Category: Consumer Education

Charles Schwab, the discount brokerage, made a bit of news this week by offering eight new exchange-traded funds, or ETFs. That wasn't such a big deal in itself, since the ETF business is booming with new offerings from just about every mutual fund firm and brokerage. But Schwab has upped the ante by allowing its customers to trade the house-brand ETFs for free - without paying the $12.95 brokerage commission for trading other types of stocks.

Now that's interesting. Commissions have been one of the few drawbacks to ETFs, because they can chew up accounts of investors who want to add modest sums frequently. That $12.95 is 6.5 percent of a $200 purchase, for example. You wouldn't want to pay that every month. With an ordinary mutual fund, as opposed to an ETF, you can buy and sell with no fee if you deal directly with the fund company.

You don't mind paying 1 or 2 percent in annual mutual fund fees? Okay, how would you feel about 10, 15 or 20 percent? Maybe even 30 percent?

Numbers like that would get most investors' attention - if they were real. In fact, they are. I'll get back to that in a moment.

What brings this up is news of a U.S. Supreme Court case involving investors' complaints about high fees. They are unhappy that the Oakmark family of mutual funds charges individuals twice what it does institutions like insurance companies and pension funds.

Authored by Stephanie May, NBR Summer 2009 Intern

Over the summer we dove into the idea that if you spend less during the week, you can make up for times when spending gets a bit more out of control (e.g. the weekend). But now I'm really starting to question that theory.

October was a semi-normal month for me until this last week. Boulder, Colorado puts on a Halloween celebration that rivals the best of them. It's not just one night up here. It's a whole week affair. And forget costume repetition. Creative, elaborate, and different costumes are a must. As you can imagine, this can get extremely expensive. Halloween wiped out my bank account, leaving me with a grand total of 6 dollars. Would I trade the fun I had for a bigger bank balance? Absolutely not. But, when I saw what I spent, I did wonder, "When will this get easier?"

Law makers are closing in on approving an extension of federal unemployment-insurance benefits. The bill would provide an extra 14 weeks of benefits for people who've exhausted their benefits. Those who live in states where the unemployment rate is more than 8.5 percent would get up to 20 weeks of extended benefits.

It's tough to argue that extending unemployment benefits is a bad idea at a time when more than 15 million people are out of work. The extension would come at a time when as many as 7,000 people a day are exhausting their unemployment benefits.

But that doesn't stop some people from trying.

If someone made me America's personal-finance dictator, I'd scrap the 401(k). These workplace retirement plans are inequitable, as some companies offer good ones, some bad ones and others none at all. Fees are often too high. And even the better plans often don't provide enough investment options.

Instead, I'd like to see the Roth IRA opened up to allow 401(k)-sized contributions - $16,500 a year instead of $5,000. (Or $22,000 and $6,000 for people 50 and over.) And I'd like to see the Roth's income limits lifted, so anyone could have one.

Roth's don't offer tax deductions on contributions, as 401(k)s do, but Roth withdrawals are tax free, while money taken out of 401(k)s is taxed as income, at rates as high as 35 percent. Most importantly, with a Roth you can invest in just about anything you want, not just a set of funds picked by the boss.

But since I'm not running things, the best I can do is suggest ways to make the traditional 401(k) work best.

Sales of newly built homes fell in September for the first time in five months. New single-family home sales dropped 3.6 percent from the previous month, according to the U.S. Commerce Department. It was brow-popping news to market watchers, who'd been expecting sales to increase by 2.6 percent in the month.

Now, wait a minute. Weren't consumers and investors (oh, and yes, real-estate agents) just cheering reports of a surprising leap in existing-home sales? The National Association of Realtors announced Friday that sales of single-family town homes, condominiums and co-ops jumped 9.4 percent in September. The rise in home sales, almost double the increase expected, had people speculating that the long-awaited housing-market rebound had finally arrived.

Then boom ... new-home sales tank. What happened?

Authored by Stephanie May, NBR Summer 2009 Intern

After weeks of financial musings and bringing you (my wonderful readers) along on my journey of financial self-discovery, I feel it is time to return to our money makeover roots for a quick visit.

I am so appreciative of the comments I receive from you all. I love to hear what you have to say. One recent comment from reader "dmd" really made me think...

Stephanie, ...For your sake, I hope the job will be a well paying one or that the Bank of Mom doesn't run out of capital. Otherwise you may have to stop blowing an extra $2,000 a month, or not be able to afford $115 shades or weekend trips to Las Vegas. Let's see if you still take 15 minute showers when you're paying the water and electric bills.

Stephanie, it's time to leave Fantasyland and move into the real world... most of us, including those of us who are fortunate enough to have well-paying, are still struggling with many aspects of today's financial climate. The last thing I need to read about is some college kid's out-of-control spending habits.

As a single woman, I NEVER wait for men to call, so I was giddy when Jim Simonin of New Mexico called me right on time yesterday at 2:05 p.m. Now, now, before you get any ideas, Jim isn't a man I'm dating. He's a viewer who used Skype to be our first on-air guest in our new "Can You Tell Me?" segment.

There was something else pleasantly surprising about Jim. I was expecting some college kids and a few other 20-somethings to call us on Skype with questions. But Jim is 73 years old. He's a retired engineer who loves technology. His web cam was crystal clear and we had a great conversation. You'll have to stay tuned to NBR to hear his questions on the air.

Here's the point: NBR is trying some new things like Skype and we want to hear from YOU to answer your questions on the economy and personal finance.

My post on Tuesday dealt with selling money-losing investments by the year's end for tax reasons. It's a good idea, but doing so presents investors with a new dilemma: what to do with the proceeds?

That's easy: reinvest them - as soon as possible.

The hard part is choosing the new investment, and if you don't watch out you can get stuck with an unwelcome - but avoidable -- tax bill when you buy mutual fund shares late in the year - around now.

Today's topic: taxes.

Hey, don't click away so fast. Taxes -- for most people -- don't have to be as mystifying as they seem. And year-end tax moves can really save you money come April. Honestly. There are just a few basic things to keep in mind.

Don't get me wrong: tax issues can be very complex for the well-to-do, and for people who own businesses. But for most people - those of us whose tax bills come from ordinary income and a few investments - tax matters play only a small role in most financial decisions. The main concern is to be sure not to pay more -- or less -- than we owe when the day of reckoning comes. For the most part, tax issues influence when you will do things you're going to do anyway, like selling a money-losing investment or billing a customer for a freelance job.