MSN Columnist Donna Freedman has a nice piece todayÂ called “Scaring Off the Financial Boogeyman,” which looks at deep-seated beliefs that limit our progress to wealth and happiness. She quotes me talking about how to let go of financial fears that set you back, by setting blue-sky goals and listening to that inner voice that tells you why they’re impossible.
What illusions about money are blocking you from grabbing hold of your financial life? Whether your money issue is related to earning, spending or saving, here are eight steps to changing your worldview:
1. Make a radical proposal to yourself around wealth: I want to earn/have/do ______.
2. Listen to the inner voice of protest: You canâ€™t because ______.
3. Challenge your doubts: That objection is false because ______.
4. Identify the beliefs behind them: I thought that way because I believed ______.
5. Examine the origin of the beliefs: I learned that when ______.
6. Revisit the experiences and emotions that gave birth to the beliefs: That lesson took hold when I experienced ______.
7. Challenge the belief system: The belief is untrue because ______.
8. Shift to a new paradigm: The truth is, I can earn/have/do ______ because ______.
We don’t have to be victims of our worldview. The way we manage money, our attitude toward it, is ultimately a choice. No matter what money mind-set we have developed over time through life experience, we have the power toÂ re-shape it. We can work around our money personalities; we canÂ seek outÂ individuals and communities that support our goals rather than hold us back; we can reject negative beliefs we learned in childhood and choose a healthier set of values.
Have you overcome a negative illusion that blocked you from achieving financial well-being? Comment here or email me at laura at laurarowley dot com.
- Focusing on Savings: Reminders Help
- Not All Goals Are Created Equal
- Failing to Plan Is Planning to Fail
- How to Overcome Financial Chaos
- Don’t Give Money More Power Than It Deserves
My Yahoo!Finance column that appears July 29 examines ways to plug a gap in a resume. In June 2010, nearly 7 million Americans were out of work for more than six months, a five-fold increase since 2007. The story looks at various strategies to explain a gap in employment. But job seekers can also structure their resumes to divert attention away from a gap.
Start with a profile of three or four lines that describes who you are and puts the rest of the page in context, advises Patrick Knisley, who teaches business writing, including resume and cover letter skills, at the Fashion Institute of Technology (FIT) in New York.
“If the first thing I see is your most recent job ended two years ago, Iâ€™m going to focus on that; but if I read something about your hard and soft skills, the gap is not so jarring,” Knisley says.
Knisley says a profile might read: “Interior design graduate with three years experience at architectural firm; skilled at Autocad, sketching and three-dimensional digital models; strategic thinker, problem solver, good communication skills.”
Some workers disguise a gap by crafting a resume thatâ€™s thematic rather than a chronological, but Knisley doesnâ€™t recommend it. “Hiring managers know why itâ€™s been written that way,” he says. “Do a chronological resume and put the dates to the right — and not in bold.” More experienced workers can cover a smaller gap by listing only the years of employment, rather than months and years, he adds.
In addition, workers can count a severance period as part of their workplace tenure, says Paul Bernard, president of Paul Bernard & Associates, an executive coaching firm in New York. “If you were let go on July 1 and have six months of severance, you can tell employers, â€˜Iâ€™m still working now, but I know my job is going to be disappearing in six months, so I am actively looking.â€™ If you are still collecting a paycheck, youâ€™re still employed.”
Have you found a creative way to fill a gap? Comment here or email me at laura at laura rowley dot com.Â
- Should I Pay Off The Mortgage?
- Unique Job Search Tactics That Work
- Midwesterners Happiest, Survey Finds
- What To Do First If You Get Laid Off
- How to Overcome Financial Chaos
My Yahoo!Finance column for July 22 looks atÂ new research that finds consumers who shop for a mortgage pay attention to the wrong issues and make mistakes that result in thousands of dollars in extra costs.Â
One of those costs that can cause a great deal of confusion is something known as “points” or “discount points.” I ran out of room to explain them in the story, so here’s the skinny: Points are an amount borrowers pay to â€œbuy downâ€ the interest rate on the loan. They only make sense if you’re going to stay in a home for a fairly long period of time, typically a decade.Â
Here’s an example: A borrower is offered a $200,000, fixed-rate mortgage at 6 percent for 30 years. The monthly payment is about $1,200 and the total cost (principal plus interest) is $431,676 over the life of the loan. A point is a percentage point. By paying two points (2% of $200,000, or $4,000) at the closing, the borrower can reduce the interest rate to 5.75 percent.Â
Under that scenario, the monthly payment drops to $1,167, so the borrower saves $33 a month. Divide the cost — $4,000 — by $33. The buyers would have to be in the home 121 months, or about 10 years, to break even. (With the lower rate, the total cost of the loan drops to $420,127, saving $11,550 in interest — lessÂ $4,000 paid in points –Â Â if the homeowner stays put for the life of the loan.)
I paid points on my mortgage to lower the rate because we knew we would be in the home for a while (it’s seven years and counting). I wanted a lower fixedÂ monthly payment because as a freelancer, my income can vary from year to year. (I call it “The Starbucks Mortgage.” If the columnist thing disappears and I have to work as a barista, I can still pay the mortgage.)
The otherÂ issueÂ to keep in mind is that if you pay points, that gives your mortgage broker additional compensation, and so you’re entitled to a rock-bottom interest rate. You want to pay “par”Â for the loan with no yield spread premium(something I explain inÂ the column).Â
The key is to ask for options, says Carolyn Warren, a veteranÂ broker/lender who assails dishonest practices in her book “Homebuyers Beware: Who’s Ripping You Off Now?Â
“Ethical honest loan officers always give borrowers a choice,” she says. “You can see which one makes the most sense for you depending on how long going to keep the property. The problem is people donâ€™t ask for any options, and the loan officer doesnâ€™t offer options â€“ instead he says, â€˜itâ€™s a 1 percent origination fee and 5 percent rate on the mortgage.â€™”Â
Also beware of a lender who suggests you pay points along with an array of other charges.Â Â ”I see loans where there is a 1 percent origination fee, one point, and a big yield spread premium besides, and the broker ends up making $10,000 on the loan,” says Warren. “It happens a lot; brokers are paid upfront and on the back end and make more than a physician –Â and with high school diploma. But thereâ€™s no reason that has to happen to anybody if he is savvy and shops in a smart way.”Â
What’s your mortgage experience? Nightmare or gateway to the American dream? Share your stories and tips by commenting here, or email me at laura at laurarowley dot com.Â
- Should you pay off your mortgage early or invest in your 401(k)?
- Student Loans Are Not “Good” Debt
- Making Credit Safe for Consumers
- The Pitfalls of 401(k) Borrowing
- Advice for the Homeowner Looking to Trade-Up
Since we’ve hit the midway point this year, I thought it would be helpful to offer an archive of Yahoo!Finance columns for the first half of 2010, with links to the stories (they can be tricky to find on the site). Here are the stories, fromÂ this week’s columnÂ going backÂ to January (click on the headline to see this post in one column):
July 8: How Much Money Do You Need to Be Satisfied?Â Two new research papers argue that money can buy life satisfaction, but not happy feelings — and that earnings beyond $75,000 a year don’t buy a lot more happiness.
July 1: Surprising Ways to Boost Your Finances: This column reveals new research with some unexpected strategies to help you build savings andÂ attack debt.
June 24: Unique Job Search Tactics That Work: How to stand out in a haystack when all the needles look the same.
June 17: The Happiness of Choosing Wisely:Â Framing life in terms of choice is hard work,Â but canÂ offerÂ rich rewards.
June 10: Five Ways to Minimize Your Credit Card Pain:Â The New CARD Act may not protect you in the ways you expect.
June 3: Making the Most of Irrational Behavior:Â A new book by Duke psychologist Dan Ariely shows how to transform foolish impulses into greater happiness.
May 26: Boost Wealth By Sharing Financial Chores:Â Studies find the way couples split financial tasks makes a difference in both money and happiness.
May 19: Starving for Yield on Savings:Â Rock-bottom interest rates are a stealth tax on savers.
May 12: Fast Track to Financial Success: This storyÂ unveils the secret tools, traits, motivations and behaviors that build wealth.
May 5:Â Â What Goes Around Comes Around for Banks:Â A rash of new reports show Americans continuing to lose faith in their workplaces and institutions.
April 29: Priced Out of the Top Public Schools:Â Middle-class parents who want the best education for their kids face difficult choices.
April 22: Find Extra Money Now in Your Tax Return:Â A stroll through the numbers can boost your financial outlook in the year ahead.
April 15: Six Money Tips for Recent College Graduates:Â Behavioral economics offersÂ unconventional but practical financial advice for people entering the workforce.
April 8: Two Tips for Boosting Your Happiness: A look at two new research studies — one suggests that’s what matters most when it comes to money and happiness is not absolute income, but where we rank compared to peers; a second finds a connection between happiness and meaningful conversation.
April 1 Improving Your Relationship with Money: Financial well-being demands we embrace the ordinary and the simple rather than looking for short-cuts,Â because simple perseverance in following certain personal financeÂ ”standards” can yield extraordinary results, not to mention financial peace of mind.
March 25: How to Make Smarter Choices: A review ofÂ the book “The Art of Choosing” by Columbia University psychologist Sheena Iyengar.
March 18: How to Be Your Own Financial Regulator: Although financial reform is coming,Â Â a little common sense goes a long way in avoiding the major pitfalls of consumer finance. Here are some rules of the road.
March 11: Â Two Job Markets, Worlds Apart:Â In the fourth quarter of 2009, there was no recession for the highest-income households: Â The unemployment rate for people in the top 10 percent of income — those earning more than $150,000 a year — was just 3 percent, while the unemployment rate for the bottom 10 percent of earners — workers who bring home less than $12,500 annually — was 31 percent. This story explains why.
March 4: Â You Can Save the Smart Way: HowÂ to turn anÂ extra $35.86 a month into $24,000 in savings.
February 25: The Myth of the $18,000 Wedding: Consumers’ willingness to pay can be easily manipulated because we often don’t have a good handle on our preferences or a rational baseline for the decisions.
February 18: Would You Do This to Double Your Pay?Â People areÂ often willing to trade time for money, even though a variety of studies have found people who are “time affluent” are happier than those who are materially affluent.
February 11: Loving Your Day Job and Your Life: A review ofÂ Â ”The Artist in the Office: How to Creatively Survive and Thrive Seven Days a Week” by Summer Pierre. The book offers inspiration and practical tips not only to frustrated artists, but alienated workers clinging to jobs they hate, reluctant to move on because of the tough economy.
February 4: Big Brother Wants You to Be Happy: A review of the book “Happiness Around the World: The Paradox of Happy Peasants and Miserable Millionaires” by Carol Graham, senior fellow at the Brookings Institution.
January 28: Finding Free and Low-Cost Tax Help: Exactly what the headline says.
January 21: Could the Credit Card Act Ruin You Financially: Before extending credit, companies must now consider an applicant’s “ability to pay” — or their income and debt load. That means they’ll be verifying what consumers say they earn on credit card applications.It’s a consequence of the law that few advocates have talked about: What will happen to the millions of financially strapped consumers and small business owners who’ve become dependent on credit cards in times of crisis?
January 14: Easy Tips to Avoid Being Ripped Off: A review of the new book “Stop Getting Ripped Off: Why Consumers Get Screwed and How You Can Always Get a Fair Deal” by Bob Sullivan, who writes the Red Tape Chronicles for MSNBC.
January 7: Miserable at Work? Youâ€™re Not Alone: Job satisfaction in America hit a record low in 2009, according to the Conference Board — with only 45 percent of workers reporting contentment with their jobs. Here’s why.
Do you have a column idea for me? Comment here or email me at laura at laurarowley dot com.
- Who’s Buying Your Congressperson’s Vote?
- Check Out This Happiness Blog
- Sense of Financial Control Boosts Happiness, or Vice Versa
- Credit Card Traps
- Credit Card Chaos From Banks You Bailed Out
Back in 2008 — when everyone I knew who worked on Wall Street told me the sky was falling — I wrote a Yahoo!Finance columnÂ about research byÂ Carmen Reinhart of the University of MarylandÂ and Kenneth Rogoff of Harvard University. Their workÂ showed that theÂ downturn was characterized by many of the same factors that caused financial blowouts in the past. The book that emerged from their research, aptly titled “This Time Is Different,” was published last September and has sold 100,000 copies.Â Check out thisÂ Sunday New York TimesÂ story for interestingÂ profilesÂ ofÂ Reinhart and Rogoff.
This week I’m delving into new survey dataÂ from Ed Diener of the University of Illinois and Gallup, which interviewed 136,000 people in 132 countries on money and happiness. It’s an intriguing survey because it measures “happiness” in several ways, using different evaluative scales. Watch for that piece on Thursday, July 8.
Happiness has been on my mind this weekend, because while I spent a lovely weekend watching fireworks over a lake with my husband and kids, my brother spent it in the intensive care unit of a hospital in Chicago following emergency surgery.Â If you’re a reader of spiritual persuasion, I’d appreciate your prayers.
- A Brit’s View of Money and Happiness
- Earnings Over $75K Don’t Buy A Lot More Happiness: Study
- A Brief Encounter with Greenspan
- Another Reason to Choose a State College
- Midwesterners Happiest, Survey Finds
- What To Do First If You Get Laid Off
- Structuring Your Resume to Close a Gap
- When the CEO becomes king of his castle, short the stock
- How to Get a Raise in a Soft Economy
- Seven Ways to Get A Raise in a Soft Economy
A study just released by the British insurer Aviva suggests that happiness is moreÂ influenced by a sense of financial control than by the amount someoneÂ earns. In addition, people with higher self-esteem are more likely to feel inÂ control of their money and take action to promote their financial well-being.
Aviva interviewed more than 2,200 Brits in June and a separate sample of roughly 2,000 last October. Two-thirds of respondents reported high self-esteem. Of that group:
-85 percent felt they were in control of their finances;
-50 percent said they were happy about their financial situation;
-68 percent said they are good at planning their day-to-day finances;
-and 62 percent have set themselves clear financial goals for the long term.
Now contrast that with the 15 percent reporting low self-esteem:
-70 percent of that group don’t feel in control of their finances;
-0 percentÂ reported being happy about their money;
-76 percentÂ fail to plan for the long term;
-69 percentÂ worry about managing their finances on a daily basis;
-and 42 percentÂ say they fail to stick to a budget.
Aviva says the relationship between self-esteem, happiness and a sense of financial control is largely divorced from how much money people actually make.Â The survey foundÂ more people earning over Â£50,000 have below-average self esteem (22 percent) than high self esteem (12 percent). Moverover, good health was seen as twice as important (85 percent) as earning more money (42 percent).
Princeton researcher Talya Miron-Shatz has found aÂ similar patternÂ among women who feel financially secure.Â In herÂ study,Â women with incomes in the 75th percentile and above reported more life satisfaction than those in the bottom 25th percentile. ButÂ Â women who reported feeling secure (no matter what their income level)Â enjoyed theÂ boost in happiness as those with high incomes.
Although Aviva suggests that “Financial Planning + Control = Improved Self-Esteem and Happiness” (it is an insurance companyÂ with products to sell, after all) it seems to me there’s a chicken-and-egg problem here: Does financial control improve happiness or do Â happy people tend to plan out their finances in more detail, thus giving them a better handle on them?
I tend to think it’s the latter — when you’re happy and optimistic, and have high self-esteem born ofÂ genuine accomplishments, you feel good about the future, and you make plans. Big plans — buying a home, world travel, education — usually have a financialÂ component. (Although I do find that people who have worked their way out of debt or found the discipline and tools to live within their means get a happiness boost fromÂ achieving financial peace of mind.)
This is similar to a recent study I covered in my Yahoo!Finance column thatÂ found happy people have more meaningful conversations. Are they happier because they have meaningful conversations, or do theyÂ seek out substantiveÂ discussions because they’re happy?Â
Did youÂ gain a sense of financial control at some point in your life and found it boosted your happiness? Or do you thinkÂ happy people are better financial planners?
- More Factors that Affect Wealth-Building
- Survey: Who’s Happy? High-Earners, Older People, Republicans
- What Research Shows About Money & Happiness
- Perceptions of Security Matter As Much As Money
- Earnings Over $75K Don’t Buy A Lot More Happiness: Study
On Tuesday, the Federal Reserve issued new rules limiting credit cardÂ late fees to $25 in most cases, beginning August 22 of this year, as well as other new consumer protections. The rules were issued as part of the the Credit Card Accountability, Responsibility, and Disclosure Act (the CARD Act) which became law more than a year ago.
The only exception is if oneÂ of your last six payments was late, in which case your fee may be up to $35; or your credit card company can show that the costs it incurs as a result of late payments justify a higher fee. Other new protections include:
-Late Fees: YourÂ card company cannot charge a late payment fee that’s greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can’t be more than $20.
-Over-the-limit Fees: These cannot exceed the amount you were over the limit; so if you surpassed your limitÂ by $5, you can’t be charged an over-the-limit fee of more than $5.
-Inactivity Fees: Your credit card company can’t charge you inactivity fees, such as fees for not using your card.
-One-Fee Limit: Your credit card company can’t charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.
-APR Hikes: Your credit card company must explain any increase inÂ the annual percentage interest rate charged, and it must Â re-evaluate that rate hikeÂ increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.
Separately, lawmakers on Capitol Hill agreed to permanently increase deposit insurance for bank customers to $250,000 from $100,000, as part of their negotiations to reconcile difference between the House and Senate versions of the financial reform bill. (As you probably know, if your FDIC-insured bank fails, your deposits are protected up to that limit.) In 2008, the FDIC boosted theÂ insurance levelsÂ to reassure consumers during the banking crisis. The measure had been set toÂ expire at the end of 2013.
Finally, a survey of state energy regulators finds most expect electricity costs to rise; for that story,Â and tips to cut your electricity costs, see my blog atÂ RealSimple.com.
- CARD Act Will Save Consumers Billions: Study
- Credit Cardholdersâ€™ Bill of Rights Act
- Reader Qs on Credit and Debt
- Reader Question on Credit Cards
- Calculating APR on an Overdraft Fee
MSNBC did anÂ interesting pieceÂ on new research that examined where people shop for groceries and their obesity levels. The study followed 2,000 Seattle-area shoppers between December 2008 and March 2009. Conclusion: The thinnest people spend the most money on food. Just 4 percent of Whole Foods shoppers were obese, compared with 38 percent of shoppers at Albertsons.
At Whole Foods,Â an average market basket of food cost between $370 and $420; the same basket of foodÂ at Albertson’s costÂ between $225 and $280.
Lead researcher Adam Drewnowski, a University of Washington epidemiology professor who studies obesity and social class, says it’s all about money: PeopleÂ who have the abilityÂ to pay $6 for a pound of radicchio are more able to afford health dietsÂ than consumers who buyÂ $1.88 packs of pizza rolls to feed their kids.
“If people wanted a diet to be cheap, they went to one supermarket,” Drewnowski told MSNBC. “If they wanted their diet to be healthy, they went to another supermarket and spent more.” Just 15 percent of shoppers chose a gocery store based on its proximity to their home — the rest focused on either price or quality.Â â€œDeep down, obesity is really an economic issue,â€ Drewnowski said.
I’m somewhat skeptical — maybe because I never shop at Whole Wallet, and no one in my family is obese. I think obesity is a function of lack of education about which foods are healthy and which are crap; lack of time to read up on nutrition,Â plan and prepare healthy homemade meals, and get some exercise; and lack of discipline, because let’s face it, it’s a lot easier to order a pizzaÂ and watch TV at the end of the workÂ day than toÂ grill vegetablesÂ and go for an invigorating walk.
For me, the money issue is more closely link toÂ the time issue.Â Consider two-parent householdsÂ that have the wherewithal for one person toÂ stay home or work part-time; that personÂ canÂ focus on creating a healthy environment –Â growing vegetables, shopping, cooking, and supervising kids so they spend more time running around outsideÂ than surfing YouTube.
But creating healthy menus for a family on a budget? Not that hard. For breakfast, we serve oatmeal, eggs, whole grain breads, and fruit;Â for school lunches,Â I buyÂ bagged salad on sale for $2, rinse,Â and toss into aÂ Tupperware container withÂ some raisins, sliced almonds and grilled chicken from last night’s dinner; add a piece of fruit in season and a granola bar, and voila –Â mealsÂ for three kids forÂ less thanÂ $2 a person. (Yes I know it’s cheaper to buy the head of lettuce, but it’s too crazy in the mornings to be shredding the stuff.)
Tonight for dinner we’re grilling beef shiskabob with red, yellow and green peppers, onions, mushrooms, cherry tomatoes and yellow squash over rice.Â Dinner for a family of five for $16, or $3.20 a head — nutritious, delicious and cheaper than fast food.
We base menus on what’s in season and what’s on sale, useÂ the store’s loyalty card, occasionally clip coupons andÂ make the most ofÂ leftovers.Â IÂ get produce at the farmer’s market between June and October. (You can findÂ oneÂ near you on the U.S. Department of Agriculture’s Web site.) And I shop at a warehouse club forÂ the basics like skim milk, orange juice, whole wheat bread and bananas.Â
Are you able to maintain a healthy diet on a budget? What’s your best tip?
- My First Grocery Freebie
- An Immediate 10% Return on Your Rebate Check
- The Risks and Rewards of Living on One Income
- Why Budget Shoppers May Be More Likely to Overspend
- Save Green While You Shop Green
Are you motivated to banish your debt, and interesting in blogging about it? WomansDay.com is looking for a new female blogger to write a paid blog on a daily basis for The Daily WD. I will be working with this individual, providing tips and advice toÂ help herÂ get out of the red and on the road to financial peace and prosperity.
The qualifications are fairly simple: The blogger should be someone in debt who isÂ working to get herself out of debt. SheÂ must be willing toÂ write about her journey to becoming financially stable again. The ideal age range of this blogger is 35 to 60.
If you’re interested, please submitÂ three sample blog posts (150-300 words) as well as your name, age and a little information about yourself to firstname.lastname@example.org.
Here’s the best part: The position is paid — $50 per blog post — so you have a guaranteed way to beat your debt!Â To check out the WomansDay.com blogs, click here.