Handle Your Family Finances With Tips From A Financial Journalist Who’s Seen All The Scams

It's the big payback.

by Chase Scheinbaum
Originally Published: 
Family Finances Helen Olen

Everything about being a parent is expensive: Diapers, food, toys, college … bail. In today’s world where the cost of living is yuge, the rent is too damn high, and incomes are stagnant, how you handle your personal finances could be the difference between vacations to see Mickey Mouse or day trips to see Chuck E. Cheese.

If you recall a little year known as 2009 (or the movie The Big Short) you’re aware how the predatory financial industry is trying to screw you at every turn. Fortunately, there is no one more clued into the tricks of these fat cats than financial journalist Helaine Olen, a Slate columnist and co-author of The Index Card: Why Personal Finance Doesn’t Have to Be Complicated. Even better news: She’s willing to share her advice.

Consolidate Student Loans Through The Federal Government (And No One Else)

The idea that you’re still paying off your college education when you’ve been out of school longer than you were ever in school is ridiculous. Olen says there is a light at the end of the debt tunnel. If you received federal education loans they’re eligible for income-based repayment plans via the federal government. Those loan consolidation commercials may seem tempting (especially with the 90s production quality), but are actually terrible.

“A lot of bad loaners charge fees for doing what you can do for free,” she says. “If you’re in doubt, reach out to the nonprofit National Foundation for Credit Counseling, and let them guide you through the process.” You might have to let them laugh at you for a while.

Get The Fiduciary Standard

Your financial advisor is like family to you — but he may actually be the drunk uncle. ”No one tells you the advice is weighted in the investment giver’s favor,” Olen says. She says you may think your advisor is sworn to uphold fiduciary duty, an ethical and legal standard that is the financial equivalent of the Hippocratic Oath. You would be incorrect.

Olen points out that, like Taco Bell’s menu, advisors only have to adhere to the lower suitability standard, which allows them to steer you toward investments that yield higher fees for themselves. Beginning in April 2017, financial advisors will need to follow fiduciary rules when advising on retirement accounts, but that’s about it. So, if you’re putting any securities in your kid’s name, you want to do your own research.

Teaser Rates Are For Suckers

To paraphrase Olen, “zero down” and “low interest” are loan terms that are synonymous with BS. Some dictate that if you miss even a single payment or make one late, you can face high interest rates for the entire life of the loan — even retroactively stretching back to the loan’s inception. If you’re thinking that the government fixed that a few years ago, rules to protect consumers from these practices rarely do. “Don’t miss a payment, whatever you do,” says Olen.

Don’t Forget About Automatic Payments

Olen says most people think that getting their electric bill or credit card payment automatically deducted from their bank account is a set it and forget it way to live. But what happens when credit cards are lost or stolen? Or the bank makes a mistake? Or the company you’re hoping to pay monthly experiences some sort of clerical hiccup, resulting in a missed payment? Or you get hacked?

“I’ve heard so many horror stories with this stuff, I tell people to avoid automatic payments,” she says. Instead, Olen recommends setting aside one day per month to look everything over and click the payment buttons yourself. Nobody said that it wasn’t a pain in the ass — but it’s better than waking up to find mysterious amounts of money have disappeared.

Ignore Big Time Personal Finance Pundits

Jim Cramer and Suze Orman are entertaining if you enjoy the sound of balloons rapidly deflating, just don’t do a damn thing they say, Olen advises. Orman, she says, hardly invests in the stock market herself and “her advice has been all over the place for years.” And Cramer tells viewers to invest in individual stocks — something Olen strenuously advises against. “Academic research shows that less than one percent of us have the ability to guess the market year in and year out, including professional money managers,” she says. “He’s telling you to do something flat out wrong.” Jon Stewart was right.

Keep a 3-to-6 Month Emergency Fund

Olen says to always maintain enough cash to get you through 3 to 6 months of hard times — money set aside before anything goes to general savings or index funds. “If you don’t, you’ll have an emergency and you’ll have to sell off your stocks. That’s an expensive emergency fund because you’ll pick up fees buying and selling, and you may have to sell them for less than you bought them,” Ugh, why didn’t you financial advisor tell you you could lose money in the stock market?

Invest in Low Fee Index Funds

Before you start investing your money, you need money to invest. Step 1: Pay off your debt. Step 2: Put 10 to 20 percent of your income into savings (on top of the emergency fund). Step 3: Place whatever’s left over in index funds. Olen says rather than mess around with stock picking, invest in low fee index funds like those from the Vanguard Group. Index funds are a group of funds collected to mimic popular indexes like the S&P 500. Step 4: Work hard, be kind, bring your wife flowers once in a while, and don’t screw up your kids too much.

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