With wildfires becoming more destructive in recent years, the 2008 tornado season one of the deadliest on record, and the 2008 Atlantic hurricane season forecast to be more active than usual, it’s smart to plan ahead for disaster. See my Yahoo!Finance column for the story.  The Red Cross recommends you rent a safe deposit box ($30 a year) to store originals of records that would be difficult to replace in a disaster. Key documents include:

·         Birth, death, and marriage certificates

·         Divorce and child custody papers

·         Adoption papers

·         Passports

·         Military records

·         Social Security cards

·         Copies of drivers’ licenses

·         Mortgage/property deeds

·         Stock and bond certificates

·         Car titles

·         List of insurance policies (life, health, disability, longterm care, auto, homeowners, renters), including the type, company, policy number, and name of insured

·         Copies of power of attorney, living will, and other medical power

·         Trust documents Don’t keep the original of your will in a safe deposit box because the bank may seal the box temporarily at your death, the Red Cross says. Keep the original of your will at your lawyer’s office and copies of it at home and in your safe deposit box. For more on records to keep in a disaster supply kit, see this link.   

My Yahoo!Finance column that posts August 28 looks at protecting yourself in a disaster. I wanted to add a few details here suggested by ready.gov, a Homeland Security website and the Red Cross:  

1. Plan a home escape route. 

2. Establish a meeting place where family members can gather in the case of emergency – a local school or church. Click here for a printable emergency plan to help you plan. 

3. Agree to a contact who lives out of state to coordinate communications if you can’t reach each other. Carry in your wallet a card with the out-of-state contact’s name, address and phone numbers. Carry a pre-paid phone card with enough cash on it for several calls, in the event cell phones are not working.   

4. Get a copy of the emergency plan for your child’s school to keep in your desk at work. Post emergency numbers – fire, police, ambulance – near the phone.  

5. Create an emergency kit with enough food and water for three days (one gallon of water per person per day). Keep a small disaster supply kit in your car trunk. Click here for a checklist of what to keep in your kit.

My Yahoo!Finance column that posts on August 21 examines at the continued growth in overdraft fees. The easiest way to avoid an overdraft fee is find a bank that offers “account alerts” or “balance alerts.” You specify a minimum balance you want to keep in the account, and the institution alerts you – by phone, email or text message – when your account balance has fallen below that level. (If you get your alert by mobile phone, check with your cell phone service to make sure you aren’t charged a fee for the text.)

How do I personally avoid overdrafts? I write down every transaction in my checking account register. Then I log on every few days to see which transactions have cleared. I look at what’s still scheduled to be paid in online bill pay, and add that to anything unpaid in my register (written checks) and then subtract from the account balance. If I’m too close to the minimum balance required in the account, and I won’t be making a deposit in the next week or two, I transfer in money from my online savings account (a.k.a., the emergency fund).

Follow the links here to learn about account alert services at the nation’s top ten banks. When I did the search for this information, I started in the “free checking” area of each website. Make sure whatever service you sign up for, your deposit agreement or schedule of fees specifically states the account alert service is available for free.

One other tip – if you sign up for bank alerts, beware of phishing. This is when a scam artist sends you an email that looks like a formal notice from your bank — in an attempt to get you to reveal your account information. Never reply to an email requesting account information or passwords.

In 2006, Ellen, a college student in New York who asked to remain anonymous, was hospitalized for stress just a few months shy of graduation. “It was the stress of putting together my master’s thesis, and my financial situation — knowing I was entering repayment for my loans,” she says.

Over six years of undergraduate and graduate education, Ellen had taken out $140,000 in student loans, which her grandmother co-signed against her mother’s wishes. After Ellen earned her master’s degree from an arts program at a prestigious university, she assumed she’d make the median salary cited by the school’s financial aid counselor — $65,000. Instead, she couldn’t find a position in her field paying more than $30,000.

Ellen, 26, has both federal and private loans. She put them on forbearance twice, and has now exhausted all the forbearance offered during the life of the obligation. “The interest is capitalized at the end of each forbearance period, so at the end of two years there was an additional $20,000 to $30,000 on top of the loans I took out,” she says.

Ellen recently started a new job as a media assistant at a New York gallery that pays $35,000 — or just over $1,800 a month after taxes. On Sept. 1, she begins a 15- to 20-year repayment plan. For the first two years, her payment is $527 a month. “Then it increases to 900-something,” she says. “By that time I’m hoping to be able to further myself with the company.” She still takes medication for anxiety and depression.

It’s time to banish the notion that all student loans are “good” debt. These products unquestionably offer the opportunity to boost one’s career — college grads make 60 percent more than those with only a high school diploma. But the changing nature of the private student loan industry — which in recent years doled out dollars with the enthusiasm of subprime mortgage lenders — makes it critical for students to assess the risk, and borrow with a realistic idea of future earnings potential. In fact, these loans are worse than subprime mortgages, because they can haunt the borrower for life.

During the 1990s, average student loan debt doubled. Two-thirds of graduates now leave school in the red, with average borrowing of $21,000, according to the Project on Student Debt. Ten percent of graduates from four-year, private, nonprofit institutions had debt of $40,000 or more.

Private loans, which typically carry higher interest rates than federal loans, have grown at an average annual rate of 27 percent in inflation-adjusted dollars since 2000-2001, according to the College Board. Private loans comprised about one-quarter of the student loans made in 2006-2007 — up from 6 percent a decade earlier.

Risky Business

“Federal loans offer fixed, low-interest rates and a lot of borrower protections in repayment,” says Lauren Asher, associate director of the Project on Student Debt. “Private loans have limited consumer protections and variable interest rates that can go very high. It’s a little like going to a payday lender — you’re paying a huge amount to get cash, and that can follow you through your whole life. They can be even more risky than credit cards, because private student loans can’t be discharged in bankruptcy.”

Some 54 percent of students polled in 2004 said they would have borrowed less if they had to do it again — up from 31 percent in 1991, according to the Project on Student Debt.

While Ellen is an extreme example, consider what happens to the 10 percent of students who leave four-year private institutions with $40,000 in loans. Let’s say the graduate earns the 2006 median income of $46,435 a year — or $3,382 per month after taxes. I asked Mark Kantrowitz, founder of FinAid, a college information website, to create a few scenarios contrasting public and private loans, paid back over different periods of time.

By the Numbers

The borrower who repays his loans over 10 years will face a monthly bill of $460 to $551, or 13.6 to 16.3 percent of his income. (See the tables below.) The borrower who repays over 25 years will pay $278 to $392 a month, or 8.2 to 11.6 percent of his income. The private-loan borrower who pays back his debt over 25 years will pay nearly twice the amount of the loan in interest.

Note: The federal Stafford loan has a 10-year repayment, but the term can increase to 12 to 30 years if the borrower consolidates and chooses extended repayment. Private student loans tend to have 20- to 25-year terms.

“Ten to 15 percent of income is typically considered affordable,” Kantrowitz wrote me in an email. “So $40,000 in debt is within the range of affordability, although one would probably need a 20-year term on a private loan to make it affordable. But do you really want to still be repaying your own education debt when your children are about to enroll in college?”

In his recent book “Spend ’til the End : The Revolutionary Guide to Raising Your Living Standard–Today and When You Retire,” Boston University economist Laurence Kotlikoff demonstrates that over a lifetime of earnings, a plumber actually ends up with a higher standard of living than a doctor, in part because of the debt used to finance the physician’s education.

“The College Board promises you certain median earnings — which should allow you to pay [loans] over time. But half the people will earn less, because that’s the definition of median,” Kotlikoff says, adding that the government will garnish the Social Security benefits of borrowers who don’t repay federal student loans. “This is like debtor’s prison for people. I dearly love higher education, but this is nasty business.”

Congress recently addressed some of these issues with new rules that make repayment more manageable. (See IBRinfo for the details.) And borrowing is expected to decline amid the credit crunch, as private lenders pull back from the student loan market.

Get Smart About Financing

Don’t let the extremes of borrowing daunt your educational plans. At in-state, four-year public institutions, tuition, room, and board averaged $13,589 in the 2007-2008 school year, according to the College Board. And the average full-time student at such an institution receives about $3,600 in grants and tax benefits, reducing the cost further.

A good rule of thumb is to not borrow more than your expected starting salary for all four years of your education, says Kantrowitz. “If you borrow less than your starting salary, you should be able to repay the debt in 10 years,” he wrote me in an email. “If you borrow more, you’ll probably need extended repayment in order to afford the monthly payments. If you borrow more than twice your expected starting salary, you are at very high risk of default.”

And if you’re a parent, start saving early. Someone with a two-year-old who wants to save half the cost for an in-state, four-year public university should put $171 a month in a 529 college savings plan. That’s less than $6 a day. (My calculation uses the $13,589 figure, and assumes an average annual return of 7 percent and college inflation of 5 percent a year. Crunch your own numbers on this savings calculator.)

Go, State!

Moreover, give serious consideration to financial offers from a state school, especially if you plan to attend graduate school. Ellen racked up $30,000 in undergraduate loans attending a private liberal arts school in the Midwest, even though she could’ve gone to a public college for free in her home state, based on her 4.2 grade point average.

“I was adamant that I needed to experience something different and get out of state,” she says. “When I was an undergrad, I was thinking I have plenty of time; that I didn’t have to think about [debt] until I graduated and was out in the world.”

Ellen recently cut her rent in half by moving to Brooklyn with a roommate, but won’t consider a higher-paying position outside her industry. “I couldn’t handle the idea of not even using the degree I had spent so much money for,” she says. “If I could go back, I would have graduated and found a company that would help me pay for a master’s degree. The education I received and the connections to art world through [internship] experiences were fantastic. But I’m going to be paying for it for some time.”

(Adapted from my Yahoo!Finance column)

The Census Bureau tells us that college graduates with a bachelor’s degree make 60 percent more than high school grads. So going to college is a no-brainer. (That’s if you don’t borrow absurd amounts of money to go. Rule of thumb from www.finaid.org: Don’t borrow more than twice your expected starting salary.) But which colleges offer the most salary potential?

Payscale.com recently came out with a report ranking schools in various categories – Ivy League, liberal arts, top party schools – by salary potential. In other words, which graduates in each category went on to earn the highest salaries? I’m proud, um, sort of, to say my alma mater, University of Illinois at Urbana-Champaign, boasted the highest salary potential for a party school. See chart below. (I’m thinking maybe I didn’t have enough fun in my four years.) U of I also ranks among the top state schools for salary potential.

Now remember, when it comes to building wealth, it’s not what you make, it’s what you keep. U of I’s starting salary is about $53,000 and its mid-career salary is $96,000. The Ivies Cornell, Brown and Columbia University have starting salaries of between $56,000 and $60,000, and mid-career salaries of $107,000 to $110,000. The difference in both cases is between a low of $7,000 to a high of $4,000. That’s pretty close.

Now let’s compare costs. For Illinois residents, U of I charges $24,714 for tuition, fees, books, room and board. Cornell’s charges $34,244 for state residents; Brown, $47,476; and Columbia $47,794.

Granted, most students don’t pay sticker price – grants and financial aid reduce the costs. But at mid-career, Columbia students earn $11,000 more a year than U of I grads on average – but they paid nearly double the amount for their education – an additional $92,320. If you have to borrow to pay for Columbia, that figure will be even higher.

Top Party Colleges By Salary Potential

Methodology Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 3 years of experience; mid-career have 15.5 years. See full methodology for more.

There are other studies suggesting that 20 years down the road, students who were qualified to go to an Ivy but chose a state school earn the same as their Ivy peers. So don’t rule out a great state school. I graduated with no debt, and it made a huge difference in my ability to choose a career I loved, and start building wealth early.

My Yahoo!Finance column that posts August 7 looks at the silver lining in the real estate downturn: The possibility of challenging your property tax assessment. Some jurisdictions make the process incredibly easy – even sending you the form to fill out to make your case. Others are complex, have tight deadlines, and don’t tell you exactly what proof is required.

For example, in my home state of New Jersey, the state relies on a “presumption of validity” standard – in other words, the tax assessor is always right unless you can prove him wrong. The homeowner’s evidence has to be “definite, positive and certain in quality and quantity to overcome the presumption” – which in terms of grounds for protest, has to be about as vague as it comes. (For instance, see this 2007 Superior Court ruling for an example of a Jersey man who bought a property for $40,000 in 1991, and the county reassessed its value at $360,000 in 2004. He appealed. And lost. Ouch.)

In that case, you may want to hire an attorney or other tax consultant to protest your assessment. Tap colleagues, friends and family first for recommendations. When you contact the attorney, ask for four to five references and documentation of his case record (you can also obtain this at the county government offices.) The attorney should be a member of the International Association of Assessing Officers, the group of professionals who do tax assessing. Ask how his fees are structured, and whether he would be willing to work on a contingency basis (a percentage of the tax reduction).