Category Archives: Finance

A Cult Leader With All Wheel Drive

Subaru perennially enjoys one of the highest rates of owner loyalty, right up there with Ferrari. That is so sad! But anyway, Subaru, owned by Fuji Heavy Industries, is on fire. The company’s U.S. month-to-month sales have increased for seven years, practically the entire Obama administration. Year-over sales have were in double digits for four years ending in 2015 (582,625 units).

Subaru has nearly doubled capacity at its Lafayette, Ind., campus, but it’s like trying to catch a runaway kite.

The Outback, a midsize, all-wheel-drive crossover, is the company’s granola-y icon, of course. Or maybe its heroin. At one point this year the national supply of Outbacks dwindled to nearly nothing, a seven-day supply. “I’ve only got one Outback on the lot, and it’s sold,” a Colorado Subaru dealer pleaded with managers at a recent car show. “You’ve got to get me more cars!”

Colorado.

What is the laughing gas in Subaru owners’ balloon? How has this audience, this pecuniary relationship between buyer and bought, morphed into a tribe? Subaru does have a big-tent message, including a long-term commitment to the LGBT community. OK, that accounts for a certain percentage of buyers. But who are all these other people?

Subaru’s sales neatly track the rise of crossovers and the Outback gets credit for being the ur-crossover.

I go round and round on this. One year, I feel nearly smothered by the sameness, the adequacy of mass-market cars. I find my gall rising at every marketing message that says this car or that rises above commodity status. See past the code. Take the blue pill, Neo. They’re all the same!

Then after being thoroughly convinced it’s all finely curated horse manure, I start to think: No, it really is about product. It’s the marketing that’s all the same. The machinery begs to be appreciated on its own terms, its unique courtesies and capacities, and by its own value.

I have spent long minutes contemplating these mysteries from inside the 2017 Subaru Outback 2.5i Premium ($32,160, as tested). The Outback comes in six trim levels: four with the 2.5-liter flat four engine; and two with the 3.6-liter flat-six.

As a refreshing change for me, our tester was not pride of the fleet, but the 2.5i Premium, with the smaller engine (175 hp, 174 lb-ft of torque). That allowed me to more fully appreciate what you might call the Outback’s background level of accommodation.

Emergency Fund and Save Money

download-7Experts say everyone should have an emergency fund, a reserve of three to six months’ worth of living expenses. But many consumers struggle to save when trying to cut debt and cover all of life’s other expenses.

“Probably one of the most underused pieces of financial advice we give is to scrape together an emergency fund,” says JJ Montanaro, a CERTIFIED FINANCIAL PLANNER™ at USAA. “If you don’t have any savings in the bank, you’re almost certain to end up in debt as a result of unexpected expenses.”

If you haven’t started saving, don’t panic. These six tips can help you get started:

  • Set a goal. Estimate how much you spend each month on essentials such as rent or a mortgage, utilities, food, car payment and insurance. Multiply that total by three — this is your minimum savings goal. If you have no savings, $1,000 is a reasonable start. Work gradually toward saving more, and don’t be intimidated by the numbers; the important thing is to start setting aside money regularly.
  • Track expenses. Using online banking,track your spending and break down your daily spending average. Identify nonessential purchases and trim them from your daily budget. Put the extra cash toward savings.
  • Automate savings. Set up an allotment or an automatic transfer from your checking account, maybe $25 or $50, into your savings account each payday. You can also automate additional contributions each week. Even small amounts add up — $20 a week for a year equals $1,040 in savings.
  • Round up. Round your debit card purchases to the nearest dollar, and move the difference into your savings account at the end of the week. For example, if you bought lunch for $8.36, round up to $9 and set aside the 64 cents for savings.
  • Save unexpected income. A tax refund or consumer rebate can contribute to a healthy savings account. So can a pay raise, bonus, cost-of-living adjustment or extra income from a part-time job or freelancing. Directing at least part of this money to your emergency fund will help you reach your goal sooner.
  • Make minimum payments. Paying off credit cards makes sense but not until you have a small emergency fund, at least $1,000, on hand. Having savings in place keeps you from having to use your credit card for emergencies.

How to Save Much Money

download-8No matter how you say it, it sounds good. Think about the sense of well-being that would come from knowing you had 10 crisp $100 bills tucked away in your wallet. Everyone should have that feeling.

Consider these five steps to help you get started:

  • Open a savings account. My oldest daughter once saved $800. On her way to deposit it in the bank, she took a detour by the mall and left her purse sitting on a clothes rack. That envelope with her $800? Gone in a flash. The lesson? Your hard-earned money is safer in a bank account than in your hands.
  • Automate. Does money burn a hole in your pocket? If it’s not there, you can’t easily spend it. The Defense Department’s myPay site and nearly all banks allow automatic transfers that can shift some of each paycheck from your checking to your savings account. Five percent is a good starting point, but more is obviously better. Just $84 a paycheck will get you to your $1,000 goal in six months if you are paid twice a month.
    • Cut back. You should be able to find areas where you can reduce spending. It may be on restaurants, coffee, sporting events or gaming. The idea is to rein these in a bit to free up some cash. There’s no need to go cold turkey — a few small changes can add up quickly.
    • Cut out. On the other hand, some spending needs to go. Eliminate casino trips, a tobacco habit or other types of unproductive expenditures to put yourself on the savings fast track.
    • Don’t give up. Stashing money in a change jar may not be the ideal way of saving $1,000, but if that’s all you can manage right now, then it’s an improvement. It may take time, but the key is to stay on track and avoid spending what you’ve worked hard to save.

    Once you reach your goal, celebrate — in a responsible way. But don’t stop with $1,000. Setting aside a grand is just a small step on the road to financial security.

Need to Cut Expenses

Marissa Delman a 25-year-old intensive-care-unit nurse in New York City, wants to take her career to the next level. She wants to be a certified registered nurse anesthetist.

“I’ve wanted to specialize in anesthesiology since high school,” says Ms. Delman. Keeping the patient alive as certain functions are shut down in order to perform surgery, she says, is an “art form.”

It will cost Ms. Delman a lot of money to achieve that dream. A 27-month master’s program at Columbia University, one of the few available in the area, she says, costs about $51,000 annually. That would not include the cost of living in New York City. She would also have to quit her job. “There is no part-time option and they do not allow you to work while you’re in school,” she says.

Ms. Delman says she has saved about $70,000, enough for the first year of school and living expenses. She plans to borrow to fill in the gap, though she would like to have as little student debt as possible. The $70,000 is currently in a savings account.

Through her work at a nonprofit hospital, she has a 403b retirement savings account to which she contributes $350 from each biweekly paycheck. Her employer matches 6%. So far, she has socked away $36,000.

Ms. Delman and her boyfriend currently split monthly expenses of their apartment in New York’s Astoria neighborhood. She pays $1,100 in rent; about $40 for gas and electricity; her share for car insurance and parking is $110; and a subway pass costs $116. She spends $100 a month on groceries, and about $700 on eating out and leisure activities. She deposits about $500 per paycheck, or $1,000 a month, in her savings account.

Her boyfriend has offered to help with the rent while she is in graduate school, though Ms. Delman says her financial plan is “not yet concrete” and is likely to depend on whether she takes out a loan for both years or just the second of the two-year program.

Advice from a pro: Ken Mahoney, CEO of Mahoney Asset Management in Chestnut Ridge, N.Y., says Ms. Delman’s goal seems well within reach. To start, he advises saving more and creating a better budget.

There is about $17,000 after taxes unaccounted for and not reflected in her monthly expenses or savings. Mr. Mahoney urges her to figure out where that money is being spent. A single credit card could help her keep track of expenses, or a budgeting app, like Mint.com, that will aggregate her spending into different categories. She should then set spending goals for each of those categories. She should do this with her boyfriend, as it will encourage them to save more together.

Deregulate All Electric Utilities

About two decades ago, the electric industry started getting a makeover. A number of states launched initiatives to break apart monopoly utilities and allow retail companies to sell electricity to consumers.

Today, in more than a dozen states and the District of Columbia, retail customers can shop around for the best deals on electricity, sometimes in the same way they shop around for a cellphone provider.

The question is, has the experiment with choice paid off, and is it time for the rest of the country to embrace open, competitive retail electricity markets?

Voters in Nevada apparently think so. Last week, they overwhelmingly approved a ballot measure that aims to end the monopoly of the state’s largest utility and allow customers to choose their provider.

Supporters of deregulation say that monopoly utilities have little incentive to innovate or operate efficiently, and that it will take market forces to create a cheaper, cleaner, more reliable electricity system.

Opponents say choice hasn’t exactly delivered on its promise of lower prices. In fact, its legacy so far is one of price run-ups and instability, they say.

Andrew N. Kleit, a professor of energy and environmental economics at Pennsylvania State University, argues that more states should deregulate their electricity markets. Making the contrary case isKenneth Rose, an independent consultant and a senior fellow in economics at the Institute of Public Utilities at Michigan State University.

YES: It Is the Best Way to Lower Costs and Increase Innovation

By Andrew N. Kleit

Today’s modern society requires a reliable electricity system. Anyone who has lived through a major blackout, such as occurred in the Northeast in 2003, knows that when the lights go out, life shuts down.

Users of electricity also want power to be affordable, of course, and at the same time, policy makers increasingly are demanding that more of the nation’s energy come from renewable sources such as wind and solar.

Faces Campaign Finance Charges

images-2Oklahoma state education chief Joy Hofmeister faces two state felony charges of illegal campaign-fundraising activities during her successful 2014 campaign to oust embattled then-Superintendent Janet Barresi.

A 32-page affidavit issued Nov. 3 alleges that Hofmeister for more than a year conspired with several others to funnel money from a donor corporation and two education groups into an independent expenditure fund that would finance a negative campaign ad against Barresi.

Hofmeister, who denies the allegations, was charged with “knowingly accepting contributions in excess of the maximum amounts” and two counts of “conspiracy to commit a felony.”

She faces 10 years in prison on the two conspiracy counts and a year on each of the two campaign-finance violations.

Also facing charges are Lela Odom, a former director of the Oklahoma Education Association; Steven Crawford, a former executive director of the Cooperative Council of Oklahoma School Administration; and political consultants Fount Holland and Stephanie Milligan. Milligan was a volunteer coordinator in Oklahoma for Republican presidential victor Donald Trump.

Hofmeister and Crawford have pleaded not guilty. Hofmeister’s next hearing will be Dec. 13.

The independent expenditure group, Oklahomans for Public School Excellence, according to the affidavit, accepted donations that were illegally excessive and illegal corporate donations. Oklahoma Watch, a local news organization, profiled the group during the 2014 election season. Hofmeister, a Republican, beat out Barresi in the primary and went on to win the general election.

During a short press conference the day the charges were outlined, Hofmeister said, “I will vigorously defend my integrity and reputation against any suggestion of wrongdoing. And I will fight the allegations that have been made against me.”

Oklahoma Education Association spokesman Doug Folks said in a statement that Hofmeister and the others charged in the case will eventually be exonerated.

“In its 127-year history, the Oklahoma Education Association has advocated ethically and honorably for Oklahoma public schools, students, and education professionals,” Folks said. “We are disappointed to see that charges have been filed against former OEA Executive Director Lela Odom, but we firmly believe that when this matter is resolved, she will be cleared of any wrongdoing. In the meantime, OEA will continue our work to advance public education for the benefit of all Oklahoma students.”

Despite calls from the state’s Democratic Party leaders, Hofmeister said she will not resign.

Combative Environment

Hofmeister, though a Republican, came into office with the support of many teachers who opposed Barresi for carrying out an agenda pushed by Republicans who dominate the Oklahoma legislature.

In recent years, for example, lawmakers instituted an A-F accountability system that labeled several of the state’s schools as “failing” and began to include standardized-test scores in teacher’s evaluations. Amid a funding crisis because of a dip in oil prices, teacher pay has stalled, and mass layoffs have led many districts to go to four-day school weeks.

Economy Standards Be Relaxed

Administration officials said the tougher standards would protect the environment and strengthen the economy at the same time.

The targeted fuel efficiency would dramatically reduce vehicles’ greenhouse-gas emissions, the administration said, and would save consumers money thanks to greatly reduced spending on gasoline, encourage innovation, increase the global competitiveness of U.S. auto makers and create jobs in the auto industry.

All those arguments are still made today by supporters of the fuel-efficiency mandates.

But opponents say the standards are hurting consumers by driving up the price of cars. And the environmental impact, they say, isn’t enough to justify those costs. The auto industry, these critics argue, can thrive and remain innovative without the government setting stringent efficiency mandates.

Thomas J. Pyle, president of the Institute for Energy Research, argues for scaling back the standards. Carol Lee Rawn, who directs the transportation program at Ceres, an advocacy group that promotes sustainable business practices, says the standards must be maintained.

YES: They Make Cars More Costly, With Little Environmental Gain

By Thomas J. Pyle

Buying a car is one of the most important decisions a family makes, and for many it’s a struggle to balance safety, affordability and their preferences for looks, size and other features.

Unfortunately, federal fuel-efficiency mandates are making these decisions more difficult by driving up the costs of new vehicles by thousands of dollars.

Indeed, in many cases it is now impossible for people to buy the car they want or need—or, in some cases, to buy a new car at all. They simply can’t afford it.

In effect, bureaucrats in Washington have decided for them what kind of car they can drive.

It’s time to scale back the regulations and return the decision of what type of vehicle to buy where it belongs—with the consumer.

Cars that consume less fuel are a great choice for many people, but for others, especially for families with small children, larger vehicles like minivans and SUVs are a necessity, not a luxury. These vehicles give families much more transportation flexibility, which is critical when trying to balance caring for children and work responsibilities.

Reality check on your retirement savings

You probably didn’t realize it, but the third week in October was National Retirement Security Week.

Before you write it off as just another one of those useless “branded” calendar items like National Muffin Week, think of it this way: This is the perfect time to do a reality check on your retirement savings plans.

This was actually the 10th anniversary of Save for Retirement Week, established as part of the Pension Protection Act of 2006, which, among other things, allowed companies to automatically enroll employees in 401(k) plans. That legislation been credited with dramatically increasing the number of workers participating in those plans nationwide. This is also the time of year that companies have their annual benefits and 401(k) open enrollment. That’s why it’s a perfect time to do that financial checkup.

Spencer Williams, president of the Retirement Clearinghouse in Charlotte, N.C., says you should think of the week as a reminder — much like a grocery list. “It reminds us what we are supposed to do. We live in a really busy world. It’s a little extra nudge.”

State Street Global Advisors, one of the nation’s largest managers of defined contribution assets, has a few tips to help in your checkup.

Max out your employer’s match. Don’t leave money on the table. If you can’t afford to meet the match, slowly increase your contribution over time.

Increase the amount you are saving. Ideally you should save 15 percent of your salary.

Check out the resources provided by your employer. Many are now offering financial wellness programs that come with financial education, financial coaching and long-term planning aids and other resources.

If you are over 50, take advantage of catch-up provisions. You can contribute an additional $6,000 to you retirement plan, or up to $24,000 this year

Don’t borrow from your 401(k), as tempting as it may be. Start an emergency savings fund to help get you through emergencies.

Consolidate your retirement savings from previous jobs into your current job’s plan.

Trump really raise taxes on the rich

Throughout his run for the presidency, Donald Trump has frequently talked about raising taxes on rich people. He has never actually put forth a plan to do so. Every outside analysis of his tax plan finds it would reduce taxes for the highest-earning Americans, and by a substantially higher percentage than it would for the poor and the middle class.

Trump doesn’t challenge those estimates. Instead, he falls back on a time-honored politician’s move: He emphasizes one part of his plan that could, possibly, end up raising taxes on some rich people. That move was on full display in the second presidential debate, when an undecided voter named Spencer Moss asked him, “What specific tax provisions will you change to ensure the wealthiest Americans pay their fair share in taxes?”

“One thing I’d do is get rid of carried interest,” Trump said, referring to a tax break favored by many private equity investors on Wall Street. He then digressed into attacking his opponent, Hillary Clinton, for being in the pocket of the rich and powerful, and for not doing more as a senator from New York to end their tax breaks. “She never will change,” Trump said. “We are getting rid of carried-interest provisions.”

Clinton was incredulous. “Well, everything you’ve heard from Donald is not true,” she said, adding: “His plan will give the wealthy and corporations the biggest tax cuts they have ever had.”

It’s easy to see why Trump wants voters to think he’s raising taxes on the rich, even as he stresses his tax cuts for businesses and the middle class. It’s a popular position. In April, Gallup reported that nearly 6 in 10 Americans think their federal income taxes are too high. More than 6 in 10 said upper-income Americans are not paying their “fair share” in taxes.

The problem is that Trump simply is not proposing a tax hike on the rich. He’s not even proposing a tax hike on most hedge-fund managers. A variety of other items in Trump’s plans could negate the effects of eliminating carried-interest provisions for the high earners who benefit from them now. He proposes to cut the top marginal income tax rate, and he might — this is unclear, because Trump’s team still has not fully detailed this part of his plan — allow many partners at investment firms to pay a 15 percent business tax rate on their profits.

That 15 percent, by the way, is the rate Trump wants big corporations to pay on their income taxes, down from 35 percent today. He has been consistent on this point, pledging that such a cut will boost competitiveness and spur investment and economic growth. He touted that proposal in both debates, with no equivocation — even though it is hardly a crowd-pleasing move. In the Gallup poll, two-thirds of all respondents said corporations are not paying their fair share of taxes.

How do your money habits

Your 20s can be a time of striving for better things. A better job. A bigger paycheck. A savings account.

Even if you’re making some progress, it can be difficult to know where you stand or how you compare to your peers.

A new study by Navient, a student loan servicer, and Ipsos, a market research company, may offer some insight. The companies surveyed more than 3,000 people ages 22 to 35 about different aspects of their financial health.

Remember, everyone’s path to financial stability is unique. But the findings may give you a sense of where you stand on certain goals, compared to other people your age. Here are some of the report’s top take-aways:

— More than 40 percent of people above age 30 are done paying student loans.

Sixty percent of the millennials surveyed said they borrowed to pay for college. But the report found there is a light at the end of the tunnel when it comes to student loan debt. Not surprisingly, the chances of paying off those loans increased with age. Forty-four percent of people over 30 who borrowed for college are now debt free, compared to 29 percent of 22- to 30-year-olds who have cleared their student debt.

For those still making payments, their burdens varied significantly. The average debt load in that group is $22,817, but the majority of those with debt, 51 percent, said they owed $10,000 or less. An additional 21 percent owed more than $30,000.

— Ninety-three percent of young adults are saving for a goal.

The majority of young adults between the ages of 22 and 35 — 93 percent — said they are saving. But most of them haven’t saved very much. About half of consumers had set aside less than $1,000 total for all of their savings goals. That includes 6 percent have not saved anything at all, even though they said they had a savings goal in mind.

Most people are saving for near-term goals, such as a vacation or to build an emergency fund. Only one in three workers under 35 are saving for retirement. And those workers with a bachelor’s degree were much more likely in general to be saving for retirement than people with an associate’s or those who did not have a degree.

The numbers also support, at least in part, a concern that many financial advisers have been bringing up for years: That people with student loan debt may have a harder time saving for retirement. Workers who had a degree but did not borrow were much more likely to have saved at least $50,000 for retirement than those who did borrow for their degrees.

— Forty-two percent like their jobs.

In total, 75 percent of the young people surveyed had jobs, including 62 percent of people with full-time jobs. That’s up from last year, when 69 percent of people had jobs, including 57 of people working full-time. The shift means that fewer people are unemployed, studying or staying at home to take care of children.

The more education you have, the greater your chances of working full-time. For instance, 89 percent of people with advanced degrees were working full-time, compared to 83 percent of people with a bachelor’s degree, 61 percent of people with an associate degree and 49 percent of people who had some college but no degree.

The likelihood of having a full-time job also increased generally with age, but tapered off for people ages 34 and 35. And some young people are having a better time finding jobs they like. Forty-two percent of respondents said they were very satisfied with their jobs, up from 37 percent last year.