Steven Nathan / 4 June 2017 00:05

The journey to financial freedom starts and ends with saving and investing. A few trust-fund babies and entrepreneurs apart, the only way to walk this path is to spend less than we earn and put the difference to work.

Ahigh income alone does not guarantee a secure retirement. Sports Illustrated drove this home once when it reported that 78% of NFL football players and 60% of NBA basketball players suffered financial stress within five years of retiring. There are also plenty of tales about film and pop stars who ended up broke, and lotto winners now on the dole.

These celebrities don’t just succumb to lavish lifestyles, they fall prey to elementary investment mistakes. The specifics may differ but the themes underlying these failures are as universal as they are avoidable.

Unfortunately, we are all susceptible to the same pitfalls. Here are a few personal case studies from individuals who learnt the hard way.

My RA: high fees, not enough risk

Chris: “As soon as I started my first job, I took out an RA. The broker recommended a “medium risk” portfolio and locked me into a 15% pa premium increase for the next thirty years, “to keep abreast of inflation”. The R1 million illustrative nominal maturity value at age 55 seemed like a fortune at the time.

He made no mention of any early termination “penalties”, and did not speak about fees (above 3% pa). Even if he had, I would not have considered how they would reduce my maturity value (by 26%). I also did not think about the purchasing power of R1 million in 2018 and how investing in a medium rather than a high equity portfolio would diminish my long-term return.”

Like so many other uninformed investors of that time, Chris was duped into buying an inflexible high cost, low return savings product that would barely pay back his premiums one day, adjusted for inflation. Projecting the maturity value in nominal rather than inflation-adjusted terms created a false sense of future wealth.

Today’s young investors are much better off. There’s a load of financial education online, warning of these risks. They are also not limited to life insurance; many asset managers now sell RAs direct to the public, at much lower cost, on flexible terms and without punitive early termination penalties.

My discretionary savings: inadequate diversification, discipline

Richard: “My discretionary portfolio holds my favourite shares, very much “buy and hold” stocks with a solid long-term growth record and decent dividend yields. Although I spread my money across industries, countries and currencies, it proved to be insufficiently diversified. The collapse of the MTN share price left its mark.

I also own preference shares, which delivered a tax-free cash flow until the government started taxing dividends, impairing both their income and capital value. I have also not been disciplined in reinvesting dividends. My portfolio has grown decently over the years, but nowhere near the average market return.”

Buying individual shares is a mug’s game. The chances that you’ll load up on Naspers at R40 and hold on all the way to R2 000 are slim; the risk that one or more of your stocks bombs is enormous.

Certainly, as far as your serious money is concerned, the lesson is to avoid stock-specific risk and invest in a broad index fund instead. Even the smartest professionals cannot reliably beat the market, so there is no reasonable hope for hobby investors.

My pension fund: failing to preserve

Declan: “On leaving my former employer at age 29, I cashed out my retirement fund and bought a car. What I didn’t consider was that this would not only cost me my savings, but also the future return thereon. This money would have grown six or seven-fold by retirement. Cashing out has taken a big chunk out of my pension and makes for a very expensive car.”

According to industry surveys, between 70% and 80% of employees don’t preserve when they change jobs. Younger employees, especially, are full of hubris that they have time to make this up. They don’t appreciate the long-term value of those early savings. For example, in the context of a diligent 40-year saving plan, the first two years’ contributions already fund 10% of your pension.

The sensible option when you change jobs is to transfer your savings to your new employer’s fund or to a preservation fund. This preserves not just your savings and tax benefits, but also keeps your money growing, until you do claim.

According to surveys, our single biggest regret at retirement is that we didn’t save more. Fortunately, that risk is under our control. Investing also invites regret. Wherever we put our money, there is always another stock, another portfolio or another strategy that, with hindsight, did better. Some regrets are avoidable though, namely those that relate to taking on unrewarded risks:

  1. Inadequate diversification (over-exposing your money to individual investments);
  2. Going too conservative on your asset mix (long-term investors putting too much money into defensive, low growth assets);
  3. Market timing (deciding when to move money in and out of cash);
  4. Manager selection (investing with fund managers who underperform);
  5. Over-paying on fees (more than 1% pa).

Fortunately, it’s possible to exclude ALL these risks simply by investing in a broadly-diversified, low cost, high-equity index fund and holding on for the long-term. That’s Warren Buffett’s “best advice” to investors.

Steven Nathan is CEO of 10X Investments

MoneyLion’s redesigned app gives personalized financial advice and instant access to personal loans

Personal finance management app MoneyLionwas created to help users save money, reduce debt and improve their credit. Today the app is being updated to provide users with more personalized information about how they can improve their financial health, as well as even faster access to personal loans.

Like other PFM apps, MoneyLion works by connecting with all of a user’s bank, credit card, student loan and other financial accounts and then providing them with information abouthow they could improve their financial health.

One way it does this is by giving users personalized recommendations to encourage positive financial behaviors. By analyzingtheir individual spending habits and credit, the MoneyLion app gives daily advice based on a user’smost recentfinancial information.

Anotherway it aims to help usersis byimproving their credit. It offers freecredit reports from TransUnion and Equifax, push notification credit monitoring and access to credit counseling and credit repair services.

So you want to operate a phone scam

Isn’t there a better way? I’m so glad you asked, hypothetical and morally dubious, reader.

There is no shortage of people willing to tell you just how to get all the money with none of the work; these charlatans peddle whatever trendy tincture or tonic or phone app or low-calorie dessert they can find and hoist them upon an unsuspecting public that didn’t even know what a “goji berry” was until they found out they were going to die without drinking four glasses of goji juice a day.

These people are not to be emulated. If you spend your days chasing fad after fad you’ll never achieve the kind of financial success that only traditional entrepreneurship can offer.

And by “traditional entrepreneurship” I mean “phone scam.”

Is there a more time-honored tradition in the history of these United States than the phone scam? At least, in the post-phone period, anyway.

Now, I know nothing about how to operate a phone scam; fortunately my home has recently been the recipient of one very determined scammer’s efforts.

How determined? After returning from work on Saturday night I checked my often-neglected answering machine. Five new messages, all within a 20-minute period, all from the same caller.

Clearly, this scammer has it all figured out.

Using my scammer as a template, we can walk through the steps necessary to ensuring your financial freedom via telephonic fraud. Don’t worry, there aren’t too many steps; the last thing a potential phone scammer wants is to do a lot of “work.”

Step 1: Hamburglaring

Technically speaking, phone scams are highly illegal and punishable by incarceration and fines that put your student loan payments to shame.

So you’re going to need to look the part.

Gather a large reversible cloak (black and yellow), a Lone Ranger-style mask, a large brimmed black hat and, most importantly, a black and white horizontally striped jump suit.

I cannot stress the importance of the jump suit enough. If you’re not full-Hamburglaring by your first scam phone call you might as well throw in the towel and go get an “education” like a chump.

After your costume/uniform (costuniform) is complete, remember to surreptitiously glance over your shoulder every few minutes. That way anyone within eyesight can immediately tell that you are a high-powered criminal genius and must be taken seriously.

2: Robots = profit

With your costuniform ready the next step is getting a robot to make all the calls for you.

You didn’t think you’d have to actually sit there and dial all the numbers, then … TALK to the people on the other end? What is this, a job?

Head over to the least reputable website you know and start posting that you’re looking for an autodialer. Respond immediately to anyone that wants to set up a meeting.

The seasoned autodialer salesman will pick a safe spot for the exchange, like a police station. Don’t worry about law enforcement and agree to the meeting.

Remember what all those hippie lawyers have said for years: if they’re a cop they’re required to tell you, show up in uniform, and give you a solid 10 minute head start before any kind of “arrest” can legally occur. And hippies are never wrong about the criminal justice system.

Step 3: Script, script, script

Now comes the hardest part: writing the script for the robot.

This is your chance to be creative! Do you want to pretend the robot is some wayward grandchild requesting bail money with their only phone call? Sure, you can tap into that sweet, sweet Social Security money those greedy old people horde, but you’re limiting your pool of customer-victims.

Take a page from my scammer’s process and, instead of a familial ruse, opt for a mispronounced government agency without the proper prepositions.

My scammer elected to claim they were with “IRS” and “I owe money to IRS.” Brilliant. Since no one in the United States has ever said “IRS” without a preceding “The” you know that you’re dealing with an all-star team of international phone scammers that are collecting cash from scared citizens and mispronouncing government agencies all over the world!

Step 4: All the money

You’ve got your script, you’ve got your autodialer, you’ve been practicing your Hamburglar cape twirls and can do at least three in a row before falling down: now you’re ready to start making all the money!

But what to do once you have all the money? Your first thought may be “where can I keep all the money?”

Mattresses, coffee can in the back yard, a large sack with a dollar sign; these are all excellent choices. But to truly take that next step into the world of phone scammery, you’re going to want to keep all the money in a bank.

Won’t the bank get suspicious?

Look who thinks they’re the Pope of Phone Scams! Yes, go ahead and keep depositing the checks with “IRS” crudely drawn over to say “CASH.” The bank won’t have a problem, the police won’t have a problem, and “IRS” definitely won’t have a problem; my hippie lawyer told me so.

All that’s left to do is regularly check the bank records by showing the teller a photo ID at the same time, every day, at the same location and you’ll be gliding down easy street in no time! Working is for suckers!

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Stop playing on my phone.

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Copy Editor Wes Burns is a Sunday columnist. The views expressed in this column are personal views of the writer and don’t necessarily reflect the views of the T-R. Contact Wes Burns at 641-753-6611 or wburns@timesrepublican.com.

Safe Credit Solutions|The Key to Financial Freedom,credit counseling

A McKinney credit repair company has settled Federal Trade Commission charges that it profaned federal law by lying to credit bureaus and charging customers up-front fees before providing its services.

The judicial writ subsiding the FTC’s grievance for civil penalties, imposes a $ 2.35 million civil penalty against RMCN Credit Services INC. and house owners Doug and Julie Parker. The penalty are going to be partly suspended, supported associate degree inability to pay, when they pay $ 400,000 in 2 installments at intervals 9 months of once the court enters the order.

Debt Consolidation, Negotiation, or Elimination: Which Should You Choose?

As of the first quarter in 2017, American household debt topped $12 trillion. The main contributors to this debt are home mortgages, auto and student loans, plus credit card debt. With mounting debt and the lowest savings rate since 2005 of only 1.9%, many consumers are desperately searching for relief.

Ads, emails, robo-calls and online pop-ups bombard consumers with debt negotiation, consolidation, and elimination plans, often giving conflicting advice. So what is the difference between these three types of debt management plans?

Debt Negotiation/Settlement

Debt negotiation companies claim that they will negotiate with a consumer’s lenders to lower the total amount of debt owed for an upfront fee. Unfortunately, some consumers who paid for debt negotiation services found out that the company never contacted their lenders, but instead, took their money and ran.

Because the debt negotiation company made it sound like they had everything under control, the consumer stopped talking directly with their lenders and ended up slipping deeper into debt.

Also, in certain situations, debt negotiation may damage your credit further.

According to DaveRamsey.com, “When you use one of these companies and then try to get a Conventional, FHA, or VA loan, you will be treated the same as if you had filed Chapter 13 bankruptcy. Mortgage underwriting guidelines for traditional mortgages will consider your credit trashed, so don’t do it. Real debt help is found only in changing your behavior.”

Debt Consolidation

Debt consolidation companies offer to roll up various debts allowing the debtor to make one lower payment to the company, rather than many payments to the different lenders.

While debt consolidation can make paying monthly bills more manageable, some companies tack on high fees and charge exorbitant interest rates, which means the consumer is paying much more in the long run.

Debt Elimination

Companies that offer debt elimination rely on many different schemes but they all hinge on the notion that credit lines are illegal. Debt elimination companies typically provide, for an upfront fee, a document for the lender that supposedly absolves the consumer of the debt.

Unfortunately, the document has no bearing whatsoever on the debt owed and consumers paying for such services have found that they’ve wasted money on a debt elimination scheme that would have been better spent on actually paying back their debts.

Consider the following tips, before contacting a debt management company:

  • Stay in contact with lenders and try to work out a plan with them first before enlisting outside help.
  • Always check the company out first with BBB. BBB Business Profiles on debt negotiation, consolidation, and elimination companies are available online for free at bbb.org.
  • Best practice: Start with a bona fide credit counseling service. Credit counseling services are often nonprofits that offer financial guidance for a small fee, or even for free. Reputable credit counseling services will help you create a budget plus provide coaching and training on how to manage your finances.
  • There is no easy fix for reducing debt and any company that makes huge claims and guarantees, probably can’t deliver. Sources: BBB North Alabama, bbb.org

For more details on consumer debt and advice on dealing with debt including how to manage a budget, go to Avoiding Debt-Relief Scams, The Truth about Debt Management, Microeconomic Data: Household Debt and Credit Report, Debt.com’s Personal Finance Statistics.

Alsocheck out BBB Tips on Budgeting and Credit Counseling – BBB Tip: Create a Budget and Stick to It! and BBB Tip: Overwhelmed with Debt? Understand Your Options.

BBB New Release:Debt Consolidation, Negotiation, or Elimination: Which Should You Choose?

If you would like to report a scam, call your BBB at 256-533-1640 or go to the BBB Scam Tracker. To find trustworthy businesses, visit bbb.org.

Pros and cons of a credit card balance transfer

A credit card offer that features a low- or 0 percent-interest introductory period on debt transferred from another credit card can be an efficient way to vanquish a large credit card balance over time without shelling out any (or very little) interest. Its also the only practical way to pay off one credit card with another. Credit card companies wont allow you to directly use a credit card to make a monthly payment.

Who should (and shouldnt) get one?

These cards are typically designed for and offered to individuals with good to excellent credit. You may not qualify if your credit isnt in tip-top shape. If you have damaged credit, a personal loan might be a better option, particularly if you can find a fixed-rate offer that is lower than your credit cards annual percentage rate.

Balance transfer cards are ideal for individuals struggling to pay off the principal of their credit card debt due to high monthly interest payments. With balance transfer cards, you can make one low-rate monthly credit card payment instead of several.

If you can really keep yourself on a budget . (a balance transfer credit card) can be a useful tool for paying down debts, says Thomas Nitzsche, a certified credit counselor and communications lead at Money Management International, a Sugar Land, Texas-based nonprofit credit counseling agency.

But if youre simply transferring balances from card to card, the new one wont eliminate your debt woes. In fact, you could wind up exacerbating them because balance transfers often involve fees and could carry high go-to interest rates once the introductory period is over.

You have to do a balance transfer for the right reasons, says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. To do it to tread water for another 12 months before sinking is not worth it. To tread water while aggressively paying down your debt in 12 months – thats the right strategy.

Tips on balance transfer cards

Before jumping at an offer, read the fine print and calculate the costs. The key figures are the:

– Introductory interest rate.

– Annual percentage rate (APR) after the intro rate.

– Balance transfer fee.

– Minimum monthly payment.

Under federal law, the teaser rate must last at least six months. Many balance transfer credit cards will offer introductory rates for longer periods, anywhere from 9 to 18 months or sometimes even longer, Nitzsche says.

Use a credit card balance transfer calculator to figure out if youll be able to pay off the balance in full before the promotional period ends. Otherwise, you may end up paying a much higher rate on your credit balance.

In addition, stay away from using the card for further purchases while paying off the balance. Its important to steadily reduce your credit card balance on a monthly basis.

Dont forget to add in the cost of the balance transfer fee, which is typically around 3 percent of the balance. Also factor in what the new cards minimum monthly payment will be; often, its a percentage of the balance transfer.

Can I qualify?

Even if all the numbers pan out in favor of a balance transfer, you still have to qualify. That means you should have a good idea of what your credit looks like before applying.

Those with stellar credit (750 or above) will likely qualify for the best teaser rates. If your credit score falls below that, you may get a higher teaser rate, but it still may be lower than what youre paying now.

You have to set your expectations within the realm of reality, says Bruce McClary, vice president of public relations and external affairs with the National Foundation for Credit Counseling.

Dville to host Juneteenth Freedom Festival

Donaldsonville’s Juneteenth Celebration features various special guests and performing talents from all over the south such as Claude Bryant Reggae Allstars (12:30 -1 pm), DJ Derrick 1:30-3 p..), Bucket List Band (3-4 pm), Universal Language (4:30 -5:30 pm) and the Michael Foster Project (5:45-7 pm).

There will also be numerous workshops focusing on the theme of Financial Freedom. According to organizer Tamiko Garrison, financial gurus such as credit coaches, investment consultants, bankers, financial planners and tax attorneys will be on hand to discuss credit repair, investments and banking to assist families, teens and adults with securing financial freedom in their lives.

“The festival is about love, togetherness and a celebration of freedom,” Garrison said. “It is open to everyone. We have to remember our past so that we can learn from the good and never repeat the bad. The celebration is not just for the city, parish or state, it is for the world.”

For more information about the free event visit juneteenthdville.com.

5 Lowest 15-year Mortgage Rates

Obtaining a 15-year fixed rate mortgage instead of a traditional 30-year mortgage means homeowners can save thousands of dollars in interest. One drawback of a 15-year mortgage is that consumers will be locked into higher monthly compared to a traditional 30-year mortgage or a 5 or 7-year adjustable rate mortgage, which could put the squeeze on homeowners when times are tight, said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, DC-based non-profit organization.

Cornerstone to honor Topeka banker for dedication to affordable housing

She will be the guest of honor at Cornerstone’s annual Housewarming Party fundraiser from 5:30 to 8 pm Thursday at the Kansas Expocentre’s Heritage Hall.

As lead banker at Capitol Federal for the Topeka Opportunity to Own (TOTO) loan program, Carter has frequently worked with Cornerstone’s tenants, Palmer said.

“She’s excited about what she does, and she works very hard to turn people into homeowners, and some of those have come through Cornerstone,” he said.

Cornerstone is an affordable housing provider that serves the “working poor.” Nearly 80 percent of its tenants don’t receive a government rent subsidy, according to its website.

Because Cornerstone owns all of its properties, Palmer said, its tenants become TOTO program homeowners. Through Housing and Credit Counseling Inc., they receive training on how to be a homeowner, such as upkeep and minor repairs, Palmer said. Once approved, he said, they “work with a lender, and that lender is usually Paulean Carter.”

Chris Burk, manager of HCCI’s credit counseling department, said one client’s experience captures Carter’s personality in a nutshell.

Before approving people for home loans, Burk explained, Capitol Federal wants to be able to see four lines of credit a person has had for at least a year to show how well they pay their bills. Sometimes they are willing to consider nontraditional types of credit, he said. One client had difficulty coming up with a fourth line of credit.

“The fourth one that Paulean was able to convince the underwriters to look at and accept was the lady’s church tithing that she’d been doing pretty much all her adult life, and used that as a line of credit,” Burk said. “That way, this lady was able to get the home loan.”

He said Carter “goes the extra mile” to help people get approved for home loans and to explain things to them, such as how they can improve their credit.

“She really cares about her clients,” Burk said.

Palmer said Cornerstone is excited to be giving Carter the award because of her years of dedication to affordable housing in Topeka.

This is the fifth year for Cornerstone’s Housewarming Party event. Awards previously have been given to people with strong connections to Cornerstone, Palmer said, but this year the committee expanded its search to people who have spent their careers dedicated to affordable housing. Carter’s name “came to the top of the list,” he said.

The Housewarming Party helps defray some costs of Cornerstone’s transitional housing program, in which people who are homeless may be referred by an agency for short-term stays during which they pay greatly reduced rent. The program aims to help people get back on their feet and move into Cornerstone’s affordable housing program or to other permanent housing.

Twenty-three of Cornerstone’s 175 housing units across Topeka are dedicated to housing people experiencing homelessness, according to Cornerstone’s website.

Tickets to the fundraiser cost $35 and are available in advance by calling (785) 232-1650 or emailing Palmer at chris@corner1.org. Tickets also will be available at the door.

Contact reporter Samantha Foster at (785) 295-1186 or @samfoster_ks on Twitter.