THE 33-33-33 PORTFOLIO

For decades, a 60/40 (60 percent stock, 40 percent bond) investment portfolio has been encouraged by financial advisors. However, we live in a new world, so in recent years a 33/33/33 allocation has been suggested, with investments divided equally among stocks, bonds, and alternatives. This shift in portfolio strategy is the result of unsustainable stock prices, looming inflation, and expected higher interest rates.  

The alternative investments include assets such as venture capital, real estate, private equity, private debt, commodities, and cryptocurrencies. These asset categories offer investors enhanced diversification, and have a low correlation with stocks to provide an inflation hedge. 

Real estate offers an opportunity for an improved yield for investors with a lower risk tolerance. Venture capital and private equity are suggested for investors comfortable with more risk.

Recent J.P. Morgan research revealed that an allocation of 30 percent of these alternatives can substantially increase annual returns, while strengthening portfolio stability and decreasing risk. However, these illiquid assets can’t be quickly sold, or liquidated, so careful cash-flow planning is also necessary.

Remember, every portfolio must be personalized to the needs of the individual based on liquidity need, risk tolerance, and the time horizon of financial goals.

For additional information on the 33/33/33 portfolio, go to the following articles.

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Article #2

Teaching Suggestions

  • Have students research alternative investments (venture capital, real estate, private equity, private debt, commodities, cryptocurrencies) to determine recent returns, risk, and suitability for their personal portfolio.
  • Have students create a visual proposal or video with a suggested investment portfolio for their current or future situation.

Discussion Questions 

  1. What factors should a person consider when planning an investment portfolio?
  2. Describe actions a person might take to determine if alternative investments are appropriate for their financial situation. 
Categories: Chapter_11, Chapter_12, Chapter_13, Financial Planning, Investments | Tags: | Leave a comment

Gift Card Scams

Someone might ask you to pay for something by putting money on a gift card, like a Google Play or iTunes card, and then giving them the numbers on the back of the card. If anyone asks you to do this, they’re trying to scam you. No legitimate business or government agency will ever insist you pay them with a gift card. Anyone who demands to be paid with a gift card is a scammer.

What Gift Card Scams Look Like

Gift cards are for gifts, not for payments. But these cards are popular with scammers because gift cards are easy for people to find and buy, and cards have fewer protections for buyers compared to some other payment options. Gift cards are more like cash: once you use the card, the money on it is gone. Scammers like this.

If someone calls you and demands that you pay them with gift cards, you can bet that a scammer is behind that call. Once they have the gift card number and the PIN, they have your money. Scammers may tell you many stories to get you to pay them with gift cards, but this is what usually happens:

  1. The caller says it’s urgent. The scammer says you have to pay right away or something terrible will happen.
  2. The caller usually tells you which gift card to buy. They might say to put money on an eBay, Google Play, Target, or iTunes gift card. They might send you to a specific store — often Walmart, Target, CVS, or Walgreens. Sometimes they tell you to buy cards at several stores, so cashiers won’t get suspicious. And, the caller might stay on the phone with you while you go to the store and load money onto the card. These are all signs of a scam.
  3. The caller asks you for the gift card number and PIN. The card number and PIN on the back of the card let the scammer get the money you loaded onto the card. And the scammer gets it right away.

 For more information, click here.

Teaching Suggestions:

  • How do scammers convince you to pay with gift cards?  Make a list of common gift card scams and schemes, and share it with others.
  • Ask if anyone has paid someone with a gift card.  If so, what was their experience?

Discussion Questions:

1.  What are signs of a gift card scam and how can one spot a gift card scammer?

2.  What steps should you take if you paid a scammer with gift cards?

Categories: Chapter 5, Frauds and Scams, Identity Theft | Tags: , | Leave a comment

THE NEW “BUY NOW, PAY LATER”

For a long time, “buy now, pay later” (BNPL) has referred to the use of credit. However, recently a new BNPL approach has surfaced, and is growing. Today, financial technology (FinTech) companies are using a different method to finance consumer purchases.

BNPL providers include Affirm, Afterpay, Klarna, Zip, and PayPal. The BNPL plan allows consumers to obtain a purchase immediately and then make a series of equal payments, often four payments each due two weeks apart. The first payment is due at the time of purchase.

Most BNPL plans charge interest and late fees. These plans often offer financing to customers with bad credit or no credit. BNPL is used mainly for online shopping although the plan is also available in some stores. Purchases of technology, furniture, clothing, beauty care products, groceries, health care services, and to eat at restaurants are the most common uses of BNPL.

The main benefits of BNPL mentioned by consumers, include to:

  • spread cost of expensive items over time.
  • buy items that they might not otherwise be able to afford.
  • avoid credit card debt.
  • try out the BNPL method.
  • not have to wait until payday to buy an item.

When selecting a BNPL plan, search for those with low or no interest and low or no late fees. Remember when using BNPL, you are still taking on debt. This easy access to credit often results in overspending. Some people will make purchases through multiple plans resulting in greater financial difficulties.

Be sure you can pay on time to avoid late fees and interest charges. Unlike traditional loans, BNPL providers may not report to credit bureaus, so you are not building a credit record.

For additional information on BNPL, click on these articles:

Article #1

Article #2

Teaching Suggestions

  • Have students ask if any friends or relatives have used a BNPL plan. Obtain information about their experiences.
  • Have students create a visual poster, slide presentation, or video with the benefits and drawbacks of BNPL plans.

Discussion Questions 

  1. What aspects of BNPL might create financial difficulties?
  2. Describe actions a person might take to evaluate a BNPL plan.
Categories: Chapter 4, Chapter 5, Financial Services | Tags: , | Leave a comment

Social Security Benefits Increase in 2022

Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 5.9 percent in 2022. The 5.9 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Increased payments to approximately 8 million SSI beneficiaries began on December 30, 2021. (Note: some people receive both Social Security and SSI benefits). The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000 from $142,800.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments are able to view their COLA notice online through their personal my Social Security account. People may create or access their my Social Security account online at www.socialsecurity.gov/myaccount.

For more information, click here.

Teaching Suggestions

  • What might be a secure and convenient way to receive COLA notices online and save the message for later?
  • Ask students to trace the history of automatic Cost-of-Living Adjustments (COLA).

Discussion Questions

  1. How can you avoid falling victim to fraudulent “Social Security” calls and internet “phishing” schemes?
  2. What is the purpose of the COLA adjustments?
  3. What is the official measure used by the Social Security Administration to calculate COLA?
Categories: Chapter_14, Retirement Planning | Tags: | Leave a comment

Environmental, Social and Governance (ESG) Investing

An increasing number of investors are seeking a more ethical portfolio with an emphasis on socially responsible and sustainable investing. An emerging trend is environmental, social and governance (ESG) investing, with these factors used to evaluate the financial return and overall impact. 

The ESG score measures how investments and companies perform in these categories:

  • Environmental – carbon emissions, air and water pollution, deforestation, green energy initiatives, waste management, water usage
  • Social – employee gender and diversity, data security, customer satisfaction, company sexual harassment policies, human rights at home and around the world, fair labor practices
  • Governance – diversity of board members, political contributions, executive pay, large-scale lawsuits, internal corruption, lobbying

Many view “sustainable” investing as very vague. The ESG criteria hopes to provide a grading of investments that clarifies what sustainable involves. ESG scores are calculated using different methods. Some ratings are created by using data collected from company disclosures and government, academic and NGO databases. Other scores are developed with self-reported data from participating companies.

Recent benefits of ESG investing include higher returns and a lower downside risk than traditional funds and conventional investments.  To start investing, you can search on your own to identify an ESG fund or an individual stock with a high ESG score that fits your investment beliefs and goals.  Investors can also use a robo-advisor to guide their ESG investment choices.

For additional information on ESG investing, click on the following links:

Article #1

Article #2

Article #3

Teaching Suggestions

  • Have students search online to identify ESG funds or companies they might consider for their investment portfolio.
  • Have students talk with others to obtain the level of interest for ESG investing among potential investors of various ages.

Discussion Questions 

  1. What aspects of ESG investing do you find attractive?  What are your concerns?
  2. What concerns might be associated with methods used to create ESG scores?
Categories: Chapter_11, Chapter_12, Chapter_13, Investments, Mutual Funds, Stocks | Tags: , , | Leave a comment

Tips To Avoid Internet Scams

Each day, more and more scams surface through computers, tablets, cellphones, and other smart devices. To protect your personal information and to avoid being a victim of fraud, the following actions are recommended:

  • Keep operating systems, browsers, programs, apps, and security components up to date.
  • Be aware of the latest scam techniques being used by fraudsters. Search online to learn about current scams.
  • Enable firewalls for your computer and router.
  • Install an antivirus program for your computer, tablet, and smartphone that updates automatically.
  • Create a guest network for visitors to your home to use, to avoid them having to access your home network.
  • Don’t click or respond to emails, phone calls, or text messages from strange addresses and those with unusual subject lines.
  • Update passwords often with a random, complex series of letters, numbers, and symbols; don’t use the same password on different sites. Consider use of a password manager. 
  • Use only reputable sites when shopping online. Use a credit card instead of a debit card for greater financial protection. Don’t click on links or pop-ups, which can be a fake, look-alike website; instead, go directly to the shopping website.
  • Adjust privacy settings on your devices, and for websites you visit for your best protection.  
  • Regularly back up your data in case of a malicious attack, so you don’t lose access to your information and files. If you encounter a ransomware attack, file a report with the FBI.
  • Avoid use of public Wi-Fi to prevent potential fraud and identity theft.
  • Be cautious with your social media posts, especially information about children and teens. Don’t post personal information, vacation plans, work and home schedules, address or other contact information. Don’t “check in” at the locations you visit. 
  • Be cautious about online gaming, which can result in identity theft, bullying, harassment and online predators. Children should use an avatar or nickname.

For additional information on avoiding online scams, click here.

Teaching Suggestions

  • Have students search online for examples of recently-created online scams.
  • Have students create a video, poster, or slide presentation with common email scams and actions to avoid those situations.

Discussion Questions 

  1. What are some reasons that a person might become a victim of an online scam?
  2. Describe actions to learn about new online scams. 
Categories: Chapter 4, Chapter 6, Frauds and Scams, Identity Theft | Tags: , , | Leave a comment

SELECTING AN ONLINE BANK

More and more bank customers are using online financial-service providers. Online-only (digital) banks provide traditional financial services in an online format.  FinTech companies (neobanks) offer innovative banking services with an emphasis on emerging technology, often through apps.

When deciding which online bank to use, consider these factors:

  • FDIC Insurance, Federal Deposit Insurance Corporation (FDIC) covers deposit accounts against bank failure up to $250,000 per depositor and type of ownership category. To determine if a bank is protected by the FDIC, go to https://banks.data.fdic.gov/bankfind-suite/bankfind
  • Fee-free ATMs, to avoid costly charges. Many online banks have an extensive network of ATMs, while others do not have ATM access.
  • High-yield savings accounts, with lower operating costs many online banks offer savings accounts with higher yields. Be sure to compare the rates, rules, and regulations at various online banks, such as the required minimum deposit and minimum balance. 
  • Multiple banking products, depending on your goals and needs, you might choose a bank that offers an array of financial services–checking, saving, CDs, debit card, ATMs, credit card, and loans.
  • Financial management tools, FinTech apps and online banks offer innovative financial planning tools to help you save money, such as with a round-up savings component, automatic savings deposits, and low-cost investment funds. Other apps include features for achieving goals to pay off debts or save for a vacation, or savings based on your spending patterns.
  • Investment guidance, robo-advisors provide portfolio suggestions based on financial goals and risk tolerance with the use of artificial intelligence. 

For additional information on selecting an online bank, click here.

Teaching Suggestions

  • Have students talk to others to learn about factors that were considered when selecting a bank or other financial-service provider.
  • Have students create a visual proposal (poster, slide presentation, or other format) to highlight the main factors to consider when selecting an online bank.

Discussion Questions 

  1. What online banking features could help a person improve their financial position?
  2. Describe actions a person might take to select an online bank. 
Categories: Chapter 4, Financial Services | Tags: | Leave a comment

END-OF-YEAR MONEY CHECKLIST

As we approach the end of the year, consider these actions to help create the foundation for financial success in 2022:

  • Review spending for the year. Comparing your actual spending with budgeted amounts will help you plan spending for the coming year. For the upcoming year, track spending with an app, spreadsheet file, Google doc, or a written record.
  • Use flexible spending account funds.  Be sure to spend any money in a flexible spending account on qualified medical expenses before the end of the year, or those funds might be lost. However, due to COVID-19, you may be allowed to roll over the full balance into next year. Contact your benefits department to see if you qualify.  
  • Donate to charity. This will not only create a tax saving, but will also help people in your community and around the world.
  • Create a backup plan. Review the beneficiaries on your financial accounts. You should have a durable power of attorney to handle your financial activities if you are not able to do so.  A health-care proxy (power of attorney) is someone to speak on your behalf regarding medical care when you are not able to do so. A will sets how your assets will be distributed after you die.
  • Consider increased retirement contributions. With increased limits for 2022, plan to increase the amount set aside for long-term financial security while reducing current taxes.
  • Conduct a life audit.  Start with identifying your short-term and long-term goals with sticky notes or index cards.  Then, sort your goals by category, such as personal development, work/career, financial, travel, family, community service, and health. Next, organize within a category based on time of accomplishment, which might include: now/soon, always/everyday, later this year, the next year or two, and someday. Take photos of your notes, place them in a visible location, or use an app such as OneNote as a reminder of these targets. Finally, reflect on your goals by determining why you have certain goals and what actions you need to take. Be sure to set deadlines. Also consider how your goals relate to the type of life you desire for yourself.  Do your goals reflect your beliefs, values, work situation, and personal relationships?

For additional information on year-end financial planning, click here.

Teaching Suggestions

  • Have students talk to others about recommended financial actions to take before the end of the year.
  • Have students create an action plan and timeline for a specific goal.

Discussion Questions 

  1. What attitudes, behaviors, and circumstances might restrict a person from taking certain year-end actions?
  2. Describe information sources and personal contacts that might be used to obtain guidance for achieving a specific goal. 

Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , , | Leave a comment

ARE YOU AN IMPULSE BUYER?

During the COVID quarantine, online buying became an addiction for many.  During this time, impulse spending increased by an estimated 18 percent.  Unplanned buying occurs when you purchase more than intended.  Or, buying extra grocery items while shopping when you are hungry. Or, a bad day at work results in a purchase to overcome anxiety.

Most spending occurs to make a person feel better. A survey reported that 72 percent of respondents reported a positive mood from an impulse buy, while 65 percent reported that an impulse buy can reverse a bad day. Others reported that they buy things to help loved ones feel better.

Three personality types are often associated with impulse buying:

  1. Sensation seekers may not consider the risks of impulse buying but desire the spending experience when they feel guilty, bored, or disengaged.
  2. Impulse buying tendency buyers are those who are aware of their behavior but don’t necessarily see it as a problem.
  3. Consumer-driven self-identity is a desire to be part of emerging trends and high-end brands to present an image of status, style, and good taste. 

To take advantage of in-person shoppers, stores make use of sensory environments, bold and graphic signage, associations between brand and positive feelings, checkout line “bonus” items, and price discounts and markdowns. Online retailers encourage buying with the use of time-based and quantity-based deals, heavily targeted social media ads, abandoned shopping cart emails, and free shipping.

Symptoms of impulse buying include:

  • you shop to feel better, which can be dangerous; find other ways to channel your energy
  • you shop to compete with buying to stay up or ahead of others
  • you’re bored; plan something else to do–go for a walk, read, write, draw, email a friend
  • your finances are suffering; track spending to avoid unnecessary purchases   
  • you have too much stuff, much of which you will never use

To reduce your impulse buying…

  • avoid temptations by unfollowing your favorite brand, unsubscribing from marketing emails, clearing browser cookies, blocking favorite sites, deleting shopping apps from your phone, and unsaving credit card information on your browser.
  • create a “fun” budget item as therapy
  • save to buy a “big” item to avoid unneeded spending
  • wait 24-48 hours before buying an item
  • try a no-spend challenge in which you buy nothing for a set number of days, weeks, or months to save money and change past habits. 
  • ask yourself: “Do I need this today or tomorrow?” If not, don’t buy it.

For additional information on impulse buying, click here

Teaching Suggestions

  • Have students talk to others to ask about any actions they take to avoid impulse buying.
  • Have students create an in-class presentation or video that dramatizes actions to avoid impulse buying.

Discussion Questions 

  1. What types of impulse buying situations have you experienced or observed?
  2. How might impulse buying affect long-term financial security? 
Categories: Chapter 6, Wise Shopping | Tags: | Leave a comment

Pay-Per-Mile Car Insurance

During the pandemic and at other times, if you drive very little, consider pay-per-mile car insurance to lower your premium. According to the U.S. Department of Transportation, the average American drives about 13,500 miles a year. Insurance companies estimate that a person would likely benefit from pay-per-mile insurance program if they drive less than 8,000 miles annually.

Pay-per-mile insurance may be appropriate for people who work from home, are in college, regularly use public transportation, or who have a second vehicle that is rarely used. This coverage has a base rate, which is determined similar to traditional auto insurance. After that, the per-mile rate is added on. High mileage, aggressive driving, and overnight driving can result in higher auto insurance rates. 

Usage-based insurance programs use telematic technology with an app or in-car device to track your driving. Instead of in-car monitoring systems, some companies require that you submit a photo of your odometer each month.

Another type of usage-based insurance is pay-as-you-drive with rates based on driving habits. With this coverage, rates may increase as a result of bad driving habits. Behaviors that are monitored include hard braking, acceleration and speed, the time of day you drive, mileage, and cellphone use.

For additional information on pay-per-mile car insurance, click here

Teaching Suggestions

  • Have students talk with others to learn about their current auto insurance coverage and costs.
  • Have students conduct online research for pay-per-mile and pay-as-you-drive auto insurance to obtain additional information on the features, benefits, and drawbacks of these coverages.

Discussion Questions 

  1. What features of pay-per-mile car insurance might be appropriate for you or people you know?
  2. How might a person reduce the amount paid for auto insurance? 
Categories: Car Insurance, Chapter 8 | Tags: | Leave a comment

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