Author Archives: Melissa Hart

About Melissa Hart

A permanent lecturer at North Carolina State University. I teach Personal and Corporate Finance.

“Buy Now, Pay Later” Users

Posted on May 27, 2023 by Melissa Hart

The Consumer Financial Protection Bureau (www.consumerfinance.gov) recently conducted a study of Buy Now, Pay Later (BNPL) users.  While many of the respondents did not encounter significant financial stress, BNPL users were much more likely to:

  • be highly indebted; have lower credit scores.
  • have high credit card utilization rates and revolve the balance on their credit cards.
  • have delinquencies with traditional credit products.
  • use high-interest financial services such as payday, pawn, and overdraft compared to non-BNPL borrowers.

BNPL borrowers generally have access to traditional forms of credit, using credit and retail cards, personal loans, student debt, and auto loans. The report estimates that a majority of BNPL borrowers would encounter annual credit card interest rates between 19 and 23 percent.

BNPL users tend to be younger. About 22 percent of consumers under age 35 borrowed using BNPL, while approximately 10 percent of those over the age of 65 used the service. Renters (22 percent) were more likely to be a BNPL user compared to homeowners (15 percent).

BNPL borrowing is viewed as less costly than other credit sources, such as credit cards or payday loans. However, consumers need to be aware of the potential concerns. While advertised as “no interest,” late or missed payments can trigger high fees, which can result in paying more than the original cost. BNPL will not improve your credit score, but it could damage it due to missed or late payments. BNPL can be a doorway to financial difficulties, especially if you use it for more than one purchase at a time.  

For additional information on buy now, pay later, click here.

Teaching Suggestions

  • Have students talk to someone who has used BNPL to learn about the person’s experience with this credit source.
  • Have students create an audio file or podcast with a summary of the benefits and drawbacks of BNPL borrowing.

Discussion Questions 

  1. What features of BNPL services are most attractive to consumers?
  2. What advice would you give a person who is considering using BNPL?
Categories: Chapter 4, Chapter 5, Financial Services | Tags: , | Leave a comment

Consumers Lost Nearly $8.8 Billion to Scams in 2022

Posted on May 13, 2023 by Melissa Hart

Newly released Federal Trade Commission data show that consumers reported losing nearly $8.8 billion to fraud in 2022, an increase of more than 30 percent over the previous year.

Consumers reported losing more money to investment scams—more than $3.8 billion—than any other category in 2022. That amount more than doubled the amount reported lost in 2021. The second highest reported loss amount came from imposter scams, with losses of $2.6 billion reported, up from $2.4 billion in 2021.

The FTC received fraud reports from 2.4 million consumers last year, with the most commonly reported being imposter scams, followed by online shopping scams. Prizes, sweepstakes, and lotteries; investment related reports; and business and job opportunities rounded out the top five fraud categories.

The FTC’s Consumer Sentinel Network is a database that receives reports directly from consumers, as well as from federal, state, and local law enforcement agencies, the Better Business Bureau, industry members, and non-profit organizations. Sentinel received more than 5.1 million reports in 2022.

The FTC uses the reports it receives through the Sentinel network as the starting point for many of its law enforcement investigations, and the agency also shares these reports with approximately 2,800 federal, state, local, and international law enforcement professionals.

For more information, click here.

Teaching Suggestions

  • Ask students what actions they have taken to keep their security software, internet browser, and operating system up to date.
  • Suggest that students use multi-factors authentication for extra security when they log into their accounts.

Discussion Questions

  1. What is the purpose of Consumer Sentinel Network  and why does it provide free data to any federal, state or local law enforcement agencies?
  2. Do you know how to lock down your smart phones, network, and information? 
Categories: Chapter 4, Chapter 5, Frauds and Scams, Identity Theft | Tags: , | Leave a comment

ARE YOU BEING TRICKED INTO BUYING?

Posted on April 29, 2023 by Melissa Hart

Retailing and marketing strategies are designed to encourage you to spend more than you plan. You can avoid these tactics by being aware of the tricks used to make you buy.

  • “5 for $5” implies that you must buy five to get the deal. However, you most likely can buy one for $1.
  • Taller, narrower packages are often viewed as holding more product. Be sure to check the actual weight. Also beware of smaller packages for the same price as before, or even higher.
  • “Up to 50% off” usually means many items in the store are being sold for a discount of less than 50 percent.
  • “A small $5 fee,” instead of “A $5 fee,” may influence you into thinking that is more reasonable than it really is. Also beware of prices that exclude shipping and taxes.
  • Rebates attract customers, but not everyone submits the needed paperwork to receive the refund.
  • Many prices end in 9 to create the impression of a lower price.
  • Beware of promotions that emphasize low payment; be sure to calculate the total price.

Remember: items may not always be “on sale,” but they are always “for sale.”

For additional information on avoiding marketing tricks, click here.

Teaching Suggestions

  • Have students talk to others to obtain suggestions for wise buying.
  • Have students create a visual summary (slide presentation or video) with tips for wise buying.

Discussion Questions 

  1. What actions can a person take to prevent spending money unwisely?
  2. Describe actions you use to make wise buying decisions.    
Categories: Chapter 6, Purchasing Strategies, Wise Shopping | Tags: , | Leave a comment

BEING A SUCCESSFUL SAVER

Posted on April 15, 2023 by Melissa Hart

If you desire to create/expand your emergency fund or to save for a financial goal, consider these actions:

1. Identify a specific goal. You should have both a why and a what for your savings goal. A specific amount should be determined. Too general of a goal often results in failing to follow through.

2. Track your progress. Start by budgeting an amount each month (or week) for your savings goal. This will help you move forward. Next, use a chart or a graph (or a money jar for young people) to see your progress.

3. Visualize the result.  Photos or other visuals showing your vacation location, new furniture, or other item can help keep you focused. Or write down the importance of an emergency fund, and read it out loud each day.

4. Obtain help from others. Sharing your goals with a family member or friend can help you stay accountable. Talk about the excitement when you reach your goal.  Others can offer encouragement, savings tips, or information on buying an item at a discount.

For additional information on successful saving, click here.

Teaching Suggestions

  • Have students talk to others to obtain suggestions for identifying and achieving a savings goal.
  • Have students create a visual that might be used to monitor progress toward a savings goal.

Discussion Questions 

  1. Which actions in this article would be most beneficial to you for achieving your savings goals.
  2. Describe your experiences related to achieving a savings goal.   
Categories: Uncategorized | Leave a comment

How you drive could save you money on car insurance

Posted on April 1, 2023 by Melissa Hart

Many auto insurance companies offer policies that adjust what you pay based on how much you drive or how well you drive. Here are some things to know when deciding if this type of policy is right for you.

1.    Pay-by-the-mile policies

These policies charge you a base amount plus a fee for the number of miles you drive each month. Most companies measure this through a device attached to your car’s computer. If you have an older car without a connection, ask your company if you can take a picture of the car’s odometer instead.

Pay-by-the-mile policies might be good for people who work from home. Some companies offer a cap on the number of miles you drive each day so you don’t get charged too much for the occasional road trip.

2.    Usage-based policies

Usage-based insurance policies also use a device plugged into the car’s computer or a phone app to monitor how you drive. They look at where and when you drive, how fast you go, and your braking and acceleration habits, among other things.

Your insurance company uses that information along with other factors – such as your age, type of car, and driving record – to set your cost.

3.    Is it a good deal?

These types of policies could lower your premium cost if you drive safely or don’t drive a lot. Be sure to get an estimate and compare it to the cost and coverage of your current policy.

  • The National Association of Insurance Commissioners Drive Check tool can help you figure out if a usage-based policy could save you money.
    • The Federal Highway Administration says the average car is driven 13,476 miles a year, or 1,123 miles each month. If you usually drive less than that, a pay-by-the-mile policy might be a good choice.

4.    What about my privacy?

Here are some questions to ask when considering these types of policies:

  • What device will my insurer use to track my driving? What exactly will be monitored?
    • Do I want my company to have information about my driving?
    • Am I a good driver? Do I think my driving style will help lower my premium cost?
    • How much could I save?
    • Could that information be used after an accident?

For more information, click here.

Teaching Suggestions:

  • Ask students if they would consider pay-by-the-mile auto insurance policy. Why or why not?
  • Ask students to talk to friends or relatives who might have pay-by-mile insurance policy.  What can you learn from their experience?

Discussion Questions:

  1. What type of drivers should consider pay-by-the-mile auto policy?
  2. Under what circumstances pay-by-the-mile auto insurance policy could lower your premium?
Categories: Car Insurance, Chapter 8 | Tags: | Leave a comment

Annuity or Lump Sum?

Posted on March 18, 2023 by Melissa Hart

Many people with a retirement plan are asked to choose between receiving lifetime income (also called an annuity) and a lump-sum payment to pay for their day-to-day life after they stop working. An annuity provides a lifetime steady stream of income while a lump sum is a one-time payment.

Deciding which option works best for you takes careful consideration because there are many factors to think about, such as your health, cost of living, assets and savings, and any other income you may have.

Why is this important?

Your employer may ask you to choose between an annuity and lump sum. For example, your employer may ask you to make this choice (1) if you change jobs, (2) when you stop working, or (3) even after you have begun to receive monthly annuity payments.

When making this decision, explore the benefits and risks because whichever option you choose will affect your financial future.

What are the benefits and risks?

 AnnuityLump Sum
BenefitsYou will receive a steady income for the rest of your life, like keeping a part of your paycheck for life You may be able to provide a lifetime income to your spouse or to another beneficiaryYou can use the money to pay off large debts If you don’t spend all of the lump sum, you can pass it on as an inheritance
RisksAnnuities may give you less financial flexibility and may not pay benefits to your survivors If you are in poor health, an annuity may not provide enough money to cover medical billsYou may outlive your retirement funds It’s your responsibility to manage the money to provide you with future income

Factors you should consider:

  • Your health (and your spouse’s)
  • Your investment skills (and your spouse’s), and how they may change as you age
  • Your living expenses (now and future)
  • Your savings (and your spouse’s)
  • Other steady income (Social Security, pensions from other employers)
  • Debt (mortgage, car, credit cards, student loans, child support payments)
  • Taxes on the annuity or lump sum
  •  

Are there online tools that can help me calculate my lifetime income?

Yes. The Department of Labor has a lifetime income calculator that allows you to estimate the amount of monthly income you will receive when you stop working and start receiving monthly payments.

The results shown are estimates, not guarantees, of the level of the account balance or of the lifetime income streams of payments.

For more information, click here.

Teaching Suggestions:

  • Ask students to make a list of benefits that an annuity may provide.
  • Ask students to interview their parents or relatives if they had to make a choice between an annuity or a lump sum option.  If so, which option did they choose and why?

Discussion Questions:

  1. What are the benefits and risks of choosing an annuity or a lump sum payment?
  2. What sources are available if you need assistance in making a decision to choose annuity or lump sum option?
  3. Why is it important to discuss all of the possible options with a financial advisor or an insurance agent?
Categories: Chapter_10, Chapter_14, Retirement Planning | Tags: , | Leave a comment

Are Americans Financially Educated on Retirement Savings?

Posted on March 4, 2023 by Melissa Hart

Financial education helps people learn about savings, credit, and loans. It also helps prepare people for life changes and to face the unexpected. This knowledge is essential when planning for retirement. So, how prepared are U.S. adults for their future retirement? According to a recent poll conducted by the National Endowment for Financial Education:

  • Eighty-five percent of respondents confirmed some part of their personal finances was causing them stress. For 31% of respondents, that concern was “having enough saved for retirement.”
  • In that same poll, 70% said they made financial adjustments due to the COVID-19 pandemic. Of that group, 27% increased contributions to their emergency savings, retirement savings, or other savings or investments. In comparison, 21% tapped into emergency savings—or borrowed against retirement savings.
  • About financial education mandates, 80% of U.S. adults said they wish they were required to complete a semester- or yearlong course focused on personal finance education during high school and 88% think their state should require a semester- or year-long course for high school graduation.
  • In that same poll, 84% of those approaching retirement age (60+ years old) said “spending and budgeting” should be taught in schools.

People who champion financial education typically live by the mantra “the earlier, the better.” It’s also important, though, that people keep learning throughout their lives to ensure they have the knowledge they need to make the best financial decisions.

Lifetime financial education can be a helpful tool in preparing for retirement. This includes understanding Social Security retirement benefits and making the most of retirement income.

For More Information, click here.

Teaching Suggestions:

  • Have students discuss the statement, “Financial education in high schools should be mandatory for graduation.”
  • Ask students how a financial literacy course is helping them to better manage their finances?

Discussion Questions:

  1. Why is financial literacy knowledge essential when preparing for retirement?
  2. Do students feel more prepared for financial challenges of adult life after taking a personal finance course? Explain.
Categories: Chapter_14, Retirement Planning | Tags: , | Leave a comment

FINANCIAL EMERGENCY KIT

Posted on February 18, 2023 by Melissa Hart

In case of a natural disaster or a cyber-attack, a financial emergency kit allows you to keep running your life. These documents would prepare you for the what-ifs of life. Bottom of Form

The kit starts with knowing where your vital paperwork is stored, and where are copies kept. Two suggested storage methods are: (1) a portable, fireproof, waterproof safe, and (2) digital storage with an electronic record of account numbers and sensitive information. This information can then be accessed on your phone. Also backup your data on both an external hard drive and on a cloud service.

The important documents that you should have in both a physical and digital format are:

  • Insurance policies, insurance contact information; prescriptions, medical records
  • Birth and marriage certificates; passports; driver’s license; Social Security cards
  • Mortgage information; car registration
  • Recent tax returns; employment information
  • Wills and deeds; stocks, bonds and other negotiable certificates
  • Bank, savings. Investment, and retirement account numbers
  • Pet medical records; pet identification tags
  • Recent utility bill, school registration to prove your legal place of residence

In addition to your financial documents, also plan to have these items in your emergency kit:

  1. Water; non-perishable food; first aid kit; multi-purpose tool
  2. Flashlight; battery-powered radio; extra batteries; cellphone, charger
  3. Medications, medical items; sanitation, personal hygiene items
  4. Extra cash; contact information of family and friends
  5. Emergency blankets; maps of the area

Consider a hand-crank flashlight and radio to be able to use and charge when there’s no power.

To connect with family and others in emergency times, text instead of calling to avoid network congestion.  Use apps, social media when cell networks are overloaded.  Update your voicemail message to tell your location and status.

Be prepared with these simple things that require minimal money and a small-time investment.

For additional information on financial emergency kits, go to:

16 Items To Pack in Your Financial Emergency Kit

Teaching Suggestions

  • Have students identify situations in which this type of emergency kit would be appropriate.
  • Have students create a visual proposal (poster or slide presentation) to communicate the elements of an emergency kit.

Discussion Questions 

  1. What are reasons people might give for not preparing an emergency kit?
  2. Describe methods that might be used to store financial documents for emergency situations.
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

How to Spot a Government Imposter Scam

Posted on February 4, 2023 by Melissa Hart

Scammers are pretending to be government employees. They may threaten you and may demand immediate payment to avoid arrest or other legal action. These criminals continue to evolve and find new ways to steal your money and personal information. Do not fall for it! We want you to know how you and your loved ones can avoid becoming victims!

 Be Alert

If you owe money to Social Security, you’ll receive a letter by mail with payment options and appeal rights. They only accept payments electronically through Pay.gov, Online Bill Pay, or by check or money order through its offices. The SSA will never:

  • Threaten you with arrest or legal action because you don’t agree to pay money immediately.
  • Suspend your Social Security number.
  • Promise a benefit increase in exchange for money.
  • Ask you to send gift cards, prepaid debit cards, wire transfers, Internet currency, cryptocurrency, or cash through the U.S. mail.

Know What to Look for

  • The caller or sender says there is a problem with your Social Security number or account.
  • Any call, text, or email asking you to pay a fine or debt with retail gift cards, wire transfers, pre-paid debit cards, internet currency, or by mailing cash.
  • Scammers pretend they are from Social Security or another government agency. Caller ID, texts, or documents sent by email may look official, but they are not.
  • Callers threaten you with arrest or other legal action.
  • Internet scammers may use “phishing” schemes to trick a recipient into revealing personal information by clicking on malicious links or attachments.

For more information, click here.

Teaching Suggestions:

  • Ask students if they or their families have received calls from imposters?  If so, what was their response and how did they handle the situation?
  • Ask students to make a list of schemes scammers use to trick people into revealing personal information?

Discussion Questions:

  1. What should you do if you receive a suspicious call, text, or an email from an imposter?
  2. What can local, state, or federal governments do to minimize these scams and protect people?
Categories: Chapter_14, Frauds and Scams | Tags: , | Leave a comment

PREPARING FOR A RECESSION

Posted on January 21, 2023 by Melissa Hart

If you stay ready…you don’t have to get ready!!  Whether or not a recession occurs, certain personal actions will be beneficial for your future.

Job loss is the most common effect of a recession. This can occur due to a layoff, furlough, or company failure.  With many people all experiencing job loss, finding a new job is difficult. For those who keep their jobs, they may experience pay cuts, reduced benefits, and no pay raises. Another major concern is the decline in value of stocks, bonds, real estate, and other assets. 

To be ready to cope if an economic downturn occurs, consider these financial strategies:

  • Monitor your monthly expenses. Know what it costs to live so there are no surprises. Be ready to pay items that occur only once a year.
  • Cut unnecessary spending. Look back at your spending to see what you could have done without. Add up what you could have avoided to make sure you spend less than you make. Possible areas to cut include cable TV, streaming services, gym membership, online music subscriptions, and a less expensive cellphone plan.
  • Start or expand your emergency fund.  No matter how small, be sure to set aside funds for poor economic times. To build your fund, have an amount automatically deposited in a saving account each month.   
  • Budget everything. Telling your money where it will go keeps you in control.    
  • Avoid debt. Just like saving, paying off debt can start small.
  • Be in contact with others to discuss possible late payments, reduced costs, cancel services, and other actions to cope financially.
  • Maintain retirement savings. Keep contributing to your retirement fund so it will be there when you need it. 

For career planning during times of recession, consider the following actions:

  • Inventory your skills, especially those that relate to essential work for your current employers and other organizations. 
  • Expand your skills through online certifications, courses, and training programs. 
  • Be adaptable. Step up to take on tasks needed within your company. 
  • Network for freelance work. Connect with others in your industry for consulting opportunities.
  • Be prepared for the unexpected. Despite taking these actions, a layoff may still occur. If that happens, expand your skills, update your resume, and connect to others through LinkedIn and community service activities.

For additional information on financial planning during a recession,

Source #1

Source #2

Teaching Suggestions

  • Have students research current economic conditions to determine the status of employment and inflation.
  • Have students create a podcast to encourage others to act on the suggestions in the article.

Discussion Questions 

  1. What are the benefits of these actions during every type of economic situation?
  2. Describe actions a person might take to better understand potential career opportunities.
Categories: Career, Chapter 1, Chapter 2, Financial Planning | Tags: , , | Leave a comment

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