10 Things Your Financial Magazine Won't Tell You
A certain financial publication publishes articles about “10 Things” various businesses won’t tell you about how they operate. They recently did one on financial planners and I thought it would be fun to do one on them. While I caution people to be careful about hiring a financial planner myself, I just couldn't resist the opportunity to have a little fun with this particular financial magazine. For some reason magazines never publish things like this about themselves. With that thought in mind, here are my “10” for financial magazines.
1. The subscription renewal price we offer you is generally not the best price available
We offer various prices to various people at various times. If you hang on long enough sometimes you can get a better deal on our subscription. We routinely point out how people can save money but for some strange reason we never mention magazine subscriptions.
2. A lot of our investing advice doesn’t work
We have to come up with different investments for various issues we publish because we can’t survive telling you just one thing, such as, you’ll probably be better off investing in broad market stock and bond index mutual funds over long periods of time. How often could we repeat that and get away with selling you a renewal subscription?
Also, you may see in one issue where we have an article titled, “Building Your Wealth!!!” And a later issue with the title, “Rebuilding Your Wealth!!!” You would think people who followed our advice on building wealth wouldn't need to rebuild their wealth but, as Forrest Gump said, "It happens."
3. We may not have a lot of financial background ourselves
In a recent article on “10 Things,” we pointed out financial planners may not have that much background in the business. Guess what? We may not either. It can actually take less background to write articles than it does to become licensed to sell securities and insurance. Personally, I think you should check everyone out before taking their advice.
4. Our advice is generic
It has to be. When we write about something, we really don’t know the background of the person who is going to read the article so we have to be a little vague and general. While we don’t have much responsibility (see number 3 above) we do try to be somewhat careful about giving specific advice. When you don’t know anything about the people taking your advice this is just a good defensive approach. We don’t want to intentionally screw up anyone’s life, we just want to sell magazines!
5. A lot of our information is available for free on the Internet
We hope to change this in the future (cross your fingers for us) but for now you can read a lot of articles without going to the mailbox and then disposing of our magazines (hopefully through recycling) when you’re done with them.
6. Some information we provide is not only wrong, it is terribly wrong.
Whatever you do, please don’t go back five, ten or twenty years and read what we said. Even though we try to generalize in very broad terms, we sometimes have to be somewhat specific and in some cases we are so far off the mark you wouldn’t believe it. The best of us will occasionally issue a mea culpa but how long could we stay in business if we confessed to everything that didn’t work out?
7. We would really like to have your best interests at heart (BUT)
Sure we would, but it’s a close second to wanting, needing and being required to sell more copies of our publication in order to stay in business. If it’s down to the line and between you and us, who do you think will win out? We might try to be altruistic but we’re not stupid. After all, we have mouths to feed.
8. We don’t have to understand the things we criticize
The nice thing about being in print and living remotely from wherever our subscribers happen to live is, they’ll never get to know us well enough to realize we can take a very jaundiced view of financial planners and everyone connected with financial planning (or any industry, for that matter) without ever having done a financial plan ourselves! It’s probably the same thing in the medical world where amateurs criticize brain surgeons after a procedure. It just doesn’t take a lot of knowledge to criticize (thank goodness for us!).
9. We don’t measure up to own standards
We hold others to much higher standards than we could ever possibly meet ourselves. The nice thing is, we have rights under the 1st Amendment concerning Freedom of the Press. We can pretty much write (and say, for that matter) whatever we want as long as we don't libel or slander.
10. We reprint the same stuff over and over again
It’s called recycling in the real world. In the print world it’s called brilliant resource management. Why put the time and effort into something new when it's easy to just move a few paragraphs around and print it again? Over and over.
So, as the old quote from Leave It To Beaver Goes:
Beaver: Gee, there’s something wrong with just about everything, isn’t there Dad?
Ward: Just about, Beav.
And thank goodness or we would not be able to put these lists of “10 Things” together and earn enough to be able to afford a really good financial planner. But then, there really isn’t such a thing as a good financial planner, according to us, is there?
Wednesday, May 25, 2011
Tuesday, November 16, 2010
Restaurant.com
Restaurant.com offers discounts on dining. They could do this on a very straightforward basis, but my experience was that they don't. When I logged on recently (circa 2010) I found an offer for a restaurant we were going to visit that evening. It was a $50 certificate for $25. That would be a 50% discount which was right up my alley. After paying for it (and not paying attention as closely as I should have) I checked the actual certificate and found it required a $100 purchase. This is not the type of restaurant where it is easy to spend $100, so that really wasn't workable. I called and a nice young lady offered to make an adjustment for me, which she did. I then went back online and attempted to purchase a $25 certificate. This was not available using the "code" I was given for the refund. I could only purchase this item as a "new" customer - not with this code. Then I started doing the math (and this is why you need to learn math in school, boys and girls). The $25 certificate requires a $50 purchase. That means I would pay $17.50 to Restaurant.com for essentially a $7.50 "discount." Since I'm required to make a $50 purchase that means the actual $7.50 "discount" works out to a whopping 15%. Needless to say, I won't be a Restaurant.com customer in the future.
Friday, October 1, 2010
Concise Financial Plan
The Shortest Financial Plan in The World
Or
____________________________________________________
Everything You Need to Know About Personal Investing
By Scott Adams
Make a will.
Pay off your credit card balance.
Get term life insurance if you have a family to support.
Fund your company 401k to the maximum.
Fund your IRA to the maximum.
Buy a house if you want to live in a house and can afford it.
Put six months’ of expenses in a money market account.
Take whatever money is left over and invest 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement.
If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.
_______________________________________________________
Scott Adams is the creator of the Dilbert cartoons and heaven forbid I upset him and end up being targeted by Dilbert but, I just have to add my two cents worth.
While the items above were not numbered in his book Dilbert And The Way Of The Weasel it is implied that this is the order in which to approach them. My preference would be to change the order a little so that instead of paying off your credit card balance to the exclusion of everything else, you start building your six months (or twelve months) emergency fund as you pay off credit cards. Maybe at a 50/50 ratio or something like that.
Getting term life insurance will work, but don’t forget the other insurance you need to carry on your car, home, health, etc.
Obviously there is much more to be done for a full financial plan but Scott did his homework and intentionally stripped this down for efficiency. That said, one thing you may notice about financial planning is that almost every planner will have a little different take on what you should do. I would suggest, however, that you never abdicate completely. Stay engaged and make sure any plan fits you personally.
I’m thinking maybe 65/35 or 75/25 on those investments but then that’s just me…
Or
____________________________________________________
Everything You Need to Know About Personal Investing
By Scott Adams
Make a will.
Pay off your credit card balance.
Get term life insurance if you have a family to support.
Fund your company 401k to the maximum.
Fund your IRA to the maximum.
Buy a house if you want to live in a house and can afford it.
Put six months’ of expenses in a money market account.
Take whatever money is left over and invest 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement.
If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.
_______________________________________________________
Scott Adams is the creator of the Dilbert cartoons and heaven forbid I upset him and end up being targeted by Dilbert but, I just have to add my two cents worth.
While the items above were not numbered in his book Dilbert And The Way Of The Weasel it is implied that this is the order in which to approach them. My preference would be to change the order a little so that instead of paying off your credit card balance to the exclusion of everything else, you start building your six months (or twelve months) emergency fund as you pay off credit cards. Maybe at a 50/50 ratio or something like that.
Getting term life insurance will work, but don’t forget the other insurance you need to carry on your car, home, health, etc.
Obviously there is much more to be done for a full financial plan but Scott did his homework and intentionally stripped this down for efficiency. That said, one thing you may notice about financial planning is that almost every planner will have a little different take on what you should do. I would suggest, however, that you never abdicate completely. Stay engaged and make sure any plan fits you personally.
I’m thinking maybe 65/35 or 75/25 on those investments but then that’s just me…
Monday, August 16, 2010
Bonded and Fully Insured
Nothing will save you money like making informed decisions. You can’t do that if you accept everything at face value. Case in point, the phrase “Bonded and Fully Insured.”
This wording can be seen in advertisements and on vehicles. What does it mean to you? Probably peace of mind that you have nothing to worry about if these people do work in or on your home. That’s what it implies but let’s dig a little deeper.
Bonded could simply mean they have acquired the necessary license and permit bond to do business. This doesn’t do anything for you. They may also have an employee dishonesty bond but this protects them, not you. There are bonds available that will protect you and an example is a Janitorial Bond which some cleaning companies purchase. If an employee steals your money while cleaning then there may be coverage for your loss. Some bonds require that the suspect be convicted of the theft before they will pay. So you have to make the accusation (if there are five people cleaning your house at the same time I don’t know how you sort this out) and the person must be prosecuted and convicted.
So the next time you see “Bonded” in an advertisement you might wonder exactly what they are saying.
Fully Insured is even worse. No one I know in the insurance business can agree on what this means. If they can’t, how is it a local contractor can slap that on the side of their truck and use it as advertising (easy, they just do it).
Here’s a short list of things that can go wrong. First, they may not have all the policies they need. Generally a business needs a liability policy, an auto policy and workers compensation (I’m oversimplifying for purposes of this example.) Also, there are different types of coverage available on a general liability policy and there are different limits. Let’s say the contractor has a coverage limit of $300,000 on his liability policy but burns down your $500,000 house. We’d probably agree he was not “Fully” insured at that point. Since you probably won’t read his insurance policies, you won’t know the breadth of coverage he carries so there could be a loss which is not covered at all.
When I have work done by certain companies at our house I request a Certificate of Insurance from them. This lists the policies they currently have and indicates that as of the date of the certificate, coverage is in force. But, if a payment is due the next day and it's not paid, their policies can cancel and they’ll be on your property doing work without insurance coverage. Obviously they are not fully insured at that point.
Besides requesting the Certificate, I usually call the agent the day before and verify that coverage is in force. I don’t, for example, like having people on my roof who are not insured for workers compensation. If something happens I want to make sure the worker is taken care of and I’m not on the hook.
So, the next time someone says they are “Bonded and Fully Insured” ask them exactly what that means. You might even get a blank stare and that, of course, is not a good thing.
With special thanks to Doug Kinney, Ernie Lee and Gene Stuart for insight and information.
This wording can be seen in advertisements and on vehicles. What does it mean to you? Probably peace of mind that you have nothing to worry about if these people do work in or on your home. That’s what it implies but let’s dig a little deeper.
Bonded could simply mean they have acquired the necessary license and permit bond to do business. This doesn’t do anything for you. They may also have an employee dishonesty bond but this protects them, not you. There are bonds available that will protect you and an example is a Janitorial Bond which some cleaning companies purchase. If an employee steals your money while cleaning then there may be coverage for your loss. Some bonds require that the suspect be convicted of the theft before they will pay. So you have to make the accusation (if there are five people cleaning your house at the same time I don’t know how you sort this out) and the person must be prosecuted and convicted.
So the next time you see “Bonded” in an advertisement you might wonder exactly what they are saying.
Fully Insured is even worse. No one I know in the insurance business can agree on what this means. If they can’t, how is it a local contractor can slap that on the side of their truck and use it as advertising (easy, they just do it).
Here’s a short list of things that can go wrong. First, they may not have all the policies they need. Generally a business needs a liability policy, an auto policy and workers compensation (I’m oversimplifying for purposes of this example.) Also, there are different types of coverage available on a general liability policy and there are different limits. Let’s say the contractor has a coverage limit of $300,000 on his liability policy but burns down your $500,000 house. We’d probably agree he was not “Fully” insured at that point. Since you probably won’t read his insurance policies, you won’t know the breadth of coverage he carries so there could be a loss which is not covered at all.
When I have work done by certain companies at our house I request a Certificate of Insurance from them. This lists the policies they currently have and indicates that as of the date of the certificate, coverage is in force. But, if a payment is due the next day and it's not paid, their policies can cancel and they’ll be on your property doing work without insurance coverage. Obviously they are not fully insured at that point.
Besides requesting the Certificate, I usually call the agent the day before and verify that coverage is in force. I don’t, for example, like having people on my roof who are not insured for workers compensation. If something happens I want to make sure the worker is taken care of and I’m not on the hook.
So, the next time someone says they are “Bonded and Fully Insured” ask them exactly what that means. You might even get a blank stare and that, of course, is not a good thing.
With special thanks to Doug Kinney, Ernie Lee and Gene Stuart for insight and information.
Wednesday, April 28, 2010
Lakefront Property
We received an offer in the mail recently to buy "Dockable Lakefronts" with a "New 2,500 sq. ft. Log Home Package!*" You no doubt noticed the asterisk right away. Oh, it was a "One Day Only Sale!" and it is "convenient" to where we live. Just minutes from the I-57 and I-24 interchange.
Interestingly, they don't give specific directions on how to get there. You call an 800 number first. I guess they want to check you out before you check them out.
Now to the asterisk. In very small print at the bottom of the page it indicates: "Log Home Package consists of land and building materials. Construction is buyers responsibility. Log home will differ from home shown. Some restrictions apply."
I was disappointed I apparently was not getting a brand new, beautiful 2,500 sq. ft. home on a dockable lake lot for only $49,900. Life just isn't fair.
There are paved roads and underground utilities including water, so that's good, but what extra expenses could possibly be added to this dream purchase? What does it cost to put a 2,500 sq. ft. log home "kit" together? And does it include plumbing? Heating & air conditioning? Appliances? Furniture? (Probably not) So, what is your guess the final cost of this convenient weekend getaway would be? As long as we're at it, let's figure in taxes, utilities and maintenance. Oh, did I mention it seems to be located about 162 miles from where we live?
I did a search on the Internet which indicates for some log homes the rough final cost is $150 to $200 per sq. ft. If you take 2,500 x $150 that would be $375,000. I'm not sure how the land figures into that and you could do some of the assembly work yourself or maybe just the interior. But a fairly reasonable wild guess would put the cost of this project at around $200,000 to $250,000. That's a far cry from "$49,000!" (Their exclamation point, not mine)
I'm not saying you should never buy a nice second home conveniently located to wherever you live. What I am saying is, do the math. Ask all the questions and get good answers. Then figure out how much more than the advertised price you're actually going to pay.
Oh, I forgot to add in the cost of having a dock built and buying a boat to use. It's so easy to overlook certain minor points when you're chasing a hot bargain. Did I also forget the insurance on the house, the dock and the boat? Boy, these things sure add up.
And another thing, if someone has already gone to all the expense of having one of these log homes built but they want to sell (maybe they forgot to add up all the expenses and can't afford it?) then you may have an opportunity to buy it at a better price. These things do happen.
If you've never moved into a newly construction home, visit with someone who has. They can probably tell you interesting stories about the additional expenses they had not anticipated.
Did I mention this area is probably "unprotected" for fire department services which means the insurance would generally be much more expensive? I wonder if the driveway off the road would need to be paved?
Again, I'm not saying never buy something like this, just make sure you do the math first.
Supplemental I: We recently received another "One Day Only" offer from this same operation for "Phase II". If I'm reading the promo correctly, the dockable lakefronts now start at only $39,900. (I guess waiting a few months for Phase II makes the 20% price drop worthwhile) But wait, there is now a special offer of a "Lakefront Estate & A New 2,500 Sq. Ft. Log Home Package!* (See note on asterisk above) Only $79,900." The $49,900 log home in the original ad is no longer listed separately. And, since there is probably a difference between a "Lakefront Estate" and a "Dockable Lakefront" it's hard to break the price down for a true comparison. But, this is Phase II so obviously things are selling.
Supplemental II: Another One Day Only offer arrived for Beautiful Wooded Estates with Direct Lake Access From Only $9,900! It seems amazing to me that an "Estate" can be purchased for so little money but that's what obviously makes it a bargain. They are offering 100% financing too. Oh, and "Unlimited Outdoor Activities" which is undefined but it does conjure up an exciting image in my mind.
Supplemental III: Another offer arrived indicating they are holding a Liquidation Sale on 8/27/11. Again they have 100% financing available. Prices "From Only $24,900! Comparable Lakefronts have Sold For Up to $130,000" (Sure glad we waited for the bargain pricing.) This is "Bank Ordered Pricing" whatever that is. They also quote CNN Money, July 2011,"A bright spot for bargain hunters: REAL ESTATE... making now a compelling time to acquire a second address." And SmartMoney, January 2011, "Smart people are buying REAL ESTATE." (For some reason I don't think SmartMoney capitalized real estate, but it works better for their advertising literature.) Again, no specific location information. You call and they'll let you know where they are.
Interestingly, they don't give specific directions on how to get there. You call an 800 number first. I guess they want to check you out before you check them out.
Now to the asterisk. In very small print at the bottom of the page it indicates: "Log Home Package consists of land and building materials. Construction is buyers responsibility. Log home will differ from home shown. Some restrictions apply."
I was disappointed I apparently was not getting a brand new, beautiful 2,500 sq. ft. home on a dockable lake lot for only $49,900. Life just isn't fair.
There are paved roads and underground utilities including water, so that's good, but what extra expenses could possibly be added to this dream purchase? What does it cost to put a 2,500 sq. ft. log home "kit" together? And does it include plumbing? Heating & air conditioning? Appliances? Furniture? (Probably not) So, what is your guess the final cost of this convenient weekend getaway would be? As long as we're at it, let's figure in taxes, utilities and maintenance. Oh, did I mention it seems to be located about 162 miles from where we live?
I did a search on the Internet which indicates for some log homes the rough final cost is $150 to $200 per sq. ft. If you take 2,500 x $150 that would be $375,000. I'm not sure how the land figures into that and you could do some of the assembly work yourself or maybe just the interior. But a fairly reasonable wild guess would put the cost of this project at around $200,000 to $250,000. That's a far cry from "$49,000!" (Their exclamation point, not mine)
I'm not saying you should never buy a nice second home conveniently located to wherever you live. What I am saying is, do the math. Ask all the questions and get good answers. Then figure out how much more than the advertised price you're actually going to pay.
Oh, I forgot to add in the cost of having a dock built and buying a boat to use. It's so easy to overlook certain minor points when you're chasing a hot bargain. Did I also forget the insurance on the house, the dock and the boat? Boy, these things sure add up.
And another thing, if someone has already gone to all the expense of having one of these log homes built but they want to sell (maybe they forgot to add up all the expenses and can't afford it?) then you may have an opportunity to buy it at a better price. These things do happen.
If you've never moved into a newly construction home, visit with someone who has. They can probably tell you interesting stories about the additional expenses they had not anticipated.
Did I mention this area is probably "unprotected" for fire department services which means the insurance would generally be much more expensive? I wonder if the driveway off the road would need to be paved?
Again, I'm not saying never buy something like this, just make sure you do the math first.
Supplemental I: We recently received another "One Day Only" offer from this same operation for "Phase II". If I'm reading the promo correctly, the dockable lakefronts now start at only $39,900. (I guess waiting a few months for Phase II makes the 20% price drop worthwhile) But wait, there is now a special offer of a "Lakefront Estate & A New 2,500 Sq. Ft. Log Home Package!* (See note on asterisk above) Only $79,900." The $49,900 log home in the original ad is no longer listed separately. And, since there is probably a difference between a "Lakefront Estate" and a "Dockable Lakefront" it's hard to break the price down for a true comparison. But, this is Phase II so obviously things are selling.
Supplemental II: Another One Day Only offer arrived for Beautiful Wooded Estates with Direct Lake Access From Only $9,900! It seems amazing to me that an "Estate" can be purchased for so little money but that's what obviously makes it a bargain. They are offering 100% financing too. Oh, and "Unlimited Outdoor Activities" which is undefined but it does conjure up an exciting image in my mind.
Supplemental III: Another offer arrived indicating they are holding a Liquidation Sale on 8/27/11. Again they have 100% financing available. Prices "From Only $24,900! Comparable Lakefronts have Sold For Up to $130,000" (Sure glad we waited for the bargain pricing.) This is "Bank Ordered Pricing" whatever that is. They also quote CNN Money, July 2011,"A bright spot for bargain hunters: REAL ESTATE... making now a compelling time to acquire a second address." And SmartMoney, January 2011, "Smart people are buying REAL ESTATE." (For some reason I don't think SmartMoney capitalized real estate, but it works better for their advertising literature.) Again, no specific location information. You call and they'll let you know where they are.
Friday, April 2, 2010
Your Credit Score
Your credit score has become a very, very important number. It determines whether you’ll get a loan, the interest rate you’ll pay (the lower your score the more you’ll pay), how much you are charged for certain insurance policies and sometimes whether you get a job or not.
I mentioned in a prior post that Warren Buffett’s credit score was 718. This was due to 23 missed payments on a $294 loan. Turns out there were erroneous entries on his credit report. (I happen to know Buffett would never borrow more than $100) If he can have errors on his credit report, you can too.
It is critical that you keep track of this number. Complete books have been written on this subject and I recommend Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston.
Your credit “report" and your credit “score” are two separate things:
1. Your credit report contains information on the various credit card accounts, car loans and home mortgages you have and the balances and payment history of each account.
2. Companies then analyze that information and use it to create your credit score. Several companies do this and they will each have a different number and “range” (showing how good or bad your score is.) FICO is generally recognized as the most prominent credit scoring company.
There have been sites on the Internet which offer to provide you with a “free” credit report, but many of those sites required you to start a subscription service which you end up paying for.
The legitimate Web site I’m familiar with is www.AnnualCreditReport.com where you can order your totally free (with no strings attached) credit reports. You can order them all at once or stagger them at 4 month intervals so you’ll have an ongoing way to see the activity on your report. However, not every business reports to all three of the credit agencies so there may be some information on one which is not on the other.
Some credit report companies that end up charging for reports have paid to have their information listed on certain internet search sites so they will show up when a search is done for “free credit report.” Just be aware.
Ben Stein is a noted multipurpose talent who has written several financial books. He may be better known as the economics teacher in the movie Ferris Bueller's Day Off. He has been on an ad promoting a free (FreeScore.com) credit score service. The actual name, which includes “Free,” would seem to imply you can get a free credit score at this site but it appears you need to give them a credit card number and accept a $1 charge on your card. After seven days of “free trial” you’ll be a member at $29.95 a month. I’m sure this is all very legit and aboveboard and with Ben Stein endorsing it I’m sure he checked it out to make sure his fans would not be taken advantage of, but you won’t know a lot of this stuff before you sign up. I checked the FAQs and it doesn’t ever seem to lay out the exact process involved.
The function of marketing is to reel you in so a sale can be made. There is nothing inherently wrong with this process. It’s basic free enterprise. It gets a little dicey though when you get right to the point of purchase and THEN the full details are disclosed. Of course, it’s even worse if the details are not actually ever disclosed.
Borrowing sensibly and making every single payment by its due date will go a long way toward keeping your credit score in the higher range. Interestingly, when you do this your interest rates will generally be lower which makes it easier to make the payments. Conversely, if you skip payments your interest rate will probably increase which makes it even harder to make your payments. Either way, it can be a self-fulfilling prophecy.
There are a lot of errors on credit reports. One source indicates 25% have errors and a government site reports up to 70% may have errors. Whatever the number is, it just makes good sense to check your information regularly to see that it is error free. It’s usually easier to dispute errors from the last year than it is to work on something from five years ago. Also, if someone has your credit information and is creating accounts or stealing your identity, the sooner you find out about it the better.
Supplemental: The recent CARD Act of 2009 put the kibosh on many of the practices used by companies to entice people to sign up for free credit reports and scores and then begin charging them. To avoid the process of weeding through various offers and conditions, just stick with www.AnnualCreditReport.com
I mentioned in a prior post that Warren Buffett’s credit score was 718. This was due to 23 missed payments on a $294 loan. Turns out there were erroneous entries on his credit report. (I happen to know Buffett would never borrow more than $100) If he can have errors on his credit report, you can too.
It is critical that you keep track of this number. Complete books have been written on this subject and I recommend Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston.
Your credit “report" and your credit “score” are two separate things:
1. Your credit report contains information on the various credit card accounts, car loans and home mortgages you have and the balances and payment history of each account.
2. Companies then analyze that information and use it to create your credit score. Several companies do this and they will each have a different number and “range” (showing how good or bad your score is.) FICO is generally recognized as the most prominent credit scoring company.
There have been sites on the Internet which offer to provide you with a “free” credit report, but many of those sites required you to start a subscription service which you end up paying for.
The legitimate Web site I’m familiar with is www.AnnualCreditReport.com where you can order your totally free (with no strings attached) credit reports. You can order them all at once or stagger them at 4 month intervals so you’ll have an ongoing way to see the activity on your report. However, not every business reports to all three of the credit agencies so there may be some information on one which is not on the other.
Some credit report companies that end up charging for reports have paid to have their information listed on certain internet search sites so they will show up when a search is done for “free credit report.” Just be aware.
Ben Stein is a noted multipurpose talent who has written several financial books. He may be better known as the economics teacher in the movie Ferris Bueller's Day Off. He has been on an ad promoting a free (FreeScore.com) credit score service. The actual name, which includes “Free,” would seem to imply you can get a free credit score at this site but it appears you need to give them a credit card number and accept a $1 charge on your card. After seven days of “free trial” you’ll be a member at $29.95 a month. I’m sure this is all very legit and aboveboard and with Ben Stein endorsing it I’m sure he checked it out to make sure his fans would not be taken advantage of, but you won’t know a lot of this stuff before you sign up. I checked the FAQs and it doesn’t ever seem to lay out the exact process involved.
The function of marketing is to reel you in so a sale can be made. There is nothing inherently wrong with this process. It’s basic free enterprise. It gets a little dicey though when you get right to the point of purchase and THEN the full details are disclosed. Of course, it’s even worse if the details are not actually ever disclosed.
Borrowing sensibly and making every single payment by its due date will go a long way toward keeping your credit score in the higher range. Interestingly, when you do this your interest rates will generally be lower which makes it easier to make the payments. Conversely, if you skip payments your interest rate will probably increase which makes it even harder to make your payments. Either way, it can be a self-fulfilling prophecy.
There are a lot of errors on credit reports. One source indicates 25% have errors and a government site reports up to 70% may have errors. Whatever the number is, it just makes good sense to check your information regularly to see that it is error free. It’s usually easier to dispute errors from the last year than it is to work on something from five years ago. Also, if someone has your credit information and is creating accounts or stealing your identity, the sooner you find out about it the better.
Supplemental: The recent CARD Act of 2009 put the kibosh on many of the practices used by companies to entice people to sign up for free credit reports and scores and then begin charging them. To avoid the process of weeding through various offers and conditions, just stick with www.AnnualCreditReport.com
Wednesday, March 31, 2010
Lunch With Warren Buffett - Part 2
Each year a lunch with Warren Buffett is auctioned online by the Glide Foundation as a fund raiser. In 2007 it went for $650,100, in 2008 for $2.1 million and in 2009 the winning bid was $1.7 million. In 2006 my wife, Shelly, and I had lunch with Warren for free (and he bought). We felt like we were getting a good deal at the time but felt even better when the auction amounts went so high.
I began corresponding with Warren in 1994. It turned out that one of his earliest investments was in The Western Insurance Companies which were based in my hometown of Fort Scott, Kansas, about 80 miles south of Kansas City. Warren said he put 50% of his net worth in stock of The Western and “It did very, very well.”
When we arrived, Shelly and I were invited into the Berkshire Hathaway offices for a short visit. There is no fancy lobby, no expensive wood paneling and only 19 people work at world headquarters. They oversee more than 60 companies which have 200,000+ employees. In 2009 revenues for the entire company were over $100 billion. There is probably not a more efficiently run main office, for the size of the overall company, in the country.
During our visit Buffett went through the process of finding and analyzing The Western which included contacting the Nebraska Department of Insurance as well as Independent Insurance Agents who represented The Western and agents who competed against the company. Then Buffett went to Kansas City and met with then CEO Ray Duboc. This was intriguing to me because he did the same thing at GEICO, with Lorimer Davidson. Buffett was 21 years old at the time. How many 21 year olds walk in and get access to company CEOs? In a letter after our lunch Buffett wrote, "Western, in a major way, contributed to the financial success I had. I owe a lot to Ray Duboc, the Western and Fort Scott, Kansas."
During lunch we discussed reinsurance and the New Madrid fault catastrophe exposure. Berkshire Hathaway writes insurance for insurance companies, which is called reinsurance. Those companies in turn write the actual polices we purchase to cover our homes, automobiles and businesses. He mentioned a $1.5 billion fire-following earthquake reinsurance contract Berkshire Hathaway writes for a major insurance company. One of his responsibilities in running the company is to manage the amount of exposure the company has to any one catastrophe which can occur, which is why he keeps an eye on the New Madrid situation.
We talked about the best deal on credit cards. He showed me his American Express Green card and I showed him my American Express Platinum card. We compared annual fees and mine was lower. When I told him it was a Costco American Express card he smiled and said they are a good company and the vice chairman of Berkshire Hathaway, Charlie Munger, is on the board of directors there. Buffett is notoriously frugal so being able to "one-up" him on the credit card fee was a bit of a coup.
When I mentioned a free meal we had received during our trip to Omaha, Warren pulled out his billfold and showed us complementary dining cards he has from a few restaurants where he can eat for free. You wouldn't think the richest man in the world would even keep cards like that, but he is a known bargain hunter. I won't mention any names, but one was an establishment that guys really like because the servers are all cute girls in somewhat skimpy outfits.
One of my goals during the visit was to ask Buffett a question he could not answer. I accomplished this by asking, "Do you know what your credit score is?" He said he did not. I guessed he had not experienced any problems obtaining credit along the way. In the March 31, 2008 issue of Fortune Magazine I read where he did check his credit score. It was 718, which is slightly below the U.S. median. He quipped, "I've been telling my family for years my credit was sort of shaky." Turns out there were some incorrect entries on his credit report.
Specific investments were not discussed, except for one company in Kansas City. It was a smaller company and one he had not heard of. Berkshire Hathaway has grown in size to the point where investing in or buying smaller companies won't have enough impact on the results to make it worthwhile.
When you're really good at something it looks very easy. Buffett started his career with $10,000 and turned it into $60+ billion. In 2010 he was the 3rd richest man in the world, per Forbes Magazine. All he did was look for good companies to invest in or buy outright and then he hung on over a long period of time. It sounds simple and it is, but it's very difficult to implement.
I began corresponding with Warren in 1994. It turned out that one of his earliest investments was in The Western Insurance Companies which were based in my hometown of Fort Scott, Kansas, about 80 miles south of Kansas City. Warren said he put 50% of his net worth in stock of The Western and “It did very, very well.”
When we arrived, Shelly and I were invited into the Berkshire Hathaway offices for a short visit. There is no fancy lobby, no expensive wood paneling and only 19 people work at world headquarters. They oversee more than 60 companies which have 200,000+ employees. In 2009 revenues for the entire company were over $100 billion. There is probably not a more efficiently run main office, for the size of the overall company, in the country.
During our visit Buffett went through the process of finding and analyzing The Western which included contacting the Nebraska Department of Insurance as well as Independent Insurance Agents who represented The Western and agents who competed against the company. Then Buffett went to Kansas City and met with then CEO Ray Duboc. This was intriguing to me because he did the same thing at GEICO, with Lorimer Davidson. Buffett was 21 years old at the time. How many 21 year olds walk in and get access to company CEOs? In a letter after our lunch Buffett wrote, "Western, in a major way, contributed to the financial success I had. I owe a lot to Ray Duboc, the Western and Fort Scott, Kansas."
During lunch we discussed reinsurance and the New Madrid fault catastrophe exposure. Berkshire Hathaway writes insurance for insurance companies, which is called reinsurance. Those companies in turn write the actual polices we purchase to cover our homes, automobiles and businesses. He mentioned a $1.5 billion fire-following earthquake reinsurance contract Berkshire Hathaway writes for a major insurance company. One of his responsibilities in running the company is to manage the amount of exposure the company has to any one catastrophe which can occur, which is why he keeps an eye on the New Madrid situation.
We talked about the best deal on credit cards. He showed me his American Express Green card and I showed him my American Express Platinum card. We compared annual fees and mine was lower. When I told him it was a Costco American Express card he smiled and said they are a good company and the vice chairman of Berkshire Hathaway, Charlie Munger, is on the board of directors there. Buffett is notoriously frugal so being able to "one-up" him on the credit card fee was a bit of a coup.
When I mentioned a free meal we had received during our trip to Omaha, Warren pulled out his billfold and showed us complementary dining cards he has from a few restaurants where he can eat for free. You wouldn't think the richest man in the world would even keep cards like that, but he is a known bargain hunter. I won't mention any names, but one was an establishment that guys really like because the servers are all cute girls in somewhat skimpy outfits.
One of my goals during the visit was to ask Buffett a question he could not answer. I accomplished this by asking, "Do you know what your credit score is?" He said he did not. I guessed he had not experienced any problems obtaining credit along the way. In the March 31, 2008 issue of Fortune Magazine I read where he did check his credit score. It was 718, which is slightly below the U.S. median. He quipped, "I've been telling my family for years my credit was sort of shaky." Turns out there were some incorrect entries on his credit report.
Specific investments were not discussed, except for one company in Kansas City. It was a smaller company and one he had not heard of. Berkshire Hathaway has grown in size to the point where investing in or buying smaller companies won't have enough impact on the results to make it worthwhile.
When you're really good at something it looks very easy. Buffett started his career with $10,000 and turned it into $60+ billion. In 2010 he was the 3rd richest man in the world, per Forbes Magazine. All he did was look for good companies to invest in or buy outright and then he hung on over a long period of time. It sounds simple and it is, but it's very difficult to implement.
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