One of the biggest surprises about the whole Suze Orman “Approved Prepaid” Scam/Fiasco, to me, is that Suze Orman is a person who has been a role model, financially, for many people. She has been dispensing her brand of advice for many years, has multiple best-selling books on the subject, and regularly appears on news and talk shows trying to help people lead better financial lives. So, to have someone of that public stature, essentially attack someone I know and trust, led to some amount of disappointment. Disappointment in how she portrayed herself, and, also, eroded the trust that many had in her and her advice. (I should note that I never really cared for her style or advice, but many do and did.)

So, how do we overcome that level of disappointment when someone we trust to give good advice, and to behave in a professional manner, doesn’t?

1. First and Foremost, remember that the person is human.  People have bad days.  They have lives outside of the limelight, and sometimes that life can bleed over and cause them to do or say things that are uncharacteristic.
2. Remember that it’s still just advice.  You should be doing your own research and assessing what is right for you in any situation.  Remember when your mom would ask you “If your friends jumped off a bridge, would you do the same?” Well, the obvious point she was trying to drive home was that you need to be an independent thinker.  Whenever someone recommends a product, service, or action, you have to determine if you should take that advice, or find an alternative.
3. Express your disappointment.  Many times, people will disappoint us and not even know they’ve done it.  Tell them why they’ve disappointed you.  Do it constructively, don’t be a jerk.  If they truly meant well, they’ll want to know, and they’ll want to find a way to improve.
4. Move on.  Take what you have into account, and decide if you can continue to trust the person’s advice.  If you can, let it go, and move on.  If you can’t, let it go, and move on.  (See what I did there?)  Holding a grudge, or reacting negatively won’t help you, and it will reflect poorly on you.

People are disappointed with their role models all the time.  People that we hold in high regard do something stupid, and fall from our good graces.  It’s important to take the lessons that are available, improve upon your filter, and move on.

As I mentioned in the previous post, I don’t think that Suze Orman’s card is, necessarily, a bad card.  I think it’s entirely possible that she created the card with the best intentions, and truly believes that it can be a useful tool for those that use it.  I do think that the marketing for the card is far too broad, aimed at people who shouldn’t be using the card at all.  I do think that she (or whomever is running her twitter account) overreacted to the criticism that was being presented by PT and others.  Suze lost a lot of trust with a lot of personal finance writers over the whole fiasco.  Depending on how the fallout from the whole situation lands, she might get some of that back, she might not.  But, it’s those writers, expressing their disappointment, that might save a few people from using the card when they shouldn’t.  It’s those same writers that may cause Suze to change her course, and improve upon the card based on the recommendations they made.

Disappointment is normal.  We feel it all the time.  How we react to it, and handle it, is what makes the difference.

It’s important to trust your financial advisor.

A few years ago I caught a story on the local news about a financial advisor from my hometown who was arrested for violating that trust. He had been a financial advisor for many years and was charged with financial exploitation of the elderly.

In one instance, he had sold one of his elderly clients an annuity. She trusted her advisor and considered him a friend so she wrote him a check. Did you catch that?

A check directly to him, not the insurance company, in the amount of $20,000 and then he disappeared. As it turns out, she was not the only client  that had been taken advantage of.

Financial Planner Violates Trust

When I see story like this, I’m angered because I love my profession, I love what I do, and I love earning my clients’ trust. But when you have individuals as such; that abuse that sacred trust with their client, it gives my profession a bad name. You may be wondering if this could happen to you.

What To Do If Your Financial Planner is Crooked

• If the advisor asks you to write him a personal check, that is a clear red flag. Never, never, write out a check directly to the advisor. Especially, if you are purchasing some kind of investment product.
• If you recently purchased something but never received anything in the mail, call your advisor and see if you can get a copy of the confirmation ticket. (think of the confirmation ticket as your receipt of purchase)
• If your advisor is guaranteeing an outrageous rate of return, be extremely cautious. I ran into a competitor that was guaranteeing 12% return on his mutual funds he was offering.

Background Checks On Your Advisor

Start by thoroughly researching any broker, financial planner, or adviser you are considering hiring. Explore the North American Securities Administrators Association Website, www.nasaa.org, or call 888-84-NASAA for a regulator in your state.

State regulators, along with the National Association of Securities Dealers, jointly maintain a database of more than 650,000 stockbrokers and 5,000 securities firms. Known as the CRD, or the Central Registration Depository, the database contains critical information, such as whether a broker has ever been sanctioned or fined for investor wrongdoing.

To check CRD records, contact FINRA’s consumer hotline at 800-289-9999, or visit the them online and use their “Broker Check” system.  You’ll be amazed on how much information you can find out about the financial advisor including such things as: previous work history, outside business activities, and if they have any judgements against them.

You shouldn’t just do a background check on the financial advisor you’re considering hiring.  You should also consider doing some research on the one that you are currently working with.   You never know what you’ll find out and it literally only takes a few minutes to find out.

Jeff Rose is an Illinois Certified Financial Planner. He blogs at Good Financial Cents and Soldier of Finance. He loves Crossfit workouts, writes about Roth IRA rules and craves In-N-Out burger.

photo credit: seniorliving.org

Have you ever watched your family open up Christmas gifts while mentally calculating how much each gift cost and comparing that against the amount you have in your checking?  Have you dreaded opening the bills in January because you know the credit card statement from holiday shopping will be coming soon and you do not have the money to pay the balance in full?
When my husband and I were newly married and dirt poor, we carefully planned our Christmas purchases to fit within our meager budget.  We didn’t buy many gifts, but the ones we bought were well thought out.  When we went to visit my mom over the holidays, she kept telling us about all of the presents she had bought for us.  There were so many under the tree!  Because we are the only people to buy gifts for my mom because my dad has passed, we started feeling guilty about the few presents we bought her.  Noticing that her bathroom towels were worn, we went out Christmas Eve night and bought her an entire set of 6 new bath towels including hand towels and washcloths with money we did not have.  Then we bought her some jewelry.  We charged everything knowing we didn’t have the money to pay.

On Christmas morning, she delighted in her presents.  When we opened ours, we were in for a surprise.  She too had bought a few well thought out gifts for us.  But all those extra gifts we found under the tree?  They were leftover t-shirts from a conference some of the professors had hosted at the university where she works.  She bought them for a $1 each.  Each time I or my husband opened another one of those presents that contained a t-shirt, I felt sick.  We had put ourselves in debt to try to make sure our presents were equal to hers, but she had stuck to her financial budget by giving us “filler” presents.  There had been no need to buy those extra gifts on Christmas Eve. . .

We worked like crazy selling off things in our apartment such as textbooks we no longer used so that we could pay off those credit cards used to buy the extra gifts.  On our meager salary, it took us until March.  Thankfully, we have learned our lesson.

If you don’t want to spend the months after Christmas worrying how you will pay off the new debt you just acquired, consider having a no spend month now.  We still have nearly three months until Christmas.  Pick a month such as October or November to drastically reduce your spending.

If you normally spend $1000 a month on groceries, gas, entertainment, eating out, toiletries, etc., decide how much you want to cut that amount.  Maybe you will decide that in October you will only spend $500 a month.  To make up the difference, perhaps you won’t eat out or you will eat from the pantry to use up those groceries that have been on the shelf for awhile.  Maybe you will do something for free as a family rather than catching the latest movie.

By reducing your spending for just 4 weeks, you will be able to come up with a good amount for your holiday gift giving.  If you normally spend $1000, but only spend $500 of that in October, you now have $500 saved for holiday gift buying.  Yes, you sacrifice now, but it will be well worth it when you know that every present under the tree has been paid for.  Best of all, there is no reason to dread the bills in January.  Isn’t that a great way to start the new year?

photo credit: kevin dooley

Building credit is a phrase that you’ll see around the Internet and anywhere most financial experts talk.  It’s basically the act of getting a loan with easily repayable terms, or piggybacking on someones loan, in order to create a positive record on your credit report and thus increasing (building) your credit score.

But, for many, it’s a fallacy that acts as another trap in the debt cycle.  Here’s the scenario.  You need to build your credit.  So, on the advice of a few friends or experts, you go down to the bank and get a $300 loan.  It’s all they’ll give you, and the interest rate is way more than you should spend.  But, you don’t plan on spending any of the money, so you’ve just got to come up with the payments with the added interest and viola! A shiny new positive mark on your credit report.  Except.  Except that after about 2 months, you get a flat tire.  Or you’re favorite band comes to town.  Or your friends want to go out on the town.  Something comes up and you need some money.  You don’t have any.

Where do you get your money?  Why from the loan, of course.  You’re gonna pay it off anyways, right.  So, you’ll just have to scrape together a bit more for the next payment, that’s all.  Except.  Except, you don’t scrape together that money.  You use the rest of the funds to pay the next few months payments, but you come up short.  You still need to scrape a few dollars together to make the last few payments.  How’d this happen?!?  It must have been those parasitic lenders, right?

Not quite.  You did it to your self.  And instead of a shiny new positive mark on your credit report, now you’ve got new delinquencies.  And eventually, maybe a nice new collection note.  All because you thought it would be nice and easy to build your credit.  You fell victim to the fallacy.

It doesn’t have to be that way.  Many people pull this off, but it takes a mindset as well as the money.  If you attempt to do something like this, but you don’t have your whole mind in it, you stand a high risk of ending up with negative marks instead of positive ones.  But, if you’re determined to stay out of debt at whatever cost, you can make it work.  It means you can’t touch that money for anything.  No drinking with friends, no Bieber concert, and no new tires.  If you want to improve your credit score, and you’re in a situation where this is the only solution, you’ve got to be ready to make a few sacrifices.

Take a step in the right direction, take responsibility for your actions, and do the financially sound thing.  Building your credit can be that easy.  It’s not a easy task, but once you’ve built it long enough and high enough, maybe you can continue to build it with a nice used car loan of a couple thousand.

Image Credit: credit report by TheTruthAbout…, on Flickr

Everybody makes mistakes.  It’s just how quickly you discover them and if you recover and learn from them that makes the difference.  Make a mistake and ignore it, and you’re likely headed for disaster.  Learn from the mistake, and avoid making it again, and you just might save yourself.

Recently, while catching up on our budgeting, we noticed a pretty large discrepancy in what the bank said we had (or didn’t have as the case may be), and what our budget said we had.  I’m used to some difference, but it’s not all that much normally.  This time, we’re talking about a very large difference.  Our budget said that we had nearly $2000 left over from the month of June.  Our bank?  Said we were nearly overdrawn.  Something was seriously not right.

And we had to figure out what.  I’m no accountant.  I don’t do math well (I took Trigonometry in college 5 times before I passed it.) and I am horrible at accounting math.  I’m a computer guy.  Computers are good at math, I leave it to them.  Unfortunately, as I was soon to learn, they are only as good as the data that you feed them.  And boy oh boy have I been feeding them some fun numbers.

Here’s what’s been happening, as best as I can figure.  As part of my payroll, I have child care flex taken out of my check.  Each month, about $400 is taken out of my check.  Each time I pay my daycare, I send in a form to HR and they reimburse the amount that I’ve taken out of my check.  So, at the end of the month, that $400 has been reimbursed back into my account.  Because of the way this works, I decided (when we started using the program) to not enter either transaction into my register or my budget.  My reasoning was solid.  A debit followed by a credit makes, essentially, a non-transaction.  Or so I thought.

Some of you may already see the problem.  Some may need this extra bit of information.  In determining the amount of income we budget for, we use the gross pay amount from my check.  Why is that important?  Well, let’s say, to keep the numbers easy to use, that I make $1000 a check.  I add $1000 to the income column on my budget.  From that $1000, my employer takes out $200 for the Child Care Reimbursement.  Now I have $800.  I then pay my daycare $200.  Now I have $600.  My employer reimburses the $200 to me.   I am back at $800.  That’s how the accounting should have been done.

Now, let’s take a look at why the way I was doing it was wrong.  I get paid $1000.  I put that in the income column of my budget.  I pay my daycare $200, but because that amount is reimbursed, I don’t enter it into the budget.  I also don’t enter the reimbursement or the initial withholding into my budget.  With no transactions, my budget still says that I have $1000 in income that I can spend.  When I really only have $800.

Of course, I’m using some simple round numbers, but you can see why that would be a problem.  Especially if it’s been building that way for at least the entirety of this year.  If I’ve been padding my budget-able income by $200 a check ($400 a month) for 7 months, that gives me $2800 in income showing that I don’t actually have.  And that is why my budget and my bank statement were so very far off.

Whoops.  Luckily, it didn’t cost us much to find the problem.  Unfortunately, we don’t have that much money just lying around.  Especially since we’ve been overspending by $400 a month.  So, we have to cut back as far as we can and watch our expenses until we can manage to bring that deficit back to $0.  Not any fun at all.  But, that’s the price you pay for a mistake.  At least we learned from it (enter all transactions, no matter whether they zero out or not), and will recover from it.  It’ll just make life a little bit harder for a while. But, if we hadn’t caught it, it could have bankrupted us.  It could have, essentially, cause our financial ruin.

The only thing that saved us is doing a budget and keeping track of our money.  Which is yet another reason that I advocate so strongly that you keep track of your money.  Even if it’s only going so far as balancing your account statements at the end of the month, you’ve got to know where your money is going.  It may save your financial life.

What mistakes have you made in your search for financial independence that set you back?  Or, maybe, that cause a bit of a windfall?

Save! Be Frugal! A penny saved is a penny earned. There’s a plethora of maxims meant to encourage us all to save our money for a rainy day. To hoard our excess funds so that we can spend them at a later date and enjoy their usage. But, is saving our money a waste of our money?

The most obvious way that saving money could be a waste of money is in lost opportunity cost.  If your money is tied up in some CD or savings account that you don’t have ready access to, what opportunity are you going to miss out on that could make you even more money.  If you can’t take advantage of an opportunity to make money, your savings is wasting those potential profits.

But, that isn’t the real issue.  Potential profits don’t necessarily mean lost profits.  Maybe that opportunity doesn’t perform as expected and you earn less than you would have in the CD or savings accounts?  No, I don’t think that theory holds up.  Sure, you might miss out on a potential profit boon, but I wouldn’t encourage not saving for that purpose.  In fact, having a readily accessible savings could make it easier to take advantage of an opportunity like that.

But, let’s think for a moment about what we do to save money.  The easiest way to do that is to just have it taken directly from your paycheck and into a 401(k) or to set up an automatic transfer from your paycheck to a savings account.  Easy.  A little bit of set up involved, but very little effort thereafter.  That’s hardly a waste of money!  But, let’s look at the opposite side of the spectrum.  You’re pinching your pennies, saving as much as you possibly can and then some.  You don’t want to miss out on an opportunity, or you want to pay your debt off super fast!  You go so far as to start collecting pop cans.  (assuming you live in a state that has a deposit.)  You walk down the street and throw the cans you find into a bag.  Maybe you even hit the parks and poke through the trash cans there.  Every week, you spend several hours looking for cans.

How much is your time worth?  If you’re spending several hours a week for a few bucks worth of cans, are you making a good use of your time?  Isn’t your effort to save a few bucks a waste of potential money doing something else?  Heck, you could deliver pizzas for a few hours a week and make much more than that.  Not to mention the other ways to make extra money.  You can make money selling ebooks, or working some overtime, or consulting, or just about any second job, or make money on twitter, or even *ahem* blogging.  Sure, the cans are an extreme example.  But, one used to put a spotlight on my point.  What saving practices are you employing that are a waste of money?  Which of them are worth your time, effort, and resources?  And which aren’t?

If we are going to attempt to create a super financial situation, we have to make our saving machine as efficient as possible. It doesn’t hurt to question your tactics.  Find the ones that are causing you to waste your money and find a better use of your time.  Not only will it make your money saving efforts more efficient, but I think it will free up some time to do things that you want to do.  Like spend time with your kids, or walk through the park and not look for cans!

When it comes down to setting your budget, saving your money, spending your money, and acting responsibly with money overall, you are your own worst enemy.  You and only you are responsible for keeping your self-made goals.  There are tools that you can use to help yourself, but the only enemy that you need to worry about is yourself.

Your spouse is not responsible.  Let’s assume for a minute that you don’t have a spouse that is running around buying up all the $700 pairs of shoes in town.  Stop blaming your spouse.  He/She is not responsible for the debt that your in, your blown budget, and your lack of an emergency fund.  Your spouse, however, is an excellent tool to use to overcome all of those problems.  Get on the same team as your spouse.  Your spouse can keep you accountable better than anyone else.  Discussing the finances with your spouse is a good thing.  Get them on your side.

The Credit Card companies are not responsible for your debt and the lack of paying it off.  They may hold the note on that debt and encourage you to use your “credit”, but ultimately, it is you that uses it.  And it’s you that chooses to sign the receipt.  And it’s you who chooses to continue to carry that plastic in your wallet. If  you can’t use credit cards responsibly as a tool, get rid of them.  No Excuses.  Everytime you sign the slip, you accept responsibility for the damage you’re doing.

You have taken responsibility for so many of the things in your life from feeding yourself (I assume) to cleaning yourself (assuming again) and even to dressing yourself (yep, assuming.).  Why, then, do you blame everyone else for your financial woes?  Would you blame them if you fed yourself cardboard?  If you tried to bathe with sewer water?  Or if you forgot to put your shoes on and walked on sharp stones?  No, you wouldn’t.  Stop trying to pass the blame for your monetary faults to someone/something else.  Your actions are directly responsible for where you are.  The moment you take responsibility for those actions and their results is the moment you are free of their bindings.  It’s the moment you can begin to feel free of them and can begin to correct them.  And once they are corrected and you have broken those old habits, you will be free to develop new habits that will set you free from that old life.

Take responsibility.  Change yourself for the better.

Personal finance isn’t all just about the best ways to save money and live frugally.  There are other things to consider; other rules that should be followed.  Some have absolutely nothing to do with saving money.Many of the posts here at Beating Broke deal with saving money, budgeting, and living frugally.  On many occasions I have drummed on the amount of debt that we all take on and the ways that we can go about budgeting to make that debt go away.  Deep in the root of that is a moral standard.  I believe we have a moral responsibility to not spend more than we earn.  And, because each dollar of debt, holds some risk of default, I believe we also have an ethical responsibility to budget so that we don’t default on our debt.

In the process of paying off our debt and saving money, many of us will be faced with a moral or ethical dilemma.  Perhaps you bought a bunch of things at a department store and the teller didn’t notice that one of the items rang up for less than it was supposed to be.  Or maybe the teller only rang up one item when there were really two.  Many of us have been faced with just such a situation.  And many of us, in our struggle to reduce our spending and debt, probably didn’t say a thing.  I know I have.  And I felt guilty about it.  Morally, and ethically, we have a responsibility to pay the correct price for an item, and to pay for the correct amount of items.  Even though I admit to not doing anything, I do try to keep myself honest.  Ill gotten gains are gains you’re likely to lose.  Call it karma, or whatever you like, you’ll feel the reverberations of your acts.

Perhaps more-so than in paying off debt and saving money, ethical and moral dilemmas can arise after we’ve paid it all off.  Suddenly, we find ourselves with an abundance of spendable money that we can save or do what we want with.  It’s not earmarked for any debt, and we’ve already paid ourselves.  The situation has changed, but we still have a moral and ethical obligation to do what is right.  If you’re investing your money, do you invest in so-called “sin stocks”?  The stocks of cigarette and alcohol and other indiscretions.  Again, I know I have.  I am still a shareholder in the parent companies of both Marlboro and Camel.  I’ve owned others in the past.  Depending on how you feel about those companies, a ethical dilemma could come up.  As a generality, those companies have rather solid stock and usually pay dividends.  If you feel that those companies are responsible for cancer and death, can you ethically allow yourself to support them by becoming a share owner of that company?

As debtors, we all despise the credit card companies who charge double digit interest rates and hide fees around every corner.  Banks too.  As someone who can now invest money rather than paying those credit card companies and banks, deciding how we feel about those rates and fees can be another dilemma.  If you’re one of the lucky ones  whose state has allowed access to the peer-to-peer lending companies, you have the ability to invest in loans that carry rates that are very much the same as what a credit card company or bank would charge.  The table has turned.  If you were against it when you were paying the rates and fees, can you ethically charge them?  Morally, should you?

I think that many of us look too closely at the technical aspects of personal finance.  We study amortizations schedules and debt snowballs.  We talk endlessly about our retirement funds and the ways that we are going to build them up.  And, while it is there as an undercurrent, we sometimes fail to see the moral and ethical currents that run in the background.  And sometimes, we allow our technical expertise and know-how overcome our moral and ethical compasses in order to make our debt snowball roll a bit faster.

If you truly want to win at personal finance, you have to find your moral and ethical limits and remain steadfast in their direction.  We all fail to do that occasionally, but, as the old saying goes, you’ve got to get back up and try again.

LifeLock will pay $12,000,000 in a settlement with the FTC and 35 states.  The states and the FTC claim that LifeLock’s Identity theft and data security claims were not true.

In one of the largest FTC-state coordinated settlements on record, LifeLock and its principals will be barred from making deceptive claims and required to take more stringent measures to safeguard the personal information they collect from customers.

“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz.

“This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Illinois Attorney General Lisa Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”

Since 2006, LifeLock’s ads have claimed that it could prevent identity theft for consumers willing to sign up for its $10-a-month service.

There’s a laundry list of other things that they were fined for that includes data security holes and just overall misrepresentation.

It’s been widely reported that most of the stuff that LifeLock does is easily done by yourself without having to pay the $10/month membership fee.  It’s no surprise that they got hit with this, really.

Just what is reactive personal finance?  It’s the management of your personal finance in reaction to events or situations as opposed to the management of personal finance in anticipation of events or situations.

The best example of this is a budget.  A budget is built and held to in anticipation of events in your financial life.  You know that things like your electric bill and water bill are going to be coming and roughly how much they  will be.  That allows you to budget for them and set aside money to pay for them with.  A budget is a great tool in avoiding reactive personal finance.

Why do we need to avoid reactive personal finance?  Because reactive personal finance is disruptive.  You are managing and spending your money in reaction to the events that are happening.  Doing so can cause you to quickly lose control of your finances and find yourself in a downward spiral of poor management choices and, eventually, it can lead to you being broke.

Some examples of events that can cause you to become reactive.  Medical emergencies, blown tires, unexpected social events, and even bills that are larger than they normally are.  Any thing that is unexpected can cause you to spend in a reactive manner.  And when you have events like that, it can often lead to larger problems, like overspending on luxury items to make you feel better.

How do you avoid reactive personal finance?  No plan is foolproof, so it’s not really completely possible.  However, you can make the odds of it happening be cut drastically.  How?  An emergency fund and a bit of willpower.  The emergency fund will give you the available spending power to cover any emergencies that would normally make you spend in a reactive manner.  Instead of trying to react and borrow from somewhere else to pay for the emergency, you can just pay from the emergency fund and not need to react any further.  The willpower comes in where the spending opportunity isn’t an emergency.  You have to have the willpower to avoid last minute and spontaneous spending that could drain your funds and cause you to become reactive when you no longer have the money to pay bills or buy necessities.

The best laid plans often go askew.  But, building an emergency fund and strengthening your resolve can go miles towards avoiding reactive finance and potential disaster.