Putting Your Money Where Your Mouth Is

Money buys power and influence, and the rich have a disproportionate share of all three. With the well-documented growth of inequality in recent years, there has been a growing fear that the middle class and the poor are losing the ability to influence our public life. For all but the wealthiest, it has become increasingly difficult to find the moments when our wallets can make a difference.

Luckily, some companies are making it easier. In recent years, there have been several company executives who have made the decision to enter the political fray. Despite a number of regulations to hide behind, some corporate leaders have taken the calculated risk that publicizing their views will be beneficial to their business. Others have had their views made public by financial disclosures of their personal contributions.

These disclosures give patrons a chance to vote with their wallets — to make a decision about whether to spend hard earned dollars on items that may represent more than the product itself. For the organizations, it means making a judgment call about whether to embrace the politics, or flee from them.

Chick-fil-A President Dan Cathy waded into this storm several years ago, when among other things he gave an interview and in reference to gay marriage said, I think we are inviting Gods judgment on our nation when we shake our fist at Him and say, We know better than you as to what constitutes a marriage. Seizing on the opportunity, Fox News contributor Mike Huckabee called for a Chick-fil-A Appreciation Day, and encouraged the public to vote with their pocketbook. Suddenly eating a sandwich meant taking a political stand. Despite a public outcry, Chick-fil-A Appreciation Day, seemed to be a success. For every group protesting the chains there was another standing in line to get in. And despite efforts to tamp down the controversy, the chain remains identified by the gay marriage debate it ignited.

Such protests have not always been as successful or well publicized. OkCupids refusal to operate on Firefox in response to donations the Firefox CEO made to an anti-same-sex marriage campaign had less than a week of attention as Firefox quickly moved to remove the executive. Some conservatives joined Rush Limbaugh in a boycott over Heinz products in the wake of the 2004 presidential election (then-candidate John Kerry is married to Teresa Heinz Kerry), but it appears that it had little lasting impact.

Earlier this month, George Will sparked outrage when he suggested that sexual assault victims have a coveted status that confers privileges and questioned the legitimacy of campus assault claims and the belated steps that colleges and universities are now taking to address this epidemic in his syndicated column. Members of a broad coalition that is working to address and remove the stigma of sexual assault responded with criticism, dueling op-eds, and fodder for the 24 hour cable news programs. While some editorial pages responded by encouraging further debate, the St. Louis Post-Dispatch made a different choice. In a surprising move, the editorial page editor announced that Wills column would no longer appear in its pages after hearing from readers on both sides of the spectrum. Though he cited previous deliberations about the removal, the Editor said Wills column had been the catalyst and apologized to readers who were offended by it. Wills views had exceeded the Post-Dispatchs appetite for diverse views: minimizing the seriousness of sexual assault was not the type of diversity it was seeking.

Companies should take note of the errors of the past in deciding how an individuals personal political opinions should — or could — reflect on their business. Everyone is entitled to their opinion, and to donate money to whatever causes they believe in. But public people do not have the luxury of personal decisions.

Its true, most of us will never have the resources to be major financial players in political campaigns. Our advocacy lies in our voice, and in our wallets.


Simply Money: What to do with that old 401(k)?

One of the largest financial assets you own is probably your 401(k) or similar retirement plan through your employer. Because of its value, it is the target of a huge sales push by banks, and insurance and investment companies. If Willie Sutton (the early 20th century bank robber) were a financial adviser today, he would be concentrating his activities here. ” because that’s where the money is.”

In fact, when it comes to “orphan” 401(k)s – the accounts you leave behind when you switch jobs – we’ve heard some salespeople make the statement, “If you’ve left your employer your 401(k) should also.” And while this is definitely beneficial for the salesperson because they’ll make money on the transaction, it’s not necessarily beneficial for you. Actually, we believe this type of blanket “advice” to be financial malpractice.

So what’s the best strategy for your money? After more than 20 years of helping Simply Money clients with this exact decision, we can tell you there is no one, absolute answer. But here are your options:

o Leave your money in your old 401(k) plan. As long as your balance is over $5,000 most 401(k)s let you keep it in the plan. This may be the best option for you, at least temporarily. Most large 401(k) plans have had many of their old expenses minimized after the recent legislation mandating disclosure of all costs to plan participants.

The old sales pitch that 401(k) plans were laden with high expenses is no longer true in most cases. So if the menu of investment choices is a good one and you have the experience and time to manage this account yourself, this may be a good choice for you. Remember, you can always move it in the future.

o Transfer your old 401(k) to a self-directed IRA. This is the only option you will hear from some advisers because it’s also the only option that allows your adviser to be paid for working with you. This move will allow you or your adviser to select the investment options for your account. However, in some cases this is the best choice of all since a self-directed IRA allows you to take full control. Just be sure that all expenses of the new plan are fully disclosed to you in writing.

o Transfer your old 401(k) to your new employer’s plan. You would only want to do this if the new plan has better choices and lower costs. The only other reason for this type of transfer is to preserve your right to borrow from the plan in case of an emergency. Leaving the funds in the old plan or transferring to an IRA will eliminate this borrowing option, though this may actually be a good thing as it will remove the temptation to prematurely tap these retirement funds.

o Cash it out. Unfortunately, more than 40 percent of investors will take the worst option: cashing it out. This brings both current taxation and potential penalties in addition to all the lost long-term growth prior to retirement. Forget this one.

During your working career you will change jobs about 11 times, so you’ll be faced with this decision on multiple occasions.

Remember, you don’t have to be in a hurry to make a good decision. Exercise great caution if an “adviser” makes the blanket statement that “if you have left your employer, your 401(k) should also.” If you hear this, our recommendation is to find another adviser who will actually have your best interest at heart (not his or her own), and actually take the time to figure out the best strategy for your money and your specific situation. ?


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IT’S YOUR MONEY: Avoid the pitfalls of real estate investment

With low interest rates and the fear of another drop in the stock market, many people are looking for alternative ways to earn investment income. Many investors find the tangible nature of real estate appealing. Although real estate may seem like the logical alternative to stocks and bonds, investment in real estate can be very complex, time consuming and wrought with risk.


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Knowledge gaps expose more Americans to money problems

Toni Vallee asks her class about the secret to financial success. Good jobs and education are important, her students answer. So, too, are talent, luck and perhaps even physical beauty, they say.

Those arent the responses shes looking for.

What makes people financially successful, Vallee said, are discipline and the ability to delay gratification.

Its an insightful moment for the mostly moderate-income women in her session on basic budgeting. But it also could be considered an instructive lesson for a spend-happy society as a whole.

Five years into an economic recovery, many Americans arent feeling good about their progress, with the gap apparently widening between rich and poor. Jobs explain part of the discrepancy — people with college degrees have a much lower unemployment rate, for example — but so might differences in financial literacy or understanding.

Money doesnt come with instructions, and theres no doubt that the world has become more complex financially. But there is also plenty of evidence that Americans havent learned the basics. Some people rack up big credit-card balances or spend too much on assets that depreciate, namely cars and trucks.

Others pay too much in banking fees, leave themselves vulnerable to fraud, fail to participate in retirement accounts and invest too cautiously, parking money in low-yielding deposit accounts while avoiding the stock market entirely.

Consequences of low financial literacy include paying too much in fees or interest, leaving matching funds on the table in retirement plans, not using available tax breaks, retiring with inadequate assets and failing to meet basic goals such as homeownership.

Arizonans appear even more vulnerable, reflecting below-average personal incomes in the state and other factors.

If theres one worrisome symptom, its the widespread inability of many individuals to build up an emergency or rainy-day fund. Sometimes, thats the result of a failure to delay instant gratification. Financial advisers once recommended socking away enough cash to meet three months worth of expenses in a pinch. But many now suggest six months or even a years worth because of the longer time it now takes to find employment.

A meaningful savings account means you have the resources to absorb the shocks of life, said Vallee, a retired IBM sales manager and Fountain Hills resident who now teaches financial-literacy classes as a volunteer for the YWCA. It makes the hard times easier to get through.

No wonder the tough economy of the past half-dozen years has been so challenging. The Financial Regulatory Industry Authority, or FINRA, asked 1,000 Americans if they could scrape together $2,000 within a month to meet an emergency. Roughly two in five respondents, 39 percent, said they probably or definitely could not.

Conversely, a study last year of millionaires by Capgemini and RBC Wealth Management found that wealthy households had fully recovered from the recession a couple of years ago, partly because they kept meaningful holdings in stocks and real estate. When those markets bounced back, so did their net worth. A poor understanding of riskier assets like the stock market, now hovering at record highs, is one factor that holds back many Americans.

Financial insecurity

Nearly 46 percent of Arizonas households are in a persistent state of financial insecurity, said the Corporation for Enterprise Development, a group that works to alleviate poverty, in a study released in January. The states rank of 41st was brought down by a high proportion of unbanked residents, those with subprime credit scores, a high proportion of student-loan defaults and other issues.

While Arizonas poverty rate is fifth worst in the nation, poor people arent the only ones at risk, according to the non-profit. One in four Arizona households earning middle-class incomes between roughly $54,000 and $91,000 also lack three months of savings in the bank, the group reported.

So, enter the importance of something as basic of budgeting — tracking expenses and income every month. Its an exercise that Americans routinely ignore.

Guadalupe resident Petra Estrada, a student in Vallees YWCA class, is getting the message.

I have a booklet at home where I write down all my bills, she said. It lets me know almost exactly how much I can spend or how much over I will be.

Estrada also wants to learn more about credit-card terms and usage, and one day she would like to be a homeowner.

Financial frustration

Americans express frustration about their lack of money acumen. In a poll conducted by the National Foundation for Credit Counseling, four in 10 respondents graded themselves a C, D or F for financial literacy.

Young adults are less confident and seniors the most confident, according to a separate poll by Bank of America.

Partly, frustration reflects the fact that the world has become more complex financially. Decades ago, savers plunked their money into plain-vanilla passbook savings accounts, and they bought homes with one type of loan — a 30-year fixed-rate mortgage. Many workers had pensions that took care of their retirement-planning needs. Nobody felt the need to manage debit cards, online accounts, 401(k) plans or credit scores; they didnt exist. Few people worried about identity theft. Insurance and income taxes were simpler.

The world has changed, but money-oriented education hasnt kept pace. In the Bank of America survey, 71 percent of respondents agreed that the Internet has made it easier to learn about personal-finance topics and to do the basic research. But the demands and responsibilities also have increased, with 42 percent of people in the poll admitting to feeling overwhelmed by the amount of financial information available.

Its not rocket science, but its hard, said Vallee, referring to budgeting, saving, dealing with debt and other topics taught in the YWCAs four-week course. The earlier you get started, the better off youll be.

Starting early

Most Americans dont receive formal personal-finance instruction at an early age, if at all, even though its a topic they will apply in varying degrees throughout their lives.

Budgeting would help me, but they dont talk about this at my high school, said LJ Abad of Gilbert, a 17-year-old student and the only male who showed up for Vallees small class one day recently. Its usually the opposite, getting you to think about consumerism.

There has been some progress, with Arizona now requiring some personal-finance instruction in the schools and federal regulators tightening credit-card availability for college students a few years ago. Groups such as Junior Achievement of Arizona also are active, helping to illustrate basic financial interactions and decisions for middle- and high-school students.

They come here to apply the lessons theyve been learning in class, said Abby Slaughter, a coordinator at Junior Achievements Tempe facility, where students engage in role-playing in classroom modules set up as banks, grocery stores, auto dealerships and other commercial establishments.

We teach about interest, taxes and other concepts, Slaughter said. A lot of light bulbs go on.

Ray Himmelberg, a senior regional human-resources director for Walmart in Phoenix, volunteers at Junior Achievement, helping guide students through the exercises and checking their assignments. He considers it an important way to help youngsters gain a better appreciation for the free-enterprise system and how to survive it.

Kids will say, Now I see why my dad works two jobs, Himmelberg said. You see those moments.

What to know, when

Certain financial topics are more relevant at specific ages. Some examples:

Teens: Kids should start learning about banking, saving, taxes and the economy by the time they become adolescents, if not younger.

Focus also should be on privacy, identity theft and sharing too much information on Facebook and other social-media sites. where youngsters likely are active. Teens might not have loans but might have credit reports in their names. These can be checked for free at annualcreditreport.com.

Young adults: Americans generally start to accumulate assets, and sizable debts, in their 20s and early 30s. These people need to learn how to use credit cards and stay on top of student-loan payments.

People entering the workforce should become familiar with benefits and retirement accounts such as 401(k) plans, for which an early investment start is high advisable. Some young adults become homeowners, with all that entails.

Adults in the middle: People in their late 30s and 40s can expand on their financial assets, perhaps becoming more venturesome as investors or branching into related areas such as rental real estate. With more assets to protect, and perhaps family dependents, insurance becomes more important.

Middle-age adults might need to juggle priorities, such as saving for a childs college education and maybe even having a parent move in.

Pre-retirees: People in their 50s and early 60s typically are at their peak earning years, but financial obligations also could be growing, such as college costs for kids. Retirement comes into focus, so its wise to learn about Social Security and consider strategies such as delaying payments to receive higher benefits.

Workforce 401(k) plans and Individual Retirement Accounts remain priorities, with people 50 and older allowed to contribute more money to such programs. This also is a prime age to investigate long-term care insurance.

Seniors: People in their mid-60s and up must demonstrate an ability to live within their means. Credit might be an option, but loans could be harder to obtain without job income. If budgets are tight, products like reverse mortgages could be an answer.

Although wills, powers of attorney and trusts can be wise at any age, estate planning becomes essential for older people. Seniors might be more financially knowledgeable than younger adults, but they too must beware stumbles such as falling victim to scams.

— Russ Wiles

Money basics: How much do you know?

Try your hand at the following 10 financial-literacy questions. The first five are from a quiz developed by the Financial Industry Regulatory Authority. The second five are from a test prepared by the JumpStart Coalition.

1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have?

A) More than $102.

B) Exactly $102.

C) Less than $102.

2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After a year, would the money in the account buy more than today, the same or less?

A) More.

B) Same.

C) Less.

3. When interest rates rise, what typically happens to bond prices?

A) They rise.

B) They fall.

C) They stay the same.

4. A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.

True or false?

5. Buying a single companys stock usually provides a safer return than a stock mutual fund.

True or false?

6. Take-home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out?

A) Social Security and Medicare contributions.

B) Income tax, property tax, and Medicare and Social Security contributions.

C) Income tax, Social Security and Medicare contributions.

D) Income tax, sales tax and Social Security contributions.

7. A couple receive money as baby gifts and want to put it away for their childs college education. Which of the following tends to have the highest growth over periods of 18 years or longer?

A) Checking accounts.

B) Stocks.

C) Government savings bonds.

D) Bank savings accounts.

8. If you are behind on your debt payments and go to a responsible credit-counseling service, what help can they give you?

A) They can cancel and cut up all your credit cards without your permission.

B) They can get the federal government to apply your income taxes to pay off your debts.

C) They can work with those who loaned you money to set up a payment schedule you can meet.

D) They can force those who loaned you money to forgive all your debts.

9. If your credit card is stolen and the thief runs up a debt of $1,000 but you notify the card issuer after you discover it missing, what is the maximum amount you can be forced to pay under federal law?

A) $500.

B) $1,000.

C) Nothing.

D) $50.

10. If you cause an accident, which type of automobile insurance would cover damage to your own car?

A) Comprehensive.

B) Liability.

C) Term.

D) Collision.

1. A. Compounding, or earning interest on interest, would result in more than $102. 2. C. This question illustrates the potential purchasing-power loss on low-yielding savings accounts. 3. B. Bond prices move in the opposite direction of interest rates. 4. True. Shorter loans typically require bigger monthly payments but result in lower interest expense. 5. False. A single stock wouldnt be diversified, thus more risky. 6. C. Sales and property taxes arent deducted from paychecks. 7. B. A portfolio of stocks would be expected to outpace the other conservative investments over many years. 8. C. Responsible credit counselors try to work with lenders to come up with payment solutions. 9. D. The legal maximum is $50, though some credit-card companies will absorb all fraud losses. 10. D. Comprehensive insurance generally pays for damage not resulting directly from an accident.

Watch the video

See how a financial company mixed in basketball to teach Valley students about money basics during a presentation at US Airways Arena in downtown Phoenix. Go to business.azcentral.com.

Could you use a money makeover?

The Financial Planning Association of Greater Phoenix and The Arizona Republic are joining forces to provide free money makeovers to selected residents of Arizona.

If you are willing to have your financial information published in an article in The Republic and on azcentral.com, you could be eligible for a no-cost analysis of your situation, with recommendations provided by a certified financial planner. For further information, check out our survey at:

www.fpaofphoenix.org/ Free-Money-Makeover.


Sipp investors hit by hefty tax bills on business loans

Sipp investors hit by hefty tax bills on business loans

HM Revenue Customs has been hitting self-invested personal pension investors with a 55 per cent tax charge when they invest in companies from their pension pots, Kevin Caley has said.

By Emma Ann Hughes

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Published Jun 27, 2014
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Lincoln Theatre board looks for help

DECATUR – The power is out at Decaturs historic Lincoln Square Theatre. Insurance has lapsed. The stage that famously played host to the likes of Bob Hope and magician Harry Blackstone is gathering dust, undisturbed by all but the resident ghosts.

The building at 141 N. Main St. is up for sale on the website of Brinkoetter and Associates, currently listed at $300,000. And yet, the nonprofit organizations board of directors says theyd still prefer to reopen the historic theater.

The question is, how?

“I will be the first to admit that while our current board is a group of dedicated and passionate Lincoln Theatre fans who have the best of intentions, we lack expertise in some vital areas as it relates to turning the ship around,” said board President Anne Thompson, a veteran of community theater in Decatur. “This challenge involves overcoming our somewhat downtrodden image so we can re-engage the leaders within our community who can lend their expertise.”

To do this, Thompson and the Lincoln Square Theatre are attempting to form what they refer to as a “transition team” of community members that would inform and oversee everything from fundraising to event booking. In the wake of former Executive Director Debbie Fords passing in March, however, the organization was thrown into even more uncertainty than before. Thompson is determined in her own task, but admits the organization is ill-equipped in many areas.

On a most basic level, the theater is dealing with debt. No shows, and thus no revenue stream can exist while the building’s power has been turned off, and it can’t be turned back on until existing utility bills are paid. According to Thompson, these total around $12,000 owed to Ameren Illinois. That company’s representative said delinquent accounts such as the theater’s could lead to further action to collect.

“Disconnection of service is always a last resort,” said Amerens Marcelyn Love. “Once service is turned off, it can be referred to a collection agency if there’s no sign that payment is forthcoming.”

This, therefore, would be a transition team’s first task. Fundraising measures would have to be implemented to raise the $12,000 and get the lights on, but at the same time, shows would need to be booked in advance to provide a regular source of revenue, lest the same monthly bills immediately drag the theater down. Clearly, a background in venue management would be required by at least one transition team member.

“More than anything, we need to get a new executive director who has booking experience and expertise in running a venue,” Thompson said. “We need a viable business owner, a good fundraiser, and someone who knows about building structures and getting it back up to par. We need people with law and accounting experience. What we want to see is forward movement, getting the doors open and having shows to stay in front of operational expenses.”

That’s certainly easier said than done, however. The last show held at the building was in November 2013, and the eight-person board hasn’t officially nailed down any transition team members so far. Even events that would normally have been housed at the theater can no longer operate there, such as Troy Taylor’s annual Haunted America Conference, currently in its 18th year. The conference had been hosted at the Lincoln for most of the last decade and was booked there again for this year. Only nobody informed Taylor the power was out, according to the author.

“I would really have liked to hear it officially from someone at the theater, but I had to hear it second-hand,” said Taylor, who transferred the event to the Decatur Conference Center and Hotel. “I’d already spent a few thousand dollars on advertising for an incorrect location. I would have been happy to work around it, but I had no idea. They’ve been nice enough to still let us do the nighttime ghost hunt, but that’s really the least they could do.”

As a local author who has published numerous books chronicling every aspect of the Lincoln’s haunted history, Taylor said he would be particularly disappointed to see the theater remain closed. Indeed, in many ways the theater has been like a home base to his operations in Decatur over the years. Ultimately, he agrees with Thompson in one respect: Changes would undoubtedly be needed to save the historic building.

“It has a ton of great history, and I’ve always tried to bring attention to it,” he said. “I’d love to see it up and running again, but I don’t think it’s ever going to work the way it is, which is too bad.”

Lori Sturgill, the producer of the Decatur Celebration, is another local leader who would prefer to see the theater operational. Last August, the Celebration orchestrated the theater’s last large-scale show, as Here Come the Mummies kicked off the annual festival. The act would have returned to the venue again this year, but that became an impossibility.

“I understand what they’re going through, because it wasn’t long ago that we were really close to that ourselves,” Sturgill said. “I think just like anybody that comes to that situation, you go through the thought process of ,’Am I really doing the right thing? Is it still right for this to exist?’

“Celebration went through that, and the Lincoln Theatre is going though it now. I hope there’s a plan out there that could make it vital again.”

As Thompson admits though, doing so would take far more than “bake sale money.”

The fact that the building is officially for sale also seems to undermine any attempts to get it operational again, as the two goals would appear to be at odds. The board, however, doesn’t view the sale of the theater as a “goal,” only a possibility. The organization remains in stasis, looking for help both in its finances and leadership, unable to act without an outside infusion of expertise. In their hearts, the board members simply want to ensure the building will remain safe and erect.

“We can’t just stop, wait and hope someone buys it; we at least need to try,” Thompson said. “And we don’t want to sell it to anyone unless they want to keep it as a theater. It’s a good venue. If we can get things put together, it could be a tremendous venue.”

The question remains, though: Who would step up to do this job, and how would they do it? Although expenses have been curtailed with the power turned off, the current board is not working with an unlimited timeframe to find answers.

Today, the Lincoln Square Theatre sits dark, only two years shy of its centennial birthday. Over the years, it played host to many great musicians, vaudevillians, films and people of note.

In the local history of Decatur, it has left an indelible mark as a venue and landmark. Its future will be decided in the coming months.


Knowledge gaps expose more people to money problems

PHOENIX — Toni Vallee asks her class about the secret to financial success. Good jobs and education are important, her students answer. So, too, are talent, luck and perhaps even physical beauty, they say.

Those arent the responses shes looking for.

What makes people financially successful, Vallee said, are discipline and the ability to delay gratification.

Its an insightful moment for the mostly moderate-income women in her session on basic budgeting. But it also could be considered an instructive lesson for a spend-happy society as a whole.

Five years into an economic recovery, many Americans arent feeling good about their progress, with the gap apparently widening between rich and poor. Jobs explain part of the discrepancy — people with college degrees have a much lower unemployment rate, for example — but so might differences in financial literacy or understanding.

Money doesnt come with instructions, and theres no doubt that the world has become more complex financially. But there is also plenty of evidence that Americans havent learned the basics. Some people rack up big credit-card balances or spend too much on assets that depreciate, namely cars and trucks.

Others pay too much in banking fees, leave themselves vulnerable to fraud, fail to participate in retirement accounts and invest too cautiously, parking money in low-yielding deposit accounts while avoiding the stock market entirely.

Consequences of low financial literacy include paying too much in fees or interest, leaving matching funds on the table in retirement plans, not using available tax breaks, retiring with inadequate assets and failing to meet basic goals such as homeownership.

If theres one worrisome symptom, its the widespread inability of many individuals to build up an emergency or rainy-day fund. Sometimes, thats the result of a failure to delay instant gratification. Financial advisers once recommended socking away enough cash to meet three months worth of expenses in a pinch. But many now suggest six months or even a years worth because of the longer time it now takes to find employment.

A meaningful savings account means you have the resources to absorb the shocks of life, said Vallee, a retired IBM sales manager who now teaches financial-literacy classes as a volunteer for the YWCA. It makes the hard times easier to get through.

No wonder the tough economy of the past half-dozen years has been so challenging. The Financial Regulatory Industry Authority, or FINRA, asked 1,000 Americans if they could scrape together $2,000 within a month to meet an emergency. Roughly two in five respondents, 39 percent, said they probably or definitely could not.

Conversely, a study last year of millionaires by Capgemini and RBC Wealth Management found that wealthy households had fully recovered from the recession a couple of years ago, partly because they kept meaningful holdings in stocks and real estate. When those markets bounced back, so did their net worth. A poor understanding of riskier assets like the stock market, now hovering at record highs, is one factor that holds back many Americans.

Nearly 46 percent of Arizonas households are in a persistent state of financial insecurity, said the Corporation for Enterprise Development, a group that works to alleviate poverty, in a study released in January. The states rank of 41st was brought down by a high proportion of unbanked residents, those with subprime credit scores, a high proportion of student-loan defaults and other issues..

While Arizonas poverty rate is fifth worst in the nation, poor people arent the only ones at risk, according to the non-profit. One in four Arizona households earning middle-class incomes between roughly $54,000 and $91,000 also lack three months of savings in the bank, the group reported.

So, enter the importance of something as basic of budgeting — tracking expenses and income every month. Its an exercise that Americans routinely ignore.

Guadalupe resident Petra Estrada, a student in Vallees YWCA class, is getting the message.

I have a booklet at home where I write down all my bills, she said. It lets me know almost exactly how much I can spend or how much over I will be.

Estrada also wants to learn more about credit-card terms and usage, and one day she would like to be a homeowner.

Americans express frustration about their lack of money acumen. In a poll conducted by the National Foundation for Credit Counseling, four in 10 respondents graded themselves a C, D or F for financial literacy.

Young adults are less confident and seniors the most confident, according to a separate poll by Bank of America.

Partly, frustration reflects the fact that the world has become more complex financially. Decades ago, savers plunked their money into plain-vanilla passbook savings accounts, and they bought homes with one type of loan — a 30-year fixed-rate mortgage. Many workers had pensions that took care of their retirement-planning needs. Nobody felt the need to manage debit cards, online accounts, 401(k) plans or credit scores; they didnt exist. Few people worried about identity theft. Insurance and income taxes were simpler.

The world has changed, but money-oriented education hasnt kept pace. In the Bank of America survey, 71 percent of respondents agreed that the Internet has made it easier to learn about personal-finance topics and to do the basic research. But the demands and responsibilities also have increased, with 42 percent of people in the poll admitting to feeling overwhelmed by the amount of financial information available.

Its not rocket science, but its hard, said Vallee, referring to budgeting, saving, dealing with debt and other topics taught in the YWCAs four-week course. The earlier you get started, the better off youll be.

Most Americans dont receive formal personal-finance instruction at an early age, if at all, even though its a topic they will apply in varying degrees throughout their lives.

Budgeting would help me, but they dont talk about this at my high school, said LJ Abad of Gilbert, a 17-year-old student and the only male who showed up for Vallees small class one day recently. Its usually the opposite, getting you to think about consumerism.

There has been some progress, with Arizona now requiring some personal-finance instruction in the schools and federal regulators tightening credit-card availability for college students a few years ago. Groups such as Junior Achievement of Arizona also are active, helping to illustrate basic financial interactions and decisions for middle- and high-school students.

They come here to apply the lessons theyve been learning in class, said Abby Slaughter, a coordinator at Junior Achievements Tempe facility, where students engage in role-playing in classroom modules set up as banks, grocery stores, auto dealerships and other commercial establishments.

We teach about interest, taxes and other concepts, Slaughter said. A lot of light bulbs go on.

Ray Himmelberg, a senior regional human-resources director for Walmart in Phoenix, volunteers at Junior Achievement, helping guide students through the exercises and checking their assignments. He considers it an important way to help youngsters gain a better appreciation for the free-enterprise system and how to survive it.

Kids will say, Now I see why my dad works two jobs, Himmelberg said. You see those moments.

—-


SBA Changes Definition of Small Business: What Does It Mean?

What is a small business?

It is getting harder and harder to tell. Last week, the SBA adjusted its size standards that determine if a company is a small business.The definition varies by industry and is derived by annual revenue or by number of employees.

Because of the SBA’s changes, on Sunday, July 13, thousands of companies currently considered “large” will be classified as “small” businesses.

According to the new guidelines, a drywall and painting companies that generate up to $14 million annually are considered small businesses, as are children’s clothing stores with $30 million in annual sales, convenience stores with $27 million in annual revenue, and liquor stores with $7 million in annual sales. Meanwhile, wind electric power generation companies can have 250 employees, while soybean oil processing plants can have up to 1,000 workers.There are now numerous industries in which having 500 to 1,000 workers would still classify them as small businesses.

Being considered “small” makes companies eligible for federal government contracts.The government now has a larger number of small business contractors from which they can make purchases.

What makes this very important is that it opens up SBA financing options to companies that previously were not eligible.SBA loans offer favorable terms, including lower interest rates than other types of funding.

Critics of the SBA and of small business finance today believe that lenders are not focusing on giving loans to startups and smaller mom-and-pop shops.Despite a recent uptick in approval rates of small business loans by big banks, a primary worry has been that the largest lenders are granting requests from “small” businesses that are larger — and generating millions of dollars of revenue. Meanwhile, aspiring entrepreneurs and growing companies with perhaps a handful of employees struggle in securing capital from big lenders.The new SBA standards could reinforce this trend.

However, the growth of innovation and of new businesses continues to be a harbinger for the overall economy. Further, small banks are filling the gaps for small, growing companies.They are approving more than half of the loan applications they receive, whereas big banks OK only about one-in-five requests.

Fortunately, small business owners have learned to shop around.They can use the Internet to search for lending options and to obtain financing from lenders that are beyond their immediate geographic areas.

My concern is that young, growing businesses need better access to capital. Fortunately, even the smallest companies are able to get funding at reasonable terms from micro lenders, such as Accion East, which has a mission of providing small loans to entrepreneurs including immigrants and people who are setting up companies in depressed areas.

Recently, I attended a panel at which Senator Cory Booker (D-NJ), called access to capital a great source of democratization.I could not agree more.The SBA continues to have a commitment to promoting the growth of small businesses.This is a good thing since small, private sector firms account for the lion’s share of new jobs created in the American economy.

Rohit Arora is co-founder and CEO of Biz2Credit, an online resource that connects 1.6 million small business owners with 1,300+ lenders, credit rating agencies and service providers such as CPAs and attorneys. Since 2007, Biz2Credit has secured more than $1.2 billion in funding for thousands of small businesses across the US Follow Rohit on Twitter @biz2credit and on Facebook https://www.facebook.com/biz2credit.


The Perfect Time To Teach Your Kids About Money Is Earlier Than You Think

Whether we like it or not, money decisions permeate just about every aspect of our adult lives. Everything from going to the grocery store to filling up the gas tank to what college we choose involves money decisions.

Even if money is far from what is most important to you, it’s impossible to get away from dealing with it. For that reason, it’s important to master your finances and make your money work for you. It’s crucial to pass these skills on to our children so they can become successful, independent and happy adults.

There are a plethora of resources on how to teach kids about money and financial literacy, but when should we start teaching them? It’s never too late to start, but there is an optimal time to add a little financial literacy to their life lessons. As you teach your kids to get along with others, to count, and to read, sprinkle in a few money lessons to help them to get started on a positive track.

According to research by the Center For Financial Security, “It has been shown that children make great strides in economic understanding between the ages of 6 and 12, such that children’s understanding is ‘essentially adult’ around age 12.”

The following list lays out when children understand different financial concepts:

Counting

Studies on habit forming in children by Dr. David Whitebread and Dr. Sue Bingham at the University of Cambridge report that by age 7, children have developed many of the basic concepts that relate to financial behaviors. Children may start to understand counting as early as 2 to 3 years old, but they often haven’t mastered the concept of “equals” until about age 5.

Conservation

Typically, the researchers explain, by age 7, children understand the concept of conservation, which essentially means that the value of money is not measured by coin size. In other words, a dime is worth more than a nickel even though the latter is larger. Until they get this point, they may want five pennies instead of a dime since the size of the coin as well as the quantity is more.

Exchange and Equivalence

The other concept children start to grasp after age 6 is “exchange and equivalence” — that money has different denominations, and that there isn’t always enough to pay for certain items. The old cliche makes sense here: You can’t have your cake and eat it, too. You have to pay for the cake.

Some of your children’s first money lessons could address this concept of having to give up their money to get their item as well as how much things cost. One idea would be doing a “dollar day” and seeing what they can get when they spend that dollar. I guess the Dollar Store would be perfect for this! Children can then practice parting with their dollar for their item and maybe even receive some change in return.

Whatever you do, make it real. When your money teaching points are real life practical experiences that children can relate to instead of abstract concepts, the lesson may just stick.

It’s never too late to teach your kids about money , but you might as well start their money education at the optimal time.

For more information about teaching your kids about finances, check out these resources:

o Money As You Grow

o MyMoney.gov

o The Mint

o National Financial Educators Council

o Jump Start


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Business bankruptcies ebb, but coming wave expected

An LBO is the buyout of a companys ownership with borrowed money. LBOs surged in the years before the 2008 financial crisis.

Energy Future Holdings failed LBO is the biggest US reorganization since MF Global in 2011, according to BankruptcyData.com, a tracker of corporate bankruptcy filings. New York-based MF Global collapsed under the weight of aggressive bets on sovereign debt.

Overall, US business bankruptcy filings, including Chapter 11, are falling, according to the American Bankruptcy Institute, citing numbers from Epiq Systems Inc., which tracks filings.

Year over year, total commercial Chapter 11 filings nationwide declined 21 percent in May to 429 filings. They were also down 38 percent from April.

Companies, or individuals, file for Chapter 11 bankruptcy when they hope to reorganize their financial affairs. Chapter 7 bankruptcy usually means that the business is over.

The June issue of ABI Journal, the publication of the American Bankruptcy Institute, asks whether the steps the federal government took after the economic crisis have merely delayed the bankruptcy boom that is always a tantalizing 12 to 18 months away?

In March and April, a flurry of US publicly traded companies 11 with assets of at least $300 million each filed for Chapter 11 bankruptcy protection. The pace slowed in May, but that month was nearly as busy as January and February combined.

There have been a few short periods in the past with a burst of Chapter 11 filings, but no sustained trend followed, BankruptcyData.com said. The Quincy, Mass.-based tracker of corporate bankruptcy data has said for a while, however, that many highly leveraged companies will have to restructure their balance sheets in the not-too-distant future.

When cheap money goes away and interest rates tick up, some companies will have a hard time making their debt payments, said institute President Brian Shaw, of Shaw Fishman Glantz amp; Towbin in Chicago.

But Shaw added, Weve been hearing that there will be an uptick in the not-too-distant future for five years.

The continued availability of alternative financing sources has helped deflate the number of businesses filing for bankruptcy, Shaw said. He agreed that bankruptcies can come in spurts but said filings are still historically low, even as a sustained uptick seems inevitable.

In the Northern District of Illinois through June 10, there have been 94 Chapter 11 filings. In all of 2013 there were 298, the bankruptcy institute said.

Heres a sampling of some Chicago-area company Chapter 11 filings this year:

Illinois River Winery Inc.

Debtors location: Willowbrook

Main business location: North Utica

Founded: 1998