 12 months he had already paid. Answer: $119,342 at $898 a month.
The lights began to turn on in his mind. Now he recognized that he would be $13,743 ahead in principal owing if he just kept paying on the existing loan at the lower monthly payment ($335 less!).
This sudden revelation begged the question: How can this be? Answer: The interest on mortgage loans is front loaded. He learned that if he went for this nationally known lender's great loan deal that he would be making loan payments for 30 months (2.5 years) and still owe $13,743 more in principal balance than if he kept his present loan and paid $335 less in his monthly payment.
Finally we looked at what it would cost to service both loans. His current loan had 348 months remaining (29 years) at $898 monthly. Total cost? $312,504. The proposed loan had 360 months remaining (30 years) at $1,233 monthly. Total cost? $443,880. The difference? $131,376.
Just how badly did he need that home equity loan? Answer: Not at all.
And how much would he save in actual dollars by not accepting the proposed re-fi from the lender who was supposedly helping him out? Answer: $157,495.
Here are the savings:
1) $11,226, the difference in the original amounts of the loans.
2) $1,150, the equity he already had earned from making 12 payments on his present loan.
3) $13,743, the difference in principal owing if he continued paying his present loan.
4) $131,376, the difference in the cost to service the proposed loan.
Never forget that finance is a dirty business like finding a cockroach on a cow pie.
The banker, mortgage broker or financial predator you are dealing with is not your friend trying to help you. He (or she) is your enemy trying to hurt you so his company can profit at your expense while he gets his big commission check and looks good to his employer.
If you want an excellent example of how your banker educates you about your finances, try swallowing his line about your first home purchase being probably the greatest and most rewarding investment you will ever make.
Remember that he talked about how your new home would be such a great asset for you. Anything to get you thinking you could not possibly afford your new home without his help, and that it would be your greatest investment.
Your banking friend never told you that your fantastic new asset is not even an asset but a liability. A liability, you say? Of course, silly, the bank holds the paper on your home until you pay it off, and your loan is really an asset on the bank's balance sheet, not on yours.
By lending you the money to buy your home, your bank creates an asset on its balance sheet, and if it is an asset for the bank, it must, by straight accounting procedures and common sense, be a liability on your personal balance sheet.
Heck, if the banker told you this, you might think twice about becoming a 30-year employee of the bank while you are making your payments for the next 360 months.
Are all bankers and mortgage brokers bad people? Naw, only 95% of them. When you go to borrow money for your next mortgage, my best advice is Good Luck, and God Speed. I certainly hope you educate yourself enough to realize that dealing with the 5% will save you a ton of money and grief over the next 30 years.
Financial Predators: Vermin, Rodents and Other Insect Pests
Copyright © 2006 Ed Bagley
While there are predators all around us, we generally do not think of our financial providers as predators. Typical providers we might use include banks, financial centers (the fancy name some banks call themselves today), credit unions, mortgage brokers, and mortgage bankers to name a few.
With thousands of people going online and starting home-based Internet Marketing businesses daily, many quickly develop a need for more capital to build their new part-time, second-income enterprise. Some inexperienced newcomers fail to budget properly and soon find themselves in over their head.
Their next likely stop is to find a lender. I was stunned yesterday to get in my post office box one of those new, fancy, 6-by-9-inch oversized postcards with this screaming headline on the slicked up front side: Get $5,000 by tomorrow!
If I did not know better, I would have thought I was reading one of the exaggerated opportunities that pops up on my monitor every day, you know, the one that says "Join Us Now And Collect Your $2,000,000" from "one of the world's most rewarding financial associations." Yeah, right. I could use an extra $2 million, and if I read through the entire sales pitch, I would probably find out that I really had to do very little to get it.
Sometimes it is easier to relate to the $5,000 you can get tomorrow (yes, you read right, tomorrow). You see, the lender in this case does not want a lot of legal paperwork and collateral to hold you up. Heck, they just need your signature!
This presents a wonderful opportunity to play Donald Trump. There was a time when The Donald could borrow millions by just signing his name on a dotted line. Sure, the $5,000 lender, called CashCall out of Fountain Valley, California, presumably does a credit check and, even if you rent or your credit is not perfect, the $5,000 will be in your bank account tomorrow (this delivery process is commonly known among the financial community and those who borrow such sums in such ways as a bank wire transfer). And, of course, your immediate money problems are solved! Viola! (as the French would say).
Turns out the source of the money received actually comes from First Bank & Trust of Milbank, South Dakota, a member of the FDIC, mind you (this important fact is used to apparently inspire confidence in the lender which is probably in good standing with your federal government as FDIC does stand for the Federal Deposit Insurance Corporation, an independent agency of your federal government).
Words cannot express how choked up I am with compassion over the fact that a bank would lend someone $5,000 on their signature only, and deliver the money into their account the next day. Some banks are just too wonderful for words.
A lot of folks would be overjoyed at the bank's generosity and understanding in their time of need. Then again, those same folks probably would be too excited about solving their "problems" to read the fine print in the same offer.
Did I just say fine print? Yes I did. That is the really small type on the bottom of the back of the life-saving postcard that has the catchy headline (get $5,000 by tomorrow!), and the prominent picture of ten $100 bills on the front, that says:
"Example of loan terms: The Annual Percentage Rate (APR) for a $5,075 loan is 59.90%, with 84 payments of $254.03." This is what I call a 7-year, fixed-rate loan that will bring the lender $21,338 in return. So, here is the deal: You get a $5,000 loan and the privilege of repaying the $5,000 you borrow plus another $16,338 in interest.
It caused me to wonder if they sell asbestos suits in Milbank, South Dakota, surmising that some folks may develop a need for them, depending, of course, on where they might be going.
The next time your lender is being so nice to you, remember the message of this postcard, and ask yourself, "Why is this lender (or banker) being so nice to me?" The answer, dear friend, is not that he or she has your best interest at heart.
Why should I even give this seemingly obscure offer even two cents of my time? Only to make this point: Since when is helping a financially desperate person made better by driving them deeper into debt, and then leaving them as ignorant as you found them?
H. L. Mencken (1880-1956), who became a U. S. journalist and literary and social critic, once said "You can never underestimate the stupidity of the American people." Man, was he right.
August 14, 2007
Almost All Are Irresponsible
Mortgage Lenders Act Like Your Friend in Need, But Seek to Line Their Pockets at Your Expense
Copyright © 2007 Ed Bagley
A client of mine received a "Smart Watch Report" from her mortgage lender the other day, and asked me to evaluate it for her.
The report was really an invitation to refinance her current mortgage loan and use her equity interest to either get cash now or sell her home and use the equity to buy a new home.
She made her original 30-year fixed rate loan for $142,000 at 5.5% interest a little more than two years ago. Her principal and interest monthly payment is $806. She has her property taxes and home insurance rolled into the loan, making her actual monthly payment $1,014, or $208 more.
Her appraisal at the time of the loan was $200,000 and her mortgage lender set the estimated current value at $253,000, giving her an estimated equity of $114,000+. Her principal owing at the time was $139,000+.
This is what I quickly observed:
1) She needed to buy a new home like she needed another hole in her head, and I told her so. Since she has a fixed income, buying a newer, better home would simply increase her debt and make it more difficult to service the increased debt.
2) While she could refinance her 30-year fixed rate to a 15-year fixed rate loan and save $55,000 over the life of the loan, it would increase her monthly payment for principal and interest to $1,193, an increase of $387 over her current $806 monthly payment.
Rolling her property taxes and home insurance into the 15-year loan would bring her new actual payment to $1,401, again an increase of $387 over her current monthly payment of $1,014.
3) The first offer her mortgage lender made was to do a "cash out " refinance wherein she could get her hands on $89,000+ in cash to fritter away on a new car, vacations and whatever else she did not need. This would be an incredibly dumb move for her to make, and I said so.
To do this her mortgage lender suggested she enter into a new 30-year fixed rate loan at 6.750%, a full 1.25% greater than her current loan. Her APR (annual percentage rate) would be 6.980%, or almost 7%.
Her new payment for principal and interest would be $1,477, or an increase of $671 over her current $806 monthly payment for principal and interest.
Rolling her property taxes and home insurance into the new 30-year loan would bring her new payment to $1,685, again an increase of $671 over her current monthly payment of $1,014.
Should my client take the lure of getting her hot hands on an extra $89,000+ in cash she would pay dearly for a really stupid financial decision.
The mortgage lender that suggested this option in their "Smart Watch Report" could really care less whether my client went into more debt and may not be able to meet the new obligations should she take the "cash out" refinance.
The mortgage lender could not care less if my client dropped dead. The lender still holds the paper on the property (they own it until the current loan is paid off in full) and could easily sell the property to recover its original $142,000 investment while still making a huge profit in the process.
Is what the mortgage lender is offering my client a responsible thing to do? You decide. I fail to see how loaning my client more money at a higher interest rate and increasing her debt is helping her. It would in fact hurt her.
Borrowers do not understand that when they take out a 30-year fixed rate mortgage loan they become an employee of the company lending the money. Teasing the lender with a "cash out" offer that could easily drive them into bankruptcy is hardly a responsible act by any lender, much less a leader in the marketplace.
This is the point and purpose of writing this article and posting it on the Internet: Since when is helping a financially desperate person—or any borrower for that matter—made better by driving them deeper into debt, leaving them as ignorant as you found them, and lining your pockets at their expense?
Note: Read my Article on "Financial Predators: Vermin, Rodents and Other Insect Pests", my 2-Part Series on "Why Lenders Are Not Your Friends", "Shopping Online – Caveat Emptor (Latin for Let the Buyer Beware)" and "How Online Surveys Prey On New and Unaware Marketers". Find these articles and more in my Blog Archive.
When Is It Better For You to Use a Debit Card Rather Than a Credit Card?
(Ed's Note: This article originally appeared in the AARP Bulletin.)
By Sid Kirchheimer
Q. When is it better to use a debit card
versus a credit card?
A. Debit cards are fine for everyday purchases. Since the money comes instantly out of your bank account, you may be less inclined to overspend. And you can't run up balances the way you can with a credit card.
But credit cards are often a better choice for big-ticket and online purchases. You avoid instantly draining your bank account of large amounts, and you can get better protection if there's a problem with the purchase.
For example, you can withhold payment or more easily dispute a charge. In addition, credit cards often offer better rewards than debit cards, and sometimes provide extended warranty protection and theft insurance for things you buy.
Credit cards are also a wiser choice for transactions in which the final bill is uncertain -- hotels, for instance, where you might run up a room-service tab. When you present a debit card on check-in, the clerk is allowed to put a hold on your account for your room rate plus the hotel's guess at your incidentals.
When the transaction finally clears -- it could take up to two days after checkout -- you're debited only for what you actually spent, but in the meantime you've been at higher risk for bounced checks and overdrafts.
Rental car agencies also put holds on your accounts, as do self-service gas stations -- they put a hold on $50, even if you only buy $10 of gas.
(Ed's Note: As long as your debit card has a VISA or MasterCard logo on it, you can use it as a credit card, and I highly recommend that you do. I find it incredibly annoying to have to memorize pin numbers for debit cards in order to use them, so I never use my debit cards as debit cards; I always use them as credit cards. For a financial standpoint, you also buy two more days of credit using a credit card; why pay now when you can pay later?)
Thought You Might Like to Know
The Seven Most Frequent Mistakes That Can Really Hurt Your Credit Score, and How to Make Your Credit Score Better
(Ed's Note: This guest article by Leslie Pepper was originally posted in the AARP Bulletin on April 28, 2010.)
By Leslie Pepper
Want to get a mortgage? Lease a car? Get a
new credit card? You will need solid credit.
Anyone lending you money wants to get it back, and 90 percent of lenders use what's called a FICO score—a number between 300 and 850—to judge your risk factor before they dole out the cash. The higher your FICO score, the more desirable a customer you are, and the lower your interest rate will be.
But even the smartest folks can slip up when it comes to maximizing their credit score, sometimes without even knowing it. Here are the biggest blunders you might be making, and how to fix them.
1) Paying Bills Late
Your payment history is the single most important piece of information on your credit report. "As little as one day late can hurt your score," says Barry Paperno, consumer operations manager for Fair Isaac Corp., which originated the FICO score.
Unfortunately, nearly 64 million adults do not
pay all their bills on time, according to a survey by the National
Foundation for Credit Counseling, a nonprofit group. Car payments,
electricity bills, even a late library fine can get reported to the credit
bureau. Mark your calendar to pay bills at the same time every month, or
arrange automatic payments with your bank.
2) Closing Credit Cards
It seems logical that canceling a credit card you are not using would raise your credit score. But that is not actually the case. After payment history, the most important part of your score is your debt-to-credit ratio: how much you have borrowed compared to how much you are allowed to borrow. So canceling available credit can actually damage your score.
Here's how: Let us say you have got three credit cards, each with a credit limit of $5,000. You owe $5,000 on one card and nothing on the others, so you are using 33 percent of your available credit. But close two of those accounts and suddenly you are using 100 percent of your credit line. Such people are not considered good credit risks.
Before you close an account, Paperno suggests you ask yourself three questions:
Am I unable to resist the temptation to spend unless I close the account?
Am I concerned about identity theft due to having been a victim in the past?
trying to avoid an annual fee for a card I no longer use?
If the answer to any of these is yes, it may be wise to close the account, regardless of how it affects your FICO score.
If you really want to close an account or two, close the most recently opened cards (account age is important to your score) and the ones with the lowest credit limit.
3) Not checking Your Credit Reports
Paperno recommends checking your credit reports at least once a year, and more often if you have had problems with identity theft, or if you are a heavy credit user. By law you are entitled to a free credit report <http://annualcreditreport.com> from each of the nationwide consumer credit reporting companies—Equifax, Experian and TransUnion. If you want your actual score, you will have to pay about $16.
Be aware that Annual Credit Report.com is the only place where you can get a credit report for free with no strings attached. (Other sites may slip in monitoring services that will cost you a monthly fee unless you opt out.)
When you get your report, make sure it is
accurate, and that it is about you and only you (for example, not about your
son with the same name). If not, follow the instructions on how to fix it
with the dispute form you will be offered on the site.
4) Taking It to the Limit
Just like closing an account lowers your debt-to-available-credit ratio, running your credit cards close to the limits does as well.
"The score looks at your accounts individually
and as a whole," says Paperno. Officially it is called overutilization, and
it means you are using too much of your available credit. So running up even
one card can hurt your total score.
If you have almost maxed out your cards, use them as little as possible for a while and pay them down. Once you do, keep your charges to 30 percent or less of your available credit, recommends Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
Which should you pay off first, the card with the highest interest rate or the card with highest balance?
That depends on what your goal is. If you want to get your credit score higher, then you should pay off the one with the highest balance, because that high balance is lowering your ratio of debt to available credit. But if you want to save money in the long run, paying off the one with the higher interest rate is probably better, even if it has less effect on your credit rating.
Using Cash Over Credit
While that may be good for budgeting, it is murder on your credit score. "Your credit rating is not solely a function of what you owe, it is a measure of how well you handle debt," says Scott Bilker, founder of DebtSmart.com.
By using cash all the time, you are not
giving lenders any information to judge your creditworthiness. If you do not
want to pay interest on credit cards, just pay the bill in full every month.
6) Not Shopping Around for Lower Rates
Lenders do not know the interest rate you are paying, and if your finance charges are high, it is harder for you to pay your bill. "This puts a lot of financial pressure on people, which can eventually cause them to be late or even default," says Bilker. Spend some time looking at cards and rates at Creditcards.com and Bankrate.com.
7) Applying for Extra Cards
Getting a 10 percent discount on a purchase in exchange for opening a new credit account at the department store seems enticing, but every time you apply for a card, a "credit inquiry" is added to your report. Too many inquiries at one time make you look desperate for credit—not the signal you want to send to creditors, says Cunningham.
One exception: When you are rate-shopping for a mortgage, a car loan or a student loan, your FICO score usually reflects that by lumping those multiple inquiries together as one.
Never Underestimate How Much Credit Card Reformers Will Accept for a Vote
Copyright © 2009 Ed Bagley
When I moved from the East Coast to the West Coast in 1973, credit card companies doing business in the State of Washington could not legally charge more than 12% interest on an account. That was because credit card interest rates were subject to the usury limits of the State of Washington; that was the law in every state.
In 1979, the U. S. Supreme Court justices that represented you and me ruled that the state of the lender, not of the borrower, had the sole power to legislate interest rate limits.
South Dakota then eliminated any usury limits, hoping to draw more businesses to its state. The credit card companies flocked to South Dakota and immediately began to increase their interest rates to what have now become unconscionable levels. Federal credit unions are currently limited to charging a maximum of 18% interest, but banks can charge whatever the market will bear.
Many banks currently charge 30% interest for certain accounts, and virtually all banks have default rates that soar to 30% when cardholders use their line of credit and then overcharge their limit, make a late payment, or miss their monthly payment. Credit card providers also have steep fines for any misstep a consumer may commit.
While no one is forcing consumers to apply for and use credit cards, credit card companies have routinely and willfully taken advantage of any consumer misfortune, such as losing their job or being hit with exorbitant hospital bills, to inflate interest rates.
The average credit card balance of many Americans is $13,000, either on one card or several cards. A 30% interest rate means the consumer has to pay more than $300 a month in interest alone without reducing the underlying $13,000 principal balance by a single cent.
The idea is to put consumers into a position where they have a legal obligation for the rest of their natural lives that they cannot possibly bring to a zero balance even if they stop using their credit card(s) and pay the interest only.
The recent legislation to help curb these abuses sounds better than it is. Yes, there are some restrictions but here is what the bill does not do:
It does not cap interest rates on credit cards, it just slows down the time when the rates can be implemented. Companies will still be able to charge interest rates of 30%, 40%, 50% or 100%, whatever the market will bear.
It does not explicitly cap credit card fees. Are your surprised? Don't be.
It does not take effect immediately, giving credit providers in many cases 9 months to raise rates and fees on current accounts. Do you really think they will not do so?
It does not limit interchange fees charged to businesses for credit card processing; these fees are passed on to the consumer.
In other words, the bill does not attempt to restrict the most important issues, such as capping the interest rates and fees.
It also does not prevent issuers from finding new fees to boost revenue. Use your card to withdraw money at another bank's ATM machine, and your credit card provider as well as the bank in question charges a fee. Look for these fees to rise dramatically. So how ridiculous can this get? How about cameras that record if you even look at an ATM machine but do not use it, then you are charged a fee for just thinking about using the machine.
While some regulation of credit card provider abuse is welcome, this current bill is more smoke and mirrors than substantive legislation. Why? Heck, I thought you would never ask.
Here's why: Credit card providers spread a lot of money around to get a majority of your congressmen to craft a bill that was more favorable to the credit card company than the consumer. Some people call this lobbying; others call it a convenient pay-for-vote system that continues to enrich congressmen and credit card companies at your expense.
Being Street Smart:
Credit Card Security Tips to Prevent Identity Theft
Editor's Note: The following security information comes from an attorney who
had his identity stolen and credit cards misused in the process. My
editorial comments in parenthesis follow the attorney's advice:
1) Do not sign the back of your credit cards. Instead, put 'PHOTO ID REQUIRED'. (This presumably would not reveal your signature, but would require you to present your photo identification every time you used your card).
2) When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the 'For' line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels will not have access to it.
(While this is a worthy procedure, many credit card payers include the billing invoice from the credit card company, which does have your complete card number showing bigger than life. Anyone stealing the transaction would have not only your check but also your card statement with the number showing. The credit card company could probably figure out who you are and apply the payment correctly, but not giving them your full number may delay the posting of the payment, causing you to incur a late payment penalty.)
3) Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. (DUH!). You can add it if it is necessary. But if you have it printed, anyone can get it. (I agree. I would not even put my work number on my checks.)
4) Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place. (This is excellent advice.)
I also carry a photocopy of my passport when I travel either here or abroad. We have all heard horror stories about fraud that is committed on us in stealing a name, address, social security number, credit cards.
Unfortunately I, an attorney, have first hand knowledge because my wallet was stolen last month. Within a week, the thieves ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more.
But here is some critical information to limit the damage in case this happens to you or someone you know:
5) We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them. (Excellent advice.)
6) File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation, if there ever is one. (Excellent advice.)
But here is what is perhaps most important of all, and I never even thought to do this:
7) Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the social security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name. (Excellent advice.)
The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.
By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend—someone turned it in. It seems to have stopped them dead in their tracks.
Now, here are the numbers you always need to contact about your wallet, if it has been stolen:
1) Equifax: 1-800-525-6285
2) Experian (formerly TRW): 1-888-397-3742
3) Trans Union : 1-800-680 7289
4) Social Security Administration (fraud line): 1-800-269-0271
December 10, 2007
They Lie, Cheat and Steal
The Biggest Scam in the Credit Reporting Industry Screams Deception and Greed
Copyright © 2007 Ed Bagley
What is it with some big corporations in America today? Too many of them lull you to sleep and then rip you off while acting like this is business as usual and acceptable. The latest example comes from the three big credit reporting bureaus—TransUnion, Experian and Equifax.
These three credit reporting bureaus are involved in a fight to wrest the credit scoring business away from FICO (Fair Isaac), which for years has been the leader in the marketplace.
The industry changed dramatically in 2003 when the Fair and Accurate Credit Transactions Act required the three major credit reporting bureaus to supply each consumer with one free credit report annually.
For decades the major bureaus had denied consumers access to their credit histories, selling the data exclusively to lenders. Since then the bureaus have moved aggressively to tap the consumer market.
The result has been very profitable as domestic sales of credit data to consumers created $220 million in revenue in 2003, more than doubled to $448 million in 2006 and is projected to top $860 million by 2010, according to market researchers.
Basically, the credit reporting bureaus have generated this income by appearing to give away a free credit report when in fact they are doing no such thing. They are luring consumers to several web sites claiming to give away a free credit report but only do so if you agree to buy one of their lame services, such as credit monitoring.
Worse yet, the scores you get from two of the top three bureaus are not FICO scores at all, but rather scores concocted by two of the bureaus in question: TransUnion and Experian. These scores are generally higher than the actual FICO score, giving consumers a false idea of their true score when lenders use the actual FICO score to make lending decisions.
This amounts to not just deception on the part of the bureaus in question, but dishonesty as well, in other words, they lie, cheat and steal and get away with it under the guise of "creative marketing", which is better described as "creatively screwing the consumer out of his or her money by misrepresenting what they are actually getting for free".
In this process, the bureaus are not serving consumers honestly. There is not a shred of integrity in this process and the credit reporting bureaus know it; they do it because they can legally do it even though it does not represent how business should be conducted.
Rather than actually helping and serving consumers in a straightforward transaction, they choose to line their pockets at the consumer's expense.
America became the most prosperous nation on the face of the earth by major corporations actually serving consumers, being fair and honest in their dealings by giving consumers more value for their purchase, and actually building a reputation of being trustworthy.
Those days are long over. Too many major corporations today are raising lying, cheating and stealing to an art form and then launching their "creative marketing" plans in a fit of righteousness. They deserve my absolute contempt, and should deserve the absolute contempt of consumers in every corner of this country.
Consumers who are taken in by their corporate greed are being misused, and frankly too many of them do not realize what a lower life form they are doing business with.
Here are some facts that you should know:
1) The one and only place you can get your free credit report annually is at:
Even at AnnualCreditReport.com you will not get your FICO scores from all of the major credit reporting bureaus. You will typically get your credit reports from the three bureaus and only one of your credit scores. You will have to buy your credit scores from the other two, and even then you may not be getting your actual FICO score which virtually all lenders use in decision-making.
Dozens of these "dummy" sites affiliated with the bureaus falsely imply that they can also distribute the government-mandated free reports. This is an absolute lie and why they are lying to consumers.
The plain truth is that the word "free" in business advertising in America is used so freely that it really has no meaning in the context of these kind of disingenuous offers by credit bureaus.
2) Any other URL that says they offer a free credit report is really a scam to relieve you of your hard-earned money. Both TransUnion and Experian are lousy with these dummy web sites and are taking advantage of the opportunity to line their pockets at the consumers expense.
3) The truth is that the only place you can get your actual FICO score is at Fair Isaac's consumer web site (myFICO.com), or at Equifax (Exquifax.com), which is the only credit reporting bureau that sells (not gives away free) FICO scores to consumers.
It is a sad commentary that in our day and time too many major corporations in America are terrible role models for anything and will do nothing to stop lining their pockets at the consumer's expense.
I am ashamed of the greedy, dishonest, disingenuous leaders of these companies. They should have to face their mother and family and explain how they failed to learn and practice some basic human traits, including honesty, integrity, trustworthiness and kindness.
This, of course, will not happen because in many cases their parents have left this place for a better one. That does not excuse their behavior or greed. What else are these so-called leaders doing in the dark of the night that we cannot see?
Editor's Note: Read my articles on Borrowing and Credit Card Companies, including "Financial Predators: Vermin, Rodents and Other Insect Pests", and my 3-part series on "Your Credit Score – How It Can Cost You Thousands More on Your Mortgage – Part 1; Six Actions You Can Take to Improve Your Contract Terms – Part 2; and FICO Plans to Eliminate Authorized Credit Card User Accounts – Part 3".
July 25, 2007
The Bane of the Borrower
Your Credit Score: How It Can Cost You Thousands More on Your Mortgage – Part 1
Copyright © 2007 Ed Bagley
A sharp rise in the delinquency of subprime mortgages has caused lenders to tighten up their standards and actually reject applications.
Should you attempt to refinance your present mortgage or seek a new mortgage, your credit score has become more critical to your loan approval.
Can it make a difference? Yes, it can make a significant difference in payment.
Fair Isaac, an acronym for Fair Isaac Company which is the most recognized authority in determining your personal credit score, gives this example of how your credit score can affect your monthly payments based on a 30-year fixed-rate mortgage for a $300,000 home loan:
FICO Score Interest Rate Monthly Payment
760 to 850 6.298% $1,857
700 to 759 6.520% $1,900
660 to 699 6.804% $1,957
620 to 659 7.614% $2,121
580 to 619 8.932% $2,399
The difference between the best rating and the worst rating increases your monthly payment by $542, you pay $2,399 rather than $1,857.
A credit score is a mathematical model that analyzes information in your credit report. Lenders use credit scores to gauge the likelihood that you will repay your debts.
So what determines your credit score? Payment history is 35%, the amount you owe is 30%, the length of credit history is 15%, new credit is 10% and the types of credit you are using is 10%.
You can obtain all three of your credit reports from Equifax, Experian and TransUnion at:
You are entitled to a free copy of your credit reports annually but will not receive your credit scores for free. You will be pitched to pay for the right to receive your credit scores from the agencies.
Many of the sales pitches for free credit reports at other web sites are no more than high pressure attempts to get you to pay for the report by subscribing to any number of services that you neither need nor want.
Should you type in http://www.freecreditreport.com, for example, you will be taken to an Experian web site that will give you a free credit report for their service only IF you are willing to be subscribed to a service they offer for $14.95 a month.
Experian invites you to "Join Over 20 Million Customers who have already checked their FREE Experian CREDIT REPORT."
Multiply $14.95 per 20 million per month and it adds up to $299 million in monthly revenue if the cardholders continue the service. Multiply $299 million in monthly revenue times 12 months and it adds up to $1.588 trillion in annual revenue for Experian.
There are two things very wrong with Experian's offer. First, and foremost, the credit report IS NOT FREE unless you subscribe to a service I would neither need nor want.
Experian's marketing formula for writing a sales pitch is hardly unique. Almost any marketer can open his or her e-mail tomorrow and read the same formula repeated in 100 different sales pitches for another opportunity to provide a product, service, or attend a seminar. The pitch will be in English, the language will be in doublespeak.
Second, the large headline above the button to get your report says "GET YOUR FREE CREDIT SCORE AND A WHOLE LOT MORE!" The inducement is misleading. It does not say get your free credit report, it says get your free credit score. You get your report and your credit score and some other services only by agreeing to sign up for the $14.95 a month service.
Someone eager to get their free report will hit the button for their free credit report and unwittingly subscribe to a service they neither need nor want. You must read the fine print on the page to know the difference.
This kind of inducement by Experian is hardly clear, straightforward, honest, ethical or anything else good; it is bad and wrong. The fact that advertisers can even do this legally is disturbing and obviously not regulated.
Do not, I repeat DO NOT, respond to any other online pitches for your free credit report other than http://www.annualcreditreport.com (this is the government-mandated site) or you may be ripped off by an industry that is neither helpful nor trustworthy.
Credit card reporting agencies are always giving poor, difficult customer service, making shyster offers and responding poorly when removing incorrect information from your credit report.
They are paid by businesses to only find and record any negative information about you. They could care less whether you drop dead on their front steps as long as they relieve you or your money first.
(Note: This is Part 1 of a 3-Part Series.)
Note: Read my 2-Part Series on "Why Lenders Are Not Your Friends" and "Financial Predators: Vermin, Rodents and Other Insect Pests" and "Shopping Online – Caveat Emptor (Latin for Let the Buyer Beware)" and "How Online Surveys Prey On New and Unaware Marketers". Find these articles and more in my Blog Archive.
July 26, 2007
The Bane of the Borrower
Your Credit Score: 6 Actions You Can Take To Improve Your Contract Terms – Part 2
Copyright © 2007 Ed Bagley
If any of these three agencies (Equifax, Experian and TransUnion) could "legally" lie, cheat and steal they would do it every day of the week and twice on Sunday.
All three agencies were forced to give out a free credit report to consumers annually; they did not do it willingly and never would have done it without being mandated to do so by the Federal Trade Commission (FTC).
Another example is that the top three credit reporting bureaus agreed to $2.5 million in payments (penalties) as part of settlements negotiated by the Federal Trade Commission to resolve charges that they (each and every one) violated provisions of the Fair Credit Reporting Act (FCRA) by failing to maintain a toll-free telephone number at which personnel are accessible to consumers during normal business hours.
In other words, the three top credit reporting agencies mentioned were too cheap to offer the toll-free line and better service on their own, and would not even continue to maintain the toll-free line system they were ordered to implement unless faced with prosecution by the Federal Trade Commission.
Pigs in the barnyard are more ethical, trustworthy and honest than the top three credit reporting bureaus. If it looks like a pig, walks like a pig, acts like a pig and smells like a pig, it is a swine.
These are businesses that either through their sloppy, inattentive reporting or accurate, quality reporting help determine your credit score which determines how much you will pay or not pay to fulfill your monthly mortgage contract.
Be advised that your credit score from each agency will likely vary because, whether recorded correctly or not, some lenders do not report information about borrowers to all three credit bureaus.
Here are 6 things you can do to stay abreast with your credit reports and credit scores:
1) Secure copies of your credit reports and credit scores annually, even if you have to pay to get credit scores from two of the agencies too cheap to give them to you.
2) Dispute errors that you find in the reports. The credit reporting agencies would not care if an error caused you great harm, and they would not (singly or collectively) notify you if they found an error that they knew would hurt your score.
They get paid by businesses for your report. You are nothing to them other than the fact that there would be no credit reporting business without you.
3) Pay off credit card balances as it is one of the factors used to determine your FICO score, which is your total debt relative to your available credit line, called "credit utilization".
4) Do not close unused accounts as closing these accounts reduces the amount of credit you have available. Cut up the card and do not use it but keep the account open as it can help your credit score.
5) Do not open new accounts as it could hurt rather than help your credit score even though by doing so you will increase your credit utilization.
6) Pay your bills on time because 35% of your credit score is determined by your credit payment history.
(Note: This is Part 2 of a 3-Part Series.)
July 27, 2007
The Bane of the Borrower
Your Credit Score: FICO Plans to Eliminate Authorized Credit Card User Accounts – Part 3
Copyright © 2007 Ed Bagley
Do you realize that in our country you are penalized for practicing good money management habits? Think about it.
If you paid for your own college education and refused to fall into the credit card trap that uses lenders to purposely suck the financial life out of naïve students, you might graduate debt free and have no credit history.
When you want to buy a vehicle on credit or a home with a mortgage, you could not get a loan without a credit repayment history and a decent FICO credit score.
For years young adults with no credit history, limited credit history or blemished credit history have worked around the problem by having someone with good credit—usually a parent, spouse or good friend—added as an authorized user to their credit card.
Once the authorized user is added, his or her credit card payment history is added to the account, giving the original card holder a higher credit score and access to loans and better loan terms.
All of this is about to end as Fair Isaac (the developer of the FICO credit score) will create a new scoring formula to eliminate the authorized user tactic.
Fair Isaac is taking the action because it estimates that 30% of the 165 million consumers with credit cards have authorized users on their accounts.
Once the new system is implemented in mid-2008, millions of authorized users will see their credit scores decline or go into free fall. Authorized users with no credit history of their own will see their credit scores disappear. Those hurt the most may be young adults and married women.
Here are some tactics these two population groups can use to fight back:
1) If married and listed on your spouse's account apply for a credit card in your own name.
2) Apply for a revolving credit card from a department store or other retailer as they are easier to get because they generally have lower credit limits and higher interest rates.
3) Apply for a secured credit card because you put money into an account in advance to cover your card transactions. If you default on your payment, the lender debits your account to cover the payment.
Sometimes secured credit cards become unsecured credit cards when you pay timely over a period of time. In some cases, you may even get back the initial deposit in the secured account plus interest.
4) Try to keep your balance below 30% of your available credit as this credit utilization will improve your credit score.
You can research fees and other features of credit cards at
(Note: This is the last of a 3-Part Series.)
February 14, 2007
Cash Is King in America
If You Are Looking for Leeches, Skip the Pond, Go to Your Credit Card Company
Copyright © 2007 Ed Bagley
Two seemingly unrelated stories
caught my attention yesterday. One was about corporations stockpiling cash
and the other was about consumer savings rates.
Some American corporations really know how to sock it away.
ExxonMobil ended its 2006 first quarter with $36.5 billion (not million, but billion) cash in hand, according to USA Today, giving the world's No. 1 oil company more cash than any company in the USA.
Could you even imagine having $36.5 billion in your savings or retirement account? That is a lot of moolah, or serious money for people in the know.
Microsoft was close behind with $34.8 billion in cash. Microsoft's savings were even more significant when you remember that Microsoft paid a $32 billion one-time dividend in 2004 after starting an annual dividend program in 2003.
Johnson & Johnson was a distant third with $17.2 billion, but even $17.2 billion is a staggering figure.
Industrial companies in the Standard & Poor's 500 had stuffed their corporate piggy banks with $642.7 billion by June of 2006. Imagine just the interest a company generates on its retained earnings. ExxonMobil earned $946 million in 2005.
The savings rates of consumers are just the opposite.
In 2005 personal savings rates of consumers moved into negative territory for the first time according to the U. S. Commerce Department.
That means consumers not only spent all of their after-tax income but dipped into existing savings or borrowed money, often with credit cards (the scourge of modern American finance) to cover their spending.
This is a fact that I learned from QSR, which is a trade magazine that covers the restaurant and fast food industry. QRS follows consumer spendable income.
By law other monies evaporate from retirement savings accounts through forced distributions. Your government loves to keep consumers spending so the economy grows, and it could care less whether retirees actually need to withdraw their retirement funds early.
Your government cannot keep its nose out of your business, or its hand out of your pocket.
Credit card companies did very well during this period. CBS reported that in 2004 credit card companies collected $14 billion in penalty charges and other fees, accounting for nearly half of the industry's $33 billion in profits.
You remember credit card companies. They are the leeches who loan you money when you do not deserve it and then bleed you dry until you cannot stand up straight or pay your monthly bill on time.
Then comes the over limit fee, the late fee and the interest on the remaining balance, all of which is calculated to send you to the poor house faster than a merchant can swipe your credit card for a purchase.
I call credit card companies leeches not to be clever but to be accurate.
A leech is really a worm, many of which are bloodsucking parasites, especially of vertebrates, which include mammals, which include humans. And if you think credit card companies do not suck the lifeblood out of you financially, then you will be forever enshrined as their friend in need of being snookered.
You have no need to go looking for leeches at your local pond, most Americans are carrying eight credit cards around with them every day. The average American family has 8 credit cards according to a 2004 report by FRONTLINE (a PBS-funded web site) and the New York Times newspaper.
Here are a few facts you should know about credit cards:
1) Nearly 144 million Americans have a Visa, MasterCard, American Express or Discover credit card.
2) 38% of those credit card users pay their bill in full monthly.
3) 24% pay only the minimum payment monthly. Do you understand that only one credit card with an outstanding balance of $10,000 at 18% interest takes 40 years (yes, 40 years) to pay off if you make only the minimum payment of 2% per month? And that is even if you charged nothing else on the card for 40 years.
4) The average American family carries a credit card debt of roughly $8,000.
5) Did you know that a credit card issuer (generally banks) can raise your APR (annual percentage rate) automatically for any of the following reasons: You went over your credit limit on another card, you failed to make a payment to another creditor, or you applied for and received a loan, including a mortgage loan for a house, a car loan or a student loan. I am not making this up and some of you readers know this.
6) Did you know that there are no legal limits on the amount of interest and fees that banks can charge for a credit card because two U. S. Supreme Court decisions permit banks to charge what the market will bear.
This means a credit card issuer could charge you 100% interest, I,000% interest or 100,000% interest. Wipe that mocking smile off of your face and smarten up.
Your U. S. Supreme Court was not thinking of you when they allowed banks no legal limits on the amount of interest and fees they could charge. I suspect some of those highly educated justices own stock in credit card companies, and even if they do not, they should be ashamed to call themselves justices at any level.
That is why Citibank, the issuer of MasterCard and one of America's banking giants with its tentacles reaching into every financial area, moved to South Dakota which has no cap on interest rates.
Usually credit card issuers move to South Dakota or Delaware because they are states with weak or no "usury laws" which regulate interest rates.
So what does all of this have to do with the price of tea in China? Let us draw a picture for those who cannot connect the dots.
American corporations are doing well at the moment and stockpiling money while the consumers that feed them profits are saving zero dollars and paying high interest rates.
These high rates are charged not only by credit card issuers but by predatory lenders who prey on those most in need who have not done a good job of handling their finances.
To think that your U. S. Supreme Court allows these kinds of practices to continue is pathetic. It is neither just nor reasonable. It is downright cruel and unnecessary and should stop.
I know this article is not flashy and will probably get little attention from consumers who continue to act as if banks are their best friends.
H. L. Mencken figured it out a long time ago when he said "You can never underestimate the stupidity of the American people." He said it, not me, but I agree with him in regard to the 24% of credit card users who pay only the minimum monthly payment.
July 12, 2007
The Impulse Buying Phenomenon
American Consumers Are Short on Discipline When it Comes to Parting With Their Income
Copyright © 2007 Ed Bagley
Like a 4-year-old child at the checkout counter in a supermarket, American consumers want just one more impulse buy to make their buying day complete, and apparently the more expensive it is, the better.
Here is an example: A 68-year-old, semi-retired businessman shells out $600,000 for a recreational vehicle which costs about $550 to top off at the pump. He and his wife are tooling around the country in an effort to have fun while they can.
His comment on the decision is that "This isn't a dress rehearsal for life—this is it. We're curtailing nothing." Those big tears you see following his comment might well come from any children who see their inheritance fading away into the sunset with dad and mom.
Like a dog in heat, if we have it we tend to spend it in America.
All of this impulse buying is detailed in a recent USA Today article with this headline: "Spending is hotter than the 4th of July". And indeed it apparently is.
Although the median amount of credit-card debt carried by the typical American is about $6,600 (this is not a typo), 13% of respondents in a recent online poll reported balances higher than $25,000, according to CardTrack.com.
"Never have Americans, who have always liked their toys, been faced with a situation where their impulses are so hard to control," says Stuart Vyse, a professor of psychology and author of the upcoming book Going Broke: Why Americans Can't Hold on to Their Money.
The fact is that we as consumers can buy almost anything we want anytime we want on the easiest terms we want. Sellers and lenders have no compunctions about selling us what we do not need at a price we cannot afford and at a rate of payment that can eventually drive us into bankruptcy.
Sellers and lenders, especially credit card lenders, have raised this willingness to line their pockets at our expense to an art form. And yes, I understand and agree with the observation that we all need to be responsible for our actions.
What I do disagree with is this: How can doing the right thing with right thinking and right motives justify lending consumers money and credit when they do not deserve it, and then leaving them no smarter but broker and deeper in debt in the process?
All of this unmerited lending is creating and concentrating wealth among America's very rich, and the rich club in America is growing faster and farther away from America's poor and middle classes.
"For the first time in history, more than half of all earned income, specifically 50.4%, is going to 20% of the U. S. population, which amounts to $3.5 trillion in the hands of 23 million households," says Peter Francese, a demographic trends analyst for ad and marketing giant Ogilvy & Mather.
So more than half of the earned income in America is going to 20% of the population, leaving the other half to 80% of the working stiffs that are left to continue buying things they do not need at prices they cannot afford on credit.
A key component of this impulse spending happens because too many Americans think they can afford it when they cannot.
Families are less frugal today, in part because only 25% of households have married couples with children, a significant drop from 50% in 1960 and the lowest percentage in census history. We have a census procedure in this country to learn these kinds of sociological shifts.
There are more working couples without children who have more disposable income and keep spending rather than realizing their good fortune and saving. Leading the spending spree are the seniors mentioned at the beginning of this article.
Seniors have so much spendable income that a Luxury Marketing Council has been created to advise top brands on consumer trends for a growing group of seniors that have at least $1 million in liquid assets. They do not need to sell their home to buy a $125,000 Maserati, they simply write a check out of one of their accounts.
I personally would not encourage this kind of spending among any consumers, and especially on an automobile which is a decreasing asset. If you cannot control your impulse to buy, at least buy land or developed properties that might well appreciate over time.
The USA Today article carried information by Pitney Bowes MapInfo which identified the Top 20 Counties nationwide with the highest average expenditures annually per household. Here are the Top 7:
1) Marin, CA - $68,782
2) Fairfield, CT - $65,263
3) Fairfax, VA - $63,569
4) San Mateo, CA - $63,229
5) Morris, NJ - $62,995
6) Somerset, NJ - $62,345
7) Westchester, NY - $61,425
I identify these counties as "high rent districts" which are too expensive for most people to buy a home. One thing is for sure, if you do not make some major money, you are not going to be able to keep up with those earners who can.
Not all of us suffer from this apparent impulse to buy.
The answer to impulse control just might be in yoga. Yoga taught me "impulse control", the ability to feel an urge and delay acting on it. Yoga also taught me that when stability becomes a habit, maturity and clarity follow.
While earning money has a way of increasing financial intelligence quickly, I learned a long time ago that a fool and his money are some parted.
I will keep the $125,000 and you can have the Maserati. I will keep the $600,000 and you can have the recreational vehicle. Eventually, cash is king; the car and the recreational vehicle will eventually end up in the junkyard with a lot of other impulse purchases.
This Is a Money Issue – Your Money
Here's What to Do If Your Current Medicare Plan Won't Exist Next Year
(Ed's Note: If you think life was difficult and annoying up until now, just wait till you grow older and are dealing with Medicare and Social Security benefits. The following is an excellent example of why you do not want to be dependent upon your government as you grow older.)
By Patricia Barry from the AARP Bulletin
Q. I had a letter from my Medicare plan saying
it will not be available in 2011. Is this the result of the new health
reform law? What should I do?
A. Don't panic. Your Medicare benefits are not being taken away and you will still have choices. And no, your plan wasn't a victim of the new health care law.
But you will need to make some decisions -
depending on whether the "plan" you're talking about is a Medicare Advantage
health plan, a "stand-alone" Medicare prescription drug plan, or a Medicare
supplemental insurance policy, also known as medigap.
Medicare Advantage Health Plans
These plans -- mainly HMO and PPO managed care plans -- are offered by private insurers as an alternative to the traditional government-run Medicare program.
Since these plans began more than a decade ago,
some have pulled out of Medicare and new ones have joined. All plans are
free to make this business decision each calendar year. In 2011, nearly all
beneficiaries -- 99.7 percent, or virtually the same percentage as this
year, according to Medicare officials -- will have access to a health plan.
Since 2004, Medicare Advantage plans have received subsidies from the government that, on average, cost Medicare about 12 percent more for plan enrollees than if they had been receiving services in the traditional program.
Citing the extra cost to the taxpayer --
amounting to about $136 billion over 10 years -- and the fact that this
helps drive up the Part B premium for everybody on Medicare, the new health
care law will gradually phase out the plan subsidies. But the phase-out
doesn't start until 2012, so subsidies in 2011 remain unaffected.
However, private fee-for-service (PFFS) plans -- a non-managed-care type of Medicare Advantage plan -- will change in 2011 under a different law passed in 2008.
For the first time, these plans will be required to establish contracts with doctors, hospitals and other providers (as HMOs and PPOs have always been obliged to do) so that enrollees can be sure which providers will accept their plan. As a result, many PFFS plans have chosen to withdraw from Medicare in certain areas.
Nationwide, there will be 239 such plans in
2011 compared with 435 this year, a drop of 45 percent, according to
What you can do: If your current Medicare Advantage plan won't be available in 2011, you will still be able to choose from many other plans almost anywhere you live. (The exceptions are 28 rural counties in Colorado and one in Utah, where PFFS plans have pulled out, leaving no other plan options.)
Switching to another Medicare Advantage plan: You can use the health plan finder on Medicare's website <http://www.medicare.gov> to see what other plans are available to you and compare their costs and benefits.
You can join a new plan during open enrollment,
which runs from Nov. 15 to Dec. 31, with coverage beginning Jan. 1. Coverage
under your current plan will remain unchanged until Dec. 31. If you do not
actively enroll in a new Medicare Advantage plan, you will automatically be
covered under traditional Medicare in 2011.
Switching to traditional Medicare: This option is available to anybody on Medicare. But remember that if you change to the traditional program, you will also need to join a "stand-alone" Part D plan (see below) during open enrollment in order to get prescription drug coverage.
If your current Medicare Advantage plan is going out of business or withdrawing from your area, you also have the option of buying medigap supplemental insurance that covers some or most of the out-of-pocket costs of traditional Medicare, depending on the type of policy you purchase.
Provided that you are age 65 or older and apply for a medigap policy within 63 days of your health plan's coverage ending, you will have full federal guarantees and protections -- meaning you cannot be denied coverage or pay more because of health problems.
If you are under 65, different rules apply.
Part D Prescription Drug Plans
Whatever state you live in, you'll still have plenty of choices in 2011 among these private "stand-alone" plans, which provide prescription drug coverage to people enrolled in traditional Medicare. The options range from 28 plans in Hawaii to 38 in Pennsylvania and West Virginia. But some plans will be unavailable next year.
These include the AARP MedicareRx Saver plan (offered through United Healthcare), with more than 1.5 million people enrolled, and the PrescribaRx Bronze plan, with 482,000 members. These and other plans withdrew because of a new Medicare rule that seeks to simplify plan offerings so that consumers can see clearer differences between them.
insurer offering two or three plans is now required to make each plan's
benefit package significantly different from the other(s) - for example, by
offering a much lower premium in one plan or coverage in the doughnut hole
in another. This rule is the culmination of ongoing efforts to simplify Part
D choices for consumers dating back several years.
What you can do: Compare plans that are available in your state using the online drug plan finder on the Medicare website <http://www.medicare.gov/>
If you enter your ZIP code and the names of the
prescription drugs you take, plus their dosages and how often you take them,
the plan finder automatically does the math to find the plan that covers all
your drugs at the lowest out-of-pocket cost.
Even if your current plan will still be available next year, making this comparison is still very worthwhile.
Every year, most Part D plans change their premiums, deductibles and co-payments. For example, in 2011 some plans will charge substantially lower premiums and others much higher ones than this year.
You can compare plans and, if you want, switch
to another during open enrollment, between Nov. 15 and Dec. 31. Coverage in
the new plan starts Jan. 1.
Warning: If your current plan will not be available next year, and you do not switch to another before the end of this year, you will lose your drug coverage and will not be able to join another plan until open enrollment at the end of 2011.
You will also receive a penalty for the 12
months you were without drug coverage, in the form of a surcharge
permanently added to your Part D premiums. However, if your current plan
will still be operating in 2011, and you do nothing, you will be
automatically enrolled in the same plan for next year.
Medicare Supplemental Insurance (Medigap)
It doesn't happen often, but from time to time medigap insurers go out of business or stop selling medigap policies in some areas. This is a cause of considerable anxiety to people who hold these policies because many believe that if they have to buy a new policy, they will lose the federal guarantees and protections they had before. But that's not true.
What you can do: If you lose medigap coverage through no fault of your own, you still have the right to buy policies A, B, C, F, K or L from any medigap insurer in your state with full federal protections.
means that an insurer cannot deny you coverage or require you to pay a
higher premium based on your health status or preexisting medical
conditions. But to receive those guarantees, you must apply for a new policy
within 63 days of the end of your old coverage. To be on the safe side, it's
best to apply before your current coverage runs out.
To compare Medigap policies available to you, and for contact information of insurers that sell them, go to the Medicare website <http://www.medicare.gov/> , click on "Health and Drug Plans" and then on "Compare Medigap Policies."
For more information, see the official publication:
<http://www.medicare.gov/Publications/Pubs/pdf/02110.pdf> "Choosing a Medigap Policy."
Insurers Can Be Pigs for Profit
Your Health Insurers May Automatically Deny Claims, But Don't Let Them Get Away With It
By Martha M. Hamilton
One thing I wasn't prepared for after my
emergency surgery two weeks ago was the increase in mail.
No, not get-well cards, although I did get a few of those and even more e-mails and phone calls. What surprised me was the barrage of mailings from my insurance company and its contractors denying my claims.
I'd gone to my doctor because of mild continuing pain and discomfort and because I had lost my appetite. She wanted me to have a CT scan right away, concerned that I might have appendicitis. Hours later I was in the emergency room, introducing myself to the surgeon and anesthesiologist who were ready to go when I walked in.
Fast forward (as you do when you're unconscious), and I'm in the recovery room, thick tongued and not very articulate. They had removed my gall bladder, and the surgeon explained to me it was pretty bad and took twice as long as expected to get everything excised properly.]
Then it was ice chips and morphine, and my
sister helping me settle into the hospital room. Generous soul, she had
skipped a baseball game to give me a ride to the emergency room.
My daughter arrived the next morning, helping me through the three-day stay at the hospital and then at home. It seemed just minutes after I'd climbed into my own bed that I received the first "welcome home" denial-of-payment letter from my health insurer.
My initial reaction was anger, but I was pretty sure, based on my conversations with my health care providers, that they would put things right. Still, it felt like a body blow when I was already feeling beat up from the surgery. I could imagine someone else opening a similar denial and the damage it might do to recovery.
Reversal of Denial
I have to say that the insurance company soon reversed its decision and allowed the payment for the surgery. And it reversed itself on the question of whether the CT scan had been medically necessary. I knew of the second decision because the lab called to tell me.
As a result, I wasn't too upset when I received yet another letter, later that same day, from a company that had been asked to verify and authorize the services in question.
"Based upon this review, we regret that coverage for this service is denied for the following reason: We are unable to authorize the above procedure based on [the company's] Abdomen Imaging Guidelines. The clinical information submitted does not describe the results of a recent ultrasound."
The next day I received a second copy of exactly the same letter. Were the things being spit out by an out-of-control computer? Despite the absence of a gall bladder, I felt galled.
May I say that I have nothing against the idea of verifying claims and am an advocate of examining health care expenditures to make sure they are necessary. But that wasn't what seemed to be going on here.
Instead, the companies appeared to be reflexively sending denial-of-payment letters with virtually no examination. I wondered, what was the point of sending what appeared to be mindlessly automatic denials of payment?
Some People Just Say OK
I called J. Robert Hunter, director of insurance for the Consumer Federation of America. The point, he said, is that some patients who receive those denial letters will just accept them.
"Some people just say, the insurance company must know, and back away. I think some of them tend to deny certain claims routinely, knowing that they'll pay if the patient persists. They think maybe the patient will go away, and a certain percentage do."
"Sometimes there is a reason why it was denied, and it's legitimate," said Hunter. Maybe you haven't yet met your deductible or the treatment doesn't meet the conditions covered in the contract, he said.
"But a lot of times it's in a gray area," he said. "Anytime a company is denying a claim or dragging it out, ask them to show you the language they are relying on."
So, as painful as it may be, read all those letters. You should contest the denials and resubmit claims until you are satisfied. Like with me, the no may not really be a no.
March 28, 2007
Exactly Who Is Profiting?
Imagine Getting Sick, Having Medical Insurance and Going Broke Anyway
Copyright © 2007 Ed Bagley
When I had some pains in my chest
my internist decided I should have a stress test. It sounded like a good
idea to me. I enjoy living and am not the least bit interested in the
This was more than an ordinary stress test like running on a treadmill. I was walking quickly on an elevated treadmill while undergoing some nuclear profusion imaging to reconstruct tomographic SPECT images.
Apparently the shots they gave me lit me up inside so the physician and nuclear technician could see how I was reacting to the stress.
While I am probably leaving something important out and do not understand the technical terms involved, I was readily able to recognize the cost of the procedure. Try $2,485. All of this took about 4 hours and the physician was involved for all of probably 20 minutes.
I had insurance but still will end up paying $593. My insurance company will pay $813. It is not difficult for me to understand why people wonder if they have medical insurance or not.
An article in USA Today on March 22 had this headline: Even the insured have trouble paying bills.
Well, duh. I would hardly be exaggerating if I suggested that medical insurance coverage in America is totally out of control.
We have millions of citizens working without any medical insurance, others are paying through the nose for coverage they do have, we have millions of children without any medical coverage whatsoever, and very few of us seem to be getting our medical obligations paid with our insurance in force.
Businesses and organizations keep reducing our medical coverage to lower their premiums, and the insurance providers keep reducing our benefits and raising our deductibles and co-pays for office visits and prescription drugs.
Workers and consumers are getting it from both sides while health care providers and insurance providers claim each is gouging the other. It makes you wonder who is really profiting.
A fleet of 400-dollar-an-hour attorneys with 17 months of legal investigation could not figure it out in their most sober effort, nor would they want to as the pay is too good.
To say no one is really profiting is nonsense as medical costs have routinely exceeded the increase in inflation during recent years.
In the USA Today article, a senior policy analyst says "Shifting more costs onto patients has significant health access and financial consequences."
Well duh. Trust me when I say it does not take a senior policy analyst to tell consumers they are getting the short end of the stick as well as paying more for less medical coverage and less medical service.
Someone far brighter than a senior policy analyst needs to figure out how health care coverage in American can be less expensive and more effective.
Things are so bad you cannot even get detail on your bill, and even if you did it is so poorly explained that you cannot understand the charges.
It is like insurance companies lying, cheating and stealing in their policies with consumers, getting caught, paying multi-million dollar fines for their indiscretions, and then acting like it is no big deal when these major corporations are actually common criminals that are never prosecuted.
Is it possible that a nation that has produced so many great thinkers cannot come up with one great thinker that can see through this health care maze and produce a positive plan that benefits the few moneymakers enough to benefit all of us who need more affordable coverage?
Live and Learn
71-Year-Old Former Marine Shoots 2 "Idiots" Attempting to Rob a Subway Sandwich Shop
(Ed's Note: This article, apparently true, should remind all criminals—assuming that they are literate, can read, comprehend and retain information for their own good—of why it is not a good idea to mess with former Marines or senior citizens, many of whom put their life on the line during wartime to protect these two robbers who radical liberals will probably make out to be innocent victims of their own, stupid misfortune.)
Last week police were called to investigate an
attempted armed robbery in Plantation, Florida.
A 71-year-old retired Marine apparently opened fire on two robbers at a Subway sandwich shop, killing one and critically wounding the other. The Marine was described as a former helicopter pilot for two Presidents. He doesn't drink, he doesn't smoke, and he works out everyday.
According to Plantation police, two masked gunmen came into the Subway at shortly after 11 p.m. There was a lone diner—the 71-year-old Marine—who was finishing his meal. After robbing the cashier, the two men attempted to shove the Marine into a bathroom and rob him as well.
They got his money, but then the Marine pulled his handgun and opened fire.
He shot one of the thieves in the head and chest and the other in the head.
When police arrived, they found one of the men in the shop; K-9 units found the other in the bushes of a nearby business. They also found cash strewn
around the front of the sandwich shop according to Detective Robert Rettig of the Plantation Police Department.
Both men were taken to the Broward General Medical Center, where one of the robbers died. The other was in critical but stable condition.
A longtime friend of the Marine was not surprised to hear what happened. The friend said, ''He'd give you the shirt off his back, but he'd be mad as hell if someone tried to take the shirt off your back.''
The Marine, who was a pilot in
the Marine Corps, flew Presidents John F. Kennedy and Lyndon B. Johnson. He
later worked as a pilot for Pan Am and Delta Airlines.
He is not expected to be charged, authorities said. ''He was in fear for his life,'' Detective Rettig said, "These criminals ought to realize that most men in their 70's have military backgrounds and are not intimidated by idiots." Florida law allows eligible citizens to carry a concealed weapon. Every state should.
August 12, 2007
Both Are Headed for the Slammer
Wade Cook: Feds Finally Nail Financial Guru and His Wife on IRS Tax Evasion Charges - Part
Copyright © 2007 Ed Bagley
It came as absolutely no surprise to me that so-called financial guru Wade Cook and his wife Laura were recently convicted of income tax evasion and sentenced to jail, according to an Associated Press report.
Wade Cook became really annoying some years ago by seeking to peddle his financial advice on his theory and accompanying books, tapes, seminars and associated crap to me and a lot of other unsuspecting potential investors.
Crap is the right choice of word as his financial advice has proven worthless. I never bought his stuff but thousands of other investors did.
Cook was nothing more or less than a cab driver who decided to get rich by preying on people looking for an easy solution to becoming rich.
He wrote three get-rich-quick books on his "meter-drop" theory of investing: Wall Street Money Machine, Wealth 101 and Business by the Bible. Is it not amazing how hucksters always want God to endorse their business, products and shenanigans?
Cook conducted hundreds of seminars in the 1990s on asset protection, stock market investing, real estate acquisition and avoidance of income tax.
He was so good at the avoidance of income tax issue that he will now spend more than 7 years in prison for income tax evasion by defrauding the Internal Revenue Service.
U. S. District Judge Thomas Zilly of the federal court in Seattle ordered Cook to pay $3.75 million in back taxes on roughly $9.5 million of underreported income generated by sales of Cook's financial advice books, tapes and seminars.
It is one thing to render a financial judgment and another to collect it. It was not reported whether Cook ponied up the $3.75 million.
I do not know if Cook is penniless today, filed for personal bankruptcy, buried what money he had, placed his stash in a Swiss bank account or has millions in a petty cash account to pay his $3.75 million judgment for tax evasion.
I do know that he and his wife are dishonest, not to be trusted, will knowingly lie, cheat and steal to get ahead in this world, and know little about any kind of investing worth talking about. I knew all of that in the early 1990s when they started.
They apparently made millions selling their story to unsuspecting buyers and then not paying taxes on some of their revenue. Some pundits estimated Cook's net worth at more than $200 million when he was flying high.
He was convicted in February 2007 for tax evasion, filing false returns and obstructing justice. The jury was deadlocked on all counts against his wife Laura who kept his books.
In May 2007 she pleaded guilty to obstruction of justice rather than face a new trial. She was sentenced to 1.5 years in prison. Laura Cook admitted that she created documents to evade taxes on income she and her husband received between 1998 and 2000.
The Associated Press reported that the Cooks said that they had loaned themselves money from a trust that was supposed to become a gift to the Church of Jesus Christ of Latter-day Saints.
Government lawyers said that the couple never intended to repay the money, thus it was taxable income rather than loans.
Cook's lawyers argued that they were unable to repay the loans mostly because of the stock market collapse in 2001. Cook was apparently such a brilliant financial guru that he lost his fortune in a stock market collapse.
So much for Wade Cook's theories on investing for profit and becoming rich in the process.
Cook shut down his operations in February 2003, a month after his publicly traded company—Wade Cook Financial Corporation of Tukwila (WA)—sought Chapter 11 bankruptcy protection.
Wade Cook and his wife Laura are only one of hundreds of hucksters who have traveled the country selling their crap (get-rich books, tapes and seminars) to unsuspecting investors.
(Editor's Note: This is Part 1 of a 2-Part Series.)
August 13, 2007
Guru Headed to the Slammer
Wade Cook: So What Are We to Learn From the Wade Cook Mess? – Part 2
Copyright © 2007 Ed Bagley
So what are we to learn from the Wade Cook mess?
At least three things for sure:
1) If it sounds too good to be true and is as easy as falling off a log, then it is too good to be true.
2) People who actually make money using a new market theory would never, and I mean NEVER, tell anyone unless they are brain dead or born stupid. They understand that the pie is only so big and the more pieces that are eaten, the less there is to go around.
You do not, repeat DO NOT, see Warren Buffett writing books about what stocks to invest in, how much, when to buy and when to sell. Buffett does not even tell his investors what he is doing for the obvious reason that they could not keep a secret.
Buffett, the financial mind behind Berkshire Hathaway, was the first billionaire to make his fortune investing in the stock market, hardly the place for the faint of heart or novice to try and make money.
Buffett is only the second richest person in the world, worth $52 billion at last count. Bill Gates of Microsoft is the richest person at $56 billion, and he does not write books on investing either.
Warren Buffett is so respected and admired as an investment advisor that a California investor paid more than $620,000 on an online charity auction to have lunch with Buffett. The proceeds went to a San Francisco foundation that provides free meals and social services.
Yongping Duan, founder of a consumer electronics company in China, paid the $620,000+ under the condition that during the lunch he could query Buffett about anything EXCEPT what he is buying and selling.
Warren Buffett is not beyond gifting his time for a good purpose. He has pledged 85% of his Berkshire stock (valued then at $37 billion) to the Bill and Melinda Gates Foundation. Buffet's holding company is worth $168 billion.
3) Because Wade Cook did not make squat on his investment theories, he wrote and sold books and tapes, and gave seminars. Any significant money Cook made was by selling his stupid, unprofitable products to unsuspecting consumers who were taken in by his hype.
Live and learn. Do not buy books and tapes and go to seminars put on by financial gurus if you want to make money.
I will give you some great financial advice for free: Buy and read Buffett: The Making of an American Capitalist by Roger Lowenstein, and then invest in Buffett's Berkshire Hathaway Incorporated.
All you really need to know is that if you had invested only $10,000 with Buffett when he started in 1956 and left it with him, you would be worth more than $80 million today.
(Editor's Note: This is Part 2 of a 2-Part Series.)
June 4, 2007
Try This Novel Idea
What Should We Do With Spammers Who Are Convicted of Being a Major Nuisance in Our Life?
Copyright © 2007 Ed Bagley
The arrest of 27-year-old Robert
Alan Soloway last week was an important step in trying to reduce the amount
of spam mail you are receiving these days. Spam includes unsolicited crap
1) Subprime loans with rip-off interest rates and copious hidden clauses in the contract to keep you borrowing in the future.
2) Herbal remedies to help your love life, and assorted unregulated, unproven concoctions to solve all of your perceived illnesses and concerns.
3) Get-rich-quick schemes designed to relieve you of your hard-earned money without any return on your investment; you simply help a shyster get rich while you reduce your liquid assets and continue going nowhere a thousand miles an hour.
4) Phishing spam that lures you into typing your sensitive identification and financial data on bogus web sites which then create havoc with your personal finances.
5) "Pharm" spam pitching you fake pharmaceutical drugs that can be dangerous and expensive.
6) Stock spam that dupes you into investing in underperforming or nonperforming stocks in order to drive up the stock's value, so the bad guys can then sell for more and reduce their losses or actually make money in a fraudulent stock transaction.
According to a USA Today story Friday (6-1-07), Soloway made millions from 2003 to 2005 selling crude spamming kits to newbie spammers, and providing access to zombie networks to help his customers accelerate spamming through personal computers.
Zombie networks compromise home PCs that are used by spammers to solicit unwanted e-mail without the PC user even realizing his or her computer has been infiltrated and is being used for dastardly purposes.
Soloway became somewhat known to the real world in 2005 when Microsoft won a $7.8 million civil judgment against him, but he never paid the judgment. Given his coming up on the short end of a civil judgment, we could assume Soloway was a predator as charged.
Last week a federal grand jury returned a 35-count indictment against Soloway charging him with mail fraud, wire fraud, e-mail fraud, aggravated identity theft and money laundering.
If you think Soloway just might be a rights taker rather than a rights observer you are right.
Soloway might well be distantly related to similar butt ends who, when they think they may not make their flight while waiting in line at the airport, run through security, get caught, shut down outgoing flights, and cause thousands upon thousands of passengers to miss their flights.
Always, people like Soloway and airport security crashers are self-centered, self-absorbed, self-inflated and clearly more important than everyone else around them.
Soloway is a lower life form who thinks nothing of enriching himself at the expense of everyone else. Soloway was able to do what he did because unwanted commercial e-mail has become big business, apparently backed by organized crime, according to the USA Today report.
Soloway has pleaded not guilty and is being held in federal detention pending a hearing this week. Another news story reported that Soloway is apparently broke (nothing like moving the money out-of-sight before they catch you) and will have to be assigned an attorney to represent him at taxpayers expense (our expense). Talk about adding insult to injury.
My guess is that Soloway's rate of recidivism probably hovers around 100%; he has clearly demonstrated that his avarice and stupidity know no bounds.
I wonder how innocent Soloway can be? He already has a civil judgment against him. Perhaps what we are talking about here is not that he is guilty or not guilty of a crime, but the degree of the crime he could well have committed.
What should we do with predators like Soloway should he be convicted on all of the counts he has been charged with?
Extermination? In a fit of anger, do not even bother yourself with the thought. Given the charges against him, he would not qualify for such a final judgment. Another reason is that some two-bit attorney would make a career and millions of dollars by getting stays of execution for years at taxpayer expense (remember, we are paying for this jerk's indiscretions and legal defense).
Lock him up and throw the key away? Not a bad idea, but our laws would prevent him from receiving a life sentence for stupidity. At the least, forget community service, forget some stupid plea bargain arrangement, and forget rehabilitation; if Soloway cannot figure out that he should not have been doing what he was doing, what makes you think he is going to be smart enough to be rehabilitated?
Lock him up? Why not? Let him do time and take at least one spammer out of our electronic communication system for a period of time.
Here is a novel idea: Upon release from prison, have Soloway write out this sentence in long hand one million times before his release from a halfway house back into the community: "I will never again use a computer to commit a crime?"
Even if Soloway never smartens up this will take him out commission for another period of time and hopefully improve his penmanship. If he screws up his writing, make him do it again until he gets it right.
If he is going to practice stupidity for the rest of his life he will at least learn to write clearly even if he cannot think clearly. That may be the best we can reasonably do with lower life forms. No one will ever be able to do for Soloway what he must do for himself.
August 6, 2007
A Continuing Series:
A Famous Author Is Always Prey for Some Undeserving Crook
Copyright © 2007 Ed Bagley
The FBI has recovered the long-lost manuscript of Pearl Buck's Pulitzer Prize-winning novel The Good Earth, according to an Associated Press article (6-28-07).
The daughter of one of the author's former secretaries tried to put it up for auction. Missing for four decades, the original 400-page typed manuscript turned up at a Philadelphia auction house that notified authorities. Some estimates put the manuscript's value at $150,000.
The 1931 novel, centered on village life in rural China, helped earn Buck the Nobel Prize for Literature in 1938, making her the first American woman to win the honor. The Good Earth won the Pulitzer Prize in 1932.
Pearl Buck died in Vermont in 1973, having long wondered what happened to the original version of her most renowned work. One suspects that Buck probably trusted those closest to her, a trust that becomes much more difficult when you are famous and what you have done has proven commercial value.
May God Bless Pear Buck, and may the authorities do their job correctly and completely.
Record Album Sales Nosedive During the Last 6 Months
Sales of record albums dropped 15% during the first six months of 2007 compared with the same period last year.
One factor in the decline is the increasing shift to track downloads, which were up 49% over the same period last year and up 659% since 2004. That is what you call a significant increase.
Another factor is the loss of nearly 1,000 outlets with the demise of the Tower and Musicland retail chains.
A third factor is the dismal release of work that has seen no album exceed weekly sales of 132,000.
Digital (online) sales now account for more than 10% of the 230 million total album sales.