Financial Plan – Silent Killers

CPAs and financial advisers point out five “silent killers” that create barriers for the successful implementation of estate, retirement, and investment plans.  These common mistakes are:

1. Unrealistic Expectations. A valid financial plan must be based on practical assumptions, such as an appropriate forecast of rate of return, inflation, and future cash flow needs
2. Emotional Decision Making. Feelings and personal sentiment must be identified and minimized when setting goals and planning financial projections.
3. Inflexibility. A useful financial plan must take into account unexpected events. Creation of an emergency fund and contingency plan is vital.
4. Inaction. Without a plan for action, the perfect financial plan is worthless. Common results of inaction can be not having appropriate of property and casualty insurance coverage, financial hardship of dependents due to inadequate life and disability coverage, failing to address how assets are to be distributed in an estate plan, and overlooking a tax strategy.
5. Unclear Values and Priorities. Being on the wrong path will result in an undesired financial destination. Reflection of areas of importance and priorities is fundamental for implementing a financial plan and achieving financial goals.

For additional information on financial planning silent killers, click here.

Teaching Suggestions

  • Have students talk with others about barriers they have encountered in their financial decision making.
  • Have students create situations that reflect each of the five situations. Ask them to suggest actions to overcome these difficulties.

Discussion Questions 

  1. Explain which of these financial planning barriers you believe is the most dangerous.
  2. What are possible actions a person might take to avoid these financial planning barriers?
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Innovation for Improved Financial Health

Mobile start-up companies and other organizations are working with financial institutions to assist consumers with apps and websites that address various financial tasks and concerns.  These include:

  • Albert (www.meetalbert.com) is a mobile app to guide your financial decisions with the assistance of various financial institutions.
  • EARN (www.earn.org) is a national nonprofit to help low-income families create a habit of saving and break the cycle of financial instability.
  • eCreditHero (www.getcredithero.com) is designed to fix errors that appear on an estimated 80 percent of the credit reports of Americans.
  • Scratch (www.scratch.fi) helps borrowers to better understand, manage, and repay loans.
  • WiseBanyan (www.wisebanyan.com) is a free financial advisor that suggests and manages investment plans for various financial goals, such as savings for retirement, creating an emergency fund, and buying a home.

For additional information on innovative financial planning apps, click here.

Teaching Suggestions

  • Have students search for a website or app that would be of value of improved personal financial planning.
  • Have students talk to others about the financial concerns they face. Ask students to propose an app or website that would address a personal finance concern.

Discussion Questions 

  1. What personal financial planning areas provide people with the most difficulty?
  2. Describe potential apps or websites that might be created to assist people with their personal financial planning activities?
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

Financial Literacy Survey

Based on an online survey of personal finance knowledge, 40 percent of Americans earn a grade of C or worse. Financially literate people possess a fundamental understanding of money management activities, and are able to apply them for their financial well being.

The Wallet Literacy survey is available to assess your financial literacy. This test covers a wide range of topics, including credit scores, paycheck deductions, emergency funds, car insurance, home buying, inflation, and investment risk. Respondents are encouraged to use a calculator and other resources when taking the survey.

For additional information on the financial literacy survey, click here.

Teaching Suggestions

  • Have students take the financial literacy survey to determine the areas where additional learning is needed.
  • Have students encourage others to take the survey, and then have students talk with them about their results.

Discussion Questions 

  1. What items on the survey are topic areas for which most people need additional learning?
  2. How might people be encouraged to learning more about various personal finance topics?
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

Creating a Productive Teaching Environment

How does a class setting influence student learning?  What actions create an environment that motivates and engages students?

Some of the factors that create a productive learning environment include:

  • Class begins promptly and in a well-organized way.
  • Learners are able to see the significance and importance of information they are learning.
  • The teacher provides clear explanations and holds attention and respect of students
  • Class time includes a variety of active, hands-on student learning
  • Clear, specific expectations for assignments are communicated.
  • Learners are provided with many concrete, real-life, practical examples.
  • The class environment is comfortable for students and allows them to speak freely.

For additional information on a productive learning environment, click here.

Teaching Suggestions

  • Ask students to describe learning environments that were most beneficial for them.
  • Have students describe an activity that would be beneficial for learning personal finance.

Discussion Questions 

  1. What are potential benefits and concerns for various actions that teachers might take?
  2. What actions make be taken to enhance the personal finance learning environment?
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Cash or Credit?

“Currency still has its place, despite the pervasive use of plastic.”

Today, it seems that more people are using credit or debit cards to pay for everything.  And yet, this article provides reasons why cash may be a better payment option.  Those include

  1. A cashless society? Not so fast.  According to a recent Federal Reserve Bank of San Francisco study, 40 percent of consumer transactions involve cash–a higher percentage than for debit cards (25%), credit cards (17%), electronic payments (7%), and checks (7%).
  2. Currency comes in handy. Most vending machines don’t take plastic, and cash works best for all small purchases.
  3. Hamiltons can’t get hacked. With data breaches of major retailers becoming common, some consumers pay by cash to protect their credit card information.
  4. A cash fix can cost you. If you get a cash advance from an ATM outside your bank’s network, you’ll pay more than $4, on average.
  5. Cash is a great budgeting tool. If you have trouble controlling your spending when you pay with credit cards, then cash or a debit card is best for your finances.
  6. Paying by cash may be a good option, but it won’t help build your credit history. Using a credit card now and then for routine purchases can help build a good credit history.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Reinforce the concept of paying by cash.
  • Discuss what happens when people use their credit cards and overspend.

Discussion Questions

  1. Would you prefer to pay for merchandise and services with cash or credit? Explain your answer.
  2. How could paying with cash help you balance your budget and control spending?
Categories: Chapter 5, Credit Cards, Frauds and Scams | Tags: | Leave a comment

Want to Work from Home?

“Letting Employees Work from Home Can Be a Win-Win for Employers and Staff Alike.”

For employees, the option to telecommute appeals to a vast majority of full-time workers.  Research by Global Workplace Analytics found that there are benefits for employees and employers when employees telecommute and work at home.  For employees, the chief advantages are

  • Reduced time commuting to work
  • Lower costs of commuting to the office
  • Less stress of juggling the demands of work and family

There are also benefits for employers including

  • Less office space is needed because not every employee works in the office every day
  • Lower expenses for rent or costs associated with ownership of office space
  • A new way to attract talent because employees like the option of working at home
  • Increased employee motivation and engagement because telecommuting is considered a benefit

The top five companies and organizations that encourage telecommuting are:

  1. United-Health Group
  2. Dell
  3. S. Department of Agriculture
  4. Xerox
  5. Humana

For more information about this article and a complete list of the top 20 companies for telecommuting,  click here.

Teaching Suggestions

  • You may want to use the information in this blog post and the original article to point out the benefits of telecommuting.

Discussion Questions

  1. Not everyone is a candidate to work at home. What traits and time management skills are needed if you obtain a job where you can work at home?
  2. Are there disadvantages to telecommuting and working at home?
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Active Management. Good or Bad?

“Advisors and investors are increasingly focused more on lower fee products amid expectations that finding consistently strong performing active funds is hard.”

Passive investing (index funds and exchange traded funds) has been a trend on Wall Street for years.  So, what’s different?  The answer:  The trend is increasing at an alarming rate and investors are now retreating from actively managed funds that are beating their benchmark index.  According to data from Morningstar, investors pulled $99 billion from the actively managed funds that beat their benchmarks over a 12-month period ending January 31, 2017.  This is a remarkable trend given that most investors typically chase funds with high performance and high returns.

The reasons are many, and certainly lower fees is part of the reason, but not the only factor for this dramatic trend.  Another very important factor is that the number of managed funds that consistently beat the index over a long period of time is small.  According to data from Charles Schwab, the number of funds that score in the top 25% for at least two years is 1,098.  The number of funds drops to 702 at the end of three years, and to 33 funds at six years.  Only 4 funds score in the top 25% for at least seven years, and none stay in the top 25% for eight years.

The article goes on to say that this trend may encourage more actively managed funds to focus on bringing down the fees for their investment products in order to compete with the expense ratios for index funds and exchange traded funds.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss the difference between index funds, ETFs, and managed funds.
  • Reinforce how important fees and performance are when choosing a mutual fund.

Discussion Questions

  1. What is the difference between a managed fund, an index fund, and an exchange traded fund?
  2. Which type of fund do you think could help you obtain your investment goals? Why?
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Fraud Victims Vulnerable to Severe Stress, Anxiety and Depression

The FINRA Investor Education Foundation issued a new research report, Non-Traditional Costs of Financial Fraud, which found that nearly two thirds of self-reported financial fraud victims experienced at least one non-financial cost of fraud to a serious degree—including severe stress, anxiety, difficulty sleeping and depression. While the Stanford Financial Fraud Research Center estimates that $50 billion is lost to financial fraud every year, the FINRA Foundation’s innovative research examines the broader psychological and emotional impact of financial fraud.

“Fraud’s effects linger and cause distress well after the scam is over. For the first time, we have data on the deep toll that fraud exerts on its victims, and the results are sobering. This new research underscores the importance of the FINRA Foundation’s work with an array of national, state and local partners to help Americans avoid fraud, and assist consumers who have been defrauded,” said FINRA Foundation President Gerri Walsh.

The research report found that:

  • nearly two thirds (65 percent) reported experiencing at least one type of non-financial cost to a serious degree; and
  • most commonly cited non-financial costs of fraud are severe stress (50 percent), anxiety (44 percent), difficulty sleeping (38 percent) and depression (35 percent).
  •  Beyond the psychological and emotional costs, nearly half of fraud victims reported incurring indirect financial costs associated with the fraud, such as late fees, legal fees and bounced checks. Twenty-nine percent of respondents reported incurring more than $1,000 in indirect costs, and 9 percent declared bankruptcy as a result of the fraud.

Additionally, nearly half of victims blame themselves for the fraud—an indication of the far-reaching effects of financial fraud on the lives of its victims.

For more information, click here.

Teaching Suggestions

  • Ask students to list a few suggestions to protect themselves from financial fraud.
  • Explain how FINRA can assist consumers who have been the victims of financial fraud.

Discussion Questions

  1. What are a few indirect financial costs associated with funds?
  2. Why nearly half of victims blame themselves for being victims of financial fraud?
  3. How and where should you report financial fraud?
Categories: Chapter 5, Frauds and Scams | Tags: , , | Leave a comment

Does It Sounds Too Good To Be True?

A current email scam invites people to take advantage of “a little known Social Security contract” which enables you to receive “little known benefits.”  Think that sounds too good to be true? It should—there is no “little known Social Security contract.”

What are some clues that scams might not be legitimate?  Scammers insist that the situation is urgent and issue warnings.  They try to convince you to act now to avoid dire consequences.  They promise a deal or secret that the public doesn’t know about.  They come from organizations unknown to you.  They offer things the government doesn’t want you to know, but they don’t come from a .gov website.

The Federal Trade Commission’s website maintains a list of scams in the news.  You can sign up to be notified by an e-mail when new scams appear.  You can also get free consumer education materials and read the latest from consumer protection experts.  Stay well informed by visiting the FTC scam alert page.  It’s in your best interest to find out about the scams and how they work so you won’t fall a victim to one yourself.  Protect yourself by learning how to avoid scams and fraud.  You can search for “identity Theft” or “phishing scam” on Social Security website, www.socialsecurity.gov to learn more about how to protect yourself.  Then you’ll be the one who knew it sounded too good to be true.

For more information, click here.

Teaching Suggestions

  • Ask students what they would do if they received such enticing offers.
  • Ask students to make a list of agencies where they can file a complaint against these scammers.

Discussion Questions

  1. How can you determine if the offer is legitimate?
  2. What can you do to protect yourself from such bogus offers?
Categories: Chapter_14, Frauds and Scams | Tags: , , | Leave a comment

FINRA’s National Financial Capability Study (NFCS)

According to a recent FINRA study, the financial circumstances of Americans have improved over the last several years—driven in large part by an improving economy and job market.  For example, the percentage of survey respondents reporting no difficulty in covering their monthly expenses increased from 36 percent to 48 percent.  This is very significant and 12 percentage point improvement.

However, some groups are still struggling, particularly blacks and Hispanics, those without a high school education, and women.  Here are some sobering statistic: About half of respondents with only a high school diploma or no diploma could not come up with $2,000 in an emergency compared to 18 percent for those with a college degree.

Debt continues to be a problem for many Americans.  More than one-in-five Americans have unpaid medical debt.  Similarly, more than one-in-five Americans with credit cards have been contacted by a debt collection agency in the last year.

In terms of financial literacy, absolute levels are low; only 37 percent of respondents are considered highly financial literate—meaning they could answer four or five basic questions correctly on a five-question financial literacy quiz.  And, financial literacy is down slightly since 2009.

For more information,click here.

Teaching Suggestions

You may want to use the information in this article to

  • Help students understand that many minority groups are still struggling even though economy and job markets have improved.
  • Explain how people can improve their financial lives by saving even a tiny portion of their income for emergencies.

Discussion Questions

  1. What can be done to improve the financial circumstances of minorities?
  2. What might be some reasons that debt continues to be a problem for many Americans?
  3. Since financial literacy levels are so low, what can individuals, local, state and Federal governments can to improve financial literacy of all Americans?
Categories: Chapter 1, Financial Planning | Tags: | Leave a comment

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