Farnoosh Torabi's Blog, page 31

Kids Taste Test: Generic vs. Name Brand

Our wallets love generic snack foods, but do kids? Savvy Spender sits down with four kids to taste test popular snack products. Will they prefer generic to the more expensive name brands? Read more here.

Parents, what do you recommend? What are some generics you swear by? Email me at farnooshfinfit@yahoo.com. You can also find me on Twitter @Farnoosh.

Rethink Your Cash Investments

If you’re not on track to meet your retirement goals, odds are it’s because you’re keeping too much money in cash.

More than a quarter of Americans favor cash for their long-term investing, according to a recent survey by Bankrate.com. That’s more than those who prefer real estate (23%) and gold or other precious metals (16%.) And this is surprising: only 14% say stocks are their choice and just 8% choose bonds. This investment strategy (or lack thereof) gets tricky, however, when you remember just how low savings rates are.

In fact, according to Bankrate.com, the average money-market deposit account yields just 0.11%. That means a $10,000 initial investment would only gain $110.55 over a 10-year period. And the average five-year CD currently yields just 0.78%. That and the rising threat of inflation means you’re technically losing money over the years.

“Americans not saving enough is well-documented, but hunkering down in cash investments and settling for low returns will only magnify the problem of not having a sufficient nest egg to meet longer-range financial goals such as retirement,” said Greg McBride, CFA, Bankrate.com’s senior financial analyst. “Other choices may not do the trick either, as real estate is not only very cash-intensive, but often illiquid. And precious metals spit out zero cash flows, with gains solely dependent on price appreciation.”

McBride says many are holding onto cash because they’re still nervous from the fallout of the 2008 financial crisis. The economy has improved, however, and while he doesn’t know if the tide has turned just yet, McBride says he’s seeing improvement in terms of how folks feel about their personal financial security. “They feel more secure in their jobs, more secure with debt burdens, they’re reporting higher net worth and feel overall better than one year ago,” he says.

“For long-term goals, ones over 10 years, investors need to be comfortable taking a more aggressive stance…It’s important to expect volatility and embrace it,” says McBride. “What’s safe over the short term is actually very risky over the long term. With cash, you can’t earn a return that’s sufficient to preserve – let alone grow – your buying power.”

Photo Courtesy, Andrew Magill.

Nick Cannon: ‘I Gotta Make That Mariah Paper!’

You can’t accuse Nick Cannon of being lazy. The 32-year-old has a robust career as an actor, rapper, comedian, host, producer and DJ. He’s also raising two-year-old twins with superstar wife Mariah Carey. I caught up with the busy star at a promotional event for Snapple, advertising partner of “America’s Got Talent,” which he’s hosted for the past four seasons.

Are Women Better Investors?

According to Women’s Health Magazine, a whopping 74% of women say they don’t know enough about investing, and in a recent survey, 29% said they still expect Social Security to be their primary source of income in retirement.  Stacy Francis, president and CEO of Francis Financial (she’s also the founder of Savvy Ladies, see link below) says that part of the reason women shy away from these financial options is that “a lot ladies feel like [they] don’t know enough about the stock and bond market, and so don’t feel comfortable making those decisions.”

Yet, as experts are finding out, for the women who DO invest, they’re incredibly good at it.  Dare we say… better, even, than men? According to Francis, the truth is women’s portfolios typically out-perform men’s by an average of 1% per year and in fact, investment clubs tracked by the National Association of Investors Corporation (NAIC) found that female-only investment groups earned a 21.3% average annual return, compared with a 15% return for men-only groups, a margin of about 6.3 percentage points.  

Francis says women indeed have a lot of strengths when it comes to investing:

“Women spend more time researching their investment choices, tend to take on less risk than men do, and we hold onto our investments longer,” she says.  Instead of trying to “time” the market, women tend to be more patient, less rash, and they trade less often, which also means they save on trading fees.  This tendency to ‘stay the road’ longer than men is likely what accounts for the difference in performance. That said, women are much more nervous about the stock market, and less likely to take action, says Francis.  She thinks that overall, women can afford to be more aggressive with their portfolios.  

In fact, we might not have a choice: 

Among those who participate in 401K programs, both men and women contribute pretty equally to their portfolios: an average of about 7% of their income, and allocate their assets in roughly the same way.  However, the average woman’s account is worth 37% less: $24,320 vs. $38,460 for the average male investor.  This difference is likely due to the fact that women earn less.  We also live an average 7 years longer than men, and are out of the workforce for a longer period of time for either taking care of children or other family members.  All this adds up to portfolios that are going to require more growth than men over time, because our retirement funds simply have to be larger.

Here are 5 tips that can help any woman start small and get the confidence they need to gain big:

Do it Now

Experts say women must take charge of their finances sooner rather than later. “The biggest mistake that women still make in managing their money is leaving it until it’s too late,” says Esther M. Berger to CNN Money, a financial planner in Beverly Hills.  CNBC’s Jim Cramer says it’s as easy as starting with as few as five companies you’re interested in and care about, with at least one large Fortune 500 company to keep you afloat — it’s enough to stay diversified, but a small enough portfolio to be able to do your own homework on each stock.

Bone Up 

Cramer is right.  Start small, and you’ll be able to educate yourself faster.  Francis says, ”You didn’t start out of the gate understanding geometry or calculus, and the same is true with finances. It’s all about baby steps and having a community to help you get on the right path.”  She advises taking a strong financial stance, by educating yourself as much as possible.  An informed investor is a strong investor.

Reach Out 

Speaking of community, to get on a successful investment path women do better when they’re a part of a supportive network.  Francis advises finding a co-worker, mentor, investment buddy or even an investment club.  Savvy Ladies is a free, online resource for financial education, and a great place for connecting with finacially-savvy women.   They offer a monthly “Financial Fitness” hotline where you can speak one-on-one with a financial planner, for free.  And they even offer webinars where you can learn all about investing from the ground up!

Play It Safe…. Just Not Too Safe

Though more and more women are taking advantage of investments and 401(k)s, experts agree that women are still “playing it safe” when it comes to their more conservative portfolios.  The truth is that women can’t afford to invest “just as well’ as men, says Francis.  ”We have to do better.”

Photo Courtesy of: flickr.com/68751915@N05/6793832171/  

Financial Skinny: Federal Student Loan Changes

The fate of interest rates for federal student loans has been in limbo for nearly a month. Finally, Congress has come up with a fix that will save students money in the short term but could end up costing them more in the future.

For months now, we were worried that interest rates on federal student loans would double -reaching 6.8% - if Congress couldn’t reach a compromise before their July 1 deadline. The date came and that’s exactly what happened. But, just in time for the fall school year, our legislative leaders seem to have reached an agreement.

Under a plan passed Wednesday by the Senate, interest rates will no longer be voted on and reauthorized periodically by Congress but set  to a 10-year Treasury auction rate. This way of setting the rate treats students like other borrowers, making them subject to market rates at the time they borrow. Again, the changes have been approved by the Senate but are pending approval by the House, which experts say is likely.

“Unfortunately, the solution is worse than the problem,” says student loan expert Heather Jarvis. “It’s a double-edged sword. During times when the market is weak, students will win. But pretty much everyone agrees that rates are subject to rise.”

Today’s Treasury rates are unusually low, so the rate is proposed to be set in the fall at 3.86% for undergrads, 5.41% for graduate students and 6.41% for parents. That’s significantly better than where they were before Congress acted but, as the economy gets better, the cost of financing an education will rise. The Senate plan, however, does place a cap of 8.25% on interest rates for undergraduate loans, 9.5% on graduate loans and 10.5% for parent Plus loans— higher than what students and parents have payed in the past.

It’s important to note that any existing loans with the federal government wont’ be effected by these changes. For all future loans, the plan will be  retroactive to July 1, 2013. That means, in large part, students entering school and borrowing in the fall will be get their loans at the new rate. Jarvis explains that once the loan is issued, it will be fixed and won’t change over time. But every year, new loans will be issued and their interest rates will be evaluated and set, according to market conditions, every June 1st.

“People entering now are borrowing at the right time. Rates are low,” Jarvis says. “But someone starting high school is likely to borrow at significantly higher price. An increased rate could mean a difference of a few different thousand dollars more. That’s real money people could use.”

Photo Courtesy, 401(K) 2012.

How Biking Saves Me $10,000 a Year

Financial blogger Mr. Money Mustache retired at age 30 with roughly $800,000 in cash and investments. One of his biggest money saving tips is: ditch the car and ride a bike. He estimates Americans can save up to half their incomes by switching from automobiles to bicycles. Read more here.

Think you can make the switch to biking like Mr. Money Mustache? Connect with me on Twitter@Farnoosh and use the #finfit.

Saving Secrets: School Supplies

With less than a month out from the start of the school year, parents across the country are probably already receiving the all-important lists for supplies their kids will need come fall. And if you’ve been shopping lately, you’ve probably noticed that back-to-school sales are already in full swing.

The upcoming September issue of ShopSmart magazine, from Consumer Reports, details how to get the best deals on everything your kid will need. Here are the retailers with the best bargains and a few tips to save this year.

Start in Early August

The best time to shop? The magazine says shoppers should start grabbing items and checking them off their lists beginning in early August when deal are and stock are plentiful. And unlike other sales, where prices continue to drop, an analysis of 500 back-to-school deals by consumer site NerdWallet.com found that 78% of the back to school items selling in July sold at the exact same price in August.

Now, don’t just run into your local office-supply store to buy it all, says Lisa Lee Freeman, editor-in-chief of ShopSmart. “If you find yourself beyond the sale bins, you could wind up paying more than twice as much as at a discount store,” she says.

Avoid Office Supply Stores

The team at ShopSmart did a price comparison on common back-to-school items, at some popular retailers, so you don’t have to. With a list that included items like glue sticks, notebooks, printer paper, sharpies, pens and pencils, they found that – overall – Walmart had the best deals on most of the supplies, followed  by Target (with just a few cents difference.) For example, the magazine found that Walmart had the lowest price on Elmer’s Washable Glue Sticks, a (3-pack) for $2.94. At Staples, the same product cost nearly double.

More Ways to Save

Finally, to help you navigate the stores and save a few bucks, here are ShopSmart’s “Five Easy Ways to Save on School & Office Supplies.”

1.     Seek store-brand supplies. They’re not easy to find (Walmart had almost none), but shoppers who do can save as much as 74% compared to name-brand supplies.

2.    Check out weekly sales circulars the first of the month for the best deals. Sites such as Spoofee.com and SundaySaver.com link shoppers to local ads for dozens of stores.

3.    Download the Weekly Ads & Sales app. This mobile tool, free for Apple, allows users to view the latest ad pages while on the go without dealing with paper clutter.

4.    Search online for deals. ShopSmart found online prices for OfficeDepot, Staples, Target and Walmart closely matched those in stores, but shoppers may have to shell out for shipping.

5.    Ask for a price match. Shoppers who find a better deal somewhere else can show their phone or a paper ad at checkout at stores with price-matching policies to earn a match or discount.

Photo Courtesy, woodleywonderworks.

6 Ways to Brace for Braces

I often think how fortunate I am that my parents valued orthodontics when I was a kid. Maybe it was because they, too, had braces growing up.  Or perhaps they saw it as a health issue (overcrowded or crooked teeth can prevent good brushing and flossing, strain jaw muscles, and even wear down teeth over time); or,  it may have been as simple as wanting my sister and I to have a confident smile later in life.  All I know is that as an eleven year old wearing headgear, I wasn’t nearly as grateful as I am now!

 

As you or your family consider braces and their financial impact, here are a few ways you can better prepare:

Get the Facts 

The average time spent on orthodontic work is about 23 months but the longer treatment takes, the more expensive it will be.  Kids typically get braces during puberty (though an increasing number of adults are getting braces too, with a 58 percent increase between 1994-2010).  Whether for kids or adults, the average costs are usually in the range of $3-7,000, and unfortunately, few insurance companies will cover the cost of treatment. Among the policies that do offer coverage, most only pay out 25%. 

Be Aware of Added Costs

If you do opt for braces, be prepared for a few expenses you weren’t counting, or that weren’t included in the original quote (such as a deep cleaning or the replacement of old fillings before treatment begins).  Also, be aware that new technologies, like three-dimensional imaging, could dramatically raise your bill.

In terms of more affordable treatment options, traditional, stainless steel braces are most cost-effective while clear, “invisible” or colored braces will cost more. Yes, ceramic models will blend in with your teeth, but they also break more often which means incurring more costs.  Lingual braces hide behind your teeth, but require a skillful (and therefore more expensive) orthodontist to install them. Talk to your orthodontist about which braces are going to be right for you.

Finally, to make sure you’re not paying more than you have to, check with the Healthcare Blue Book, a free online guide that gives you an idea of what fair prices are for healthcare services in your area.

Be Prepared to Negotiate

Like dentists or even your doctor, orthodontists will often try to work with you and your budget.  They might be able to adjust their services to meet a more affordable price point, or, perhaps they’ll offer monthly payment plans extended beyond the time of treatment (with no interest or other charges).  Or, if you can afford it, some offices will offer discounts for paying upfront, particularly if it’s a straightforward treatment. 

Seek Out Discounts 

If you don’t have dental insurance, try searching for a discount dental plan that covers braces at www.dentalplans.com.  You might pay a fee of $100 to $200, but could receive discounts at participating orthodontists from anywhere of 10-60% off (just be sure the plan you sign up for includes the services you’re looking for).  Or, investigate college or universities near you with an orthodontics program.  Much like dental schools, you can get high-quality care from residents supervised by experienced orthodontists for about two-thirds the cost of a private practice. To find a school near you, visit the the American Association of Orthodontists.

Look for Low-Fee Options

If you’re truly in need, check the website Smiles Change Lives, a nonprofit organization that for a low fee, connects children whose families cannot afford braces with orthodontists willing to provide the service for free.

Don’t Undo the Docs Work

Wear your retainer!  Imagine putting in all that time, discomfort and money, just to have your teeth revert back to their original positions. Believe me, it can happen (my slightly misaligned bottom half is now a testament to stopping my retainer regime too early).

Photo Courtesy of: MAKY.OREL

Financial Skinny: Rising Mortgage Rates

If you’re in the market for a mortgage, or a refi on your old one, you’re probably feeling the effect of a recent rise in rates. Mortgage rates have jumped nearly a full percentage point since the start of May, leaving many to wonder why, and what at it means for their finances.

Here’s what you need to know.

What Started it All

Starting in mid June, stock market investors drove rates up in a reaction to news that the Federal Reserve would being easing it’s investment into the mortgage market – something the agency did to stimulate the economy. The move had the effect of pushing rates to record lows and kickstarting the recovery of the housing market. Many have expressed concern that the gains could be undone as interest rates rise along with home prices, potentially driving down demand from homebuyers.

Fed Says it Won’t Hurt the Economy

Fed Chairman Ben Bernanke urged caution last week, however, and expressed hope that rising rates wouldn’t hurt the economy. Speaking in front of the House Financial Services Committee, he said, “I think we need to monitor, particularly the housing market, to see if there is any impact from higher mortgage rates…I haven’t seen anything that points strongly to any particular problem, but again it’s very early.”

Your Dream Home is Still In Reach

Despite the recent rise, however, rates are still historically low. More good news: rates are beginning to taper off as investors quell their nerves and a new report by Fannie Mae suggest that higher rates may not be so bad for the market. The housing giant conducted a study, comparing historic mortgage rates with home price and sales data as far back as 1990. Researchers found that, while rising rates were likely to negatively impact the number of home sales, they had very little impact on home prices.

Photo Courtesy, 401(K) 2012.

How I Retired at 30

Meet Mr. Money Mustache. Hundreds of thousands of readers follow his bold advice on his self-titled blog — and for good reason. He has cracked the retirement code while many of us were struggling with student loans. At 23 years old he began working and saving…and saving some more. By age 30, he’d amassed some $800,000 in cash and investments, and then entered early retirement. Read more here.

Could you follow in Mr. Money Mustache’s financial footsteps? Connect with me on Twitter@Farnoosh and use the hashtag #finfit.