9 Things I Wonder About IPOs

• Saving & Investing
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The initial public offering (IPO) of the international e-commerce company Alibaba recently attracted a lot of attention — not to mention a couple billion dollars of investment money. This might be okay if it were an isolated occurrence, but lately there has been a flurry of IPOs — and they make me feel a little itchy about the investment environment.

I understand the principle that growing companies opening themselves up to new sources of capital is one way the economy grows. However, when investors go overboard for IPOs — either by overpaying for specific stocks or supporting too many new issues at once — it raises questions about both individual stocks and the market as a whole.

What kind of questions? Well, here are nine things that IPOs make me wonder:

  1. Is it just a status buy? The clamor to get in on IPOs reminds me of the lines of people outside a store waiting to buy some fad toy. You have to wonder how many of these people are making independent assessments of value, as opposed to just trying to capture the status of being one of the first to own a much-hyped introduction — in effect, people who are just lining up because everyone else is lining up. I don’t see much utility in going to great lengths to own something a little earlier than everyone else, and I also know that kind of hype can obscure the questionable worth of these fads. After all, do Cabbage Patch dolls really seem worth all the fuss in retrospect? Or, to ask about a more recent example, how’s that Groupon stock doing?
  2. Raising cash or cashing out? Publicly, companies issuing stock talk about raising capital so they can continue to invest in the business plan. Privately, the owners of those companies talk about creating liquidity — a smooth way of saying they are giving themselves a means of cashing out while the company is still worth something. Trying to figure out whether a management group is really raising cash or cashing out leads me to ask this next question.
  3. Raising cash for what? Given the magnitude of the capital being raised, there should be some pretty extensive expansion/upgrading plan for how to use that money to grow the company. If you don’t see a plan commensurate with the amount of money being raised by an IPO, you have a right to question the motives of management.
  4. Can entrepreneurs and public shareholders get along? Entrepreneurs are often stubborn, long-term thinkers who would rather pour profits into the next idea than simply bank the profits from their successes. That’s why some of them make a huge difference to the economy and society — and also why many others eventually fail. Once a company goes public, there is a natural friction between this kind of risk-taking, long-range thinking and the demand of shareholders for positive quarterly results.
  5. What’s the incentive now? The classic start-up fantasy is that a small group of young, hungry entrepreneurs working out of a garage somewhere goes on to become instant billionaires on the day of their IPO. The question is, once they have achieved that fantasy, how many of them can stay hungry about their work?
  6. Is the earnings multiple justified? You may love a company’s products and the way it does business, but that does not mean it’s worth the price once the stock gets driven up by IPO hype. Alibaba, for example, was recently selling for just over 40 times its annual earnings. That means it would take you 40 years to earn back each dollar you invest, unless the company’s earnings grow into that price level — which leads me to another question….
  7. How does this impact the earnings growth rate? An essential part of IPO hype is the growth story — imagining what the company will become if it can simply continue its impressive rate of growth to date. The problem is, given the scale necessary to be considered ready for an IPO, and the investment implicit in raising that much capital, continuing that growth rate for years and years becomes problematical. Mature companies simply don’t have the opportunity to match the growth rate of new start-ups.
  8. Will there be a better buying opportunity in the near future? If you still like the company, consider whether there might be a better buying opportunity after the initial hype has died down — either when the stock experiences a post-offering slump or during the next broad market downturn.
  9. Has indiscriminate investing taken over? This is the bigger-picture question, about the state of the market as a whole when IPOs start to pop like popcorn. In that environment, are people still thinking of companies as an earnings mechanism designed to pay a return to shareholders, or are they just buying stocks like lottery tickets?

None of this is meant to imply that you should not invest in IPOs, but you should ask yourself some tough questions before you do.

What the CIA Knows About Your Finances

• Banking
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This post comes from Julia Chang at our partner site LearnVest.

cia data

First it was your phone records; now it could be your financial transactions.

The Wall Street Journal reports that the Central Intelligence Agency is collecting data from U.S. money-transfer companies such as Western Union in an effort to find or track suspected funding for terrorists.

With its focus on foreign intelligence, the CIA cannot target Americans in its investigations, but it can conduct domestic operations that aid its intelligence-gathering. The agency says it isn’t collecting transaction information that takes place within the U.S.—but it can obtain records through court order for those that happen between the U.S. and foreign countries.

The CIA is being allowed to do this under the same provision of the Patriot Act that enables the National Security Agency to collect phone records that they believe to be relevant to a terrorist investigation. But the broad interpretation of “relevant, ” as brought to light by whistleblower Edward Snowden, meant the NSA was able to collect the records of millions of Americans. This revelation raised red flags for lawmakers concerned about privacy.

The justification for the program comes from the discovery that some of the terrorists involved in the 9/11 hijacking were using money-transfer services to send funds to one another.

Depending on the company, some service providers will ask for such information as names, addresses, phone numbers and even Social Security or passport information before you can wire cash. But the CIA says it obtains the data from the company in bulk and takes efforts to mask personal information about Americans—unless that data is deemed important to foreign investigations.

Even so, some lawmakers still want to stem the use of the Patriot Act to collect large swaths of data collected on Americans.

Do these latest revelations make you nervous about your financial privacy? Here are some tips for how to safeguard your financial data.

More stories from LearnVest:

10 All-Inclusive Resort Secrets—Revealed

How I Did It: Opened My Own Etsy Shop

8 Ultimate Opening Lines for Fearless Networking

Is retirement good for you or bad for you?

• Retirement•Working
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A neighbor who lives directly below me in my condominium building wakes up before 6 a.m. each morning, gets dressed, skulks outside and on some days begins looking for parked vehicles of neighbors he doesn’t like.

Under the protective cloak of a cover of darkness, he removes a key from his pocket, walks alongside those cars, and ensures the key he’s holding gouges a line six to nine feet long in the finish. If he really doesn’t like someone, while strafing the long line in the paint job, he will dig the key in with such force that the paint on either side of the furrow literally stands at 90 degrees off the surface.

For a change of pace, he’s been known to plunge a jackknife into one of the tires of folks he doesn’t like, or rip their car’s antenna from its moorings.

That this psychopath is on the far side of 70 would surprise many people. This isn’t the kind of behavior one expects from a senior citizen. But ironically, I can attest this was a much better guy when he was younger — and had a job.

Since retiring, though, he’s had nothing to do all day. So he apparently sits around from sunup to sundown, imagining enemies and ways to get even.

Just think. At the hour most people are getting ready to head off for another productive workday, this guy who spends every hour of every day not working is out making their lives even more challenging by vandalizing their cars.

This isn’t the first time I’ve seen retirement leave an older person much the worse off. Anger, depression, domestic problems and social isolation are a few of the pathologies I’ve witnessed in folks who have “hung ’em up for good, ” presumably so they can spend every day dwelling deeply on negatives.

Good state of mind?

If it sounds like I’m not a huge fan of the retirement concept, you’re right as rain. I think retirement is one of the worst ideas anyone ever devised. That someone should spend her life in productive work where she is socially engaged and rewarded for her labors, then chuck it all to start a new chapter with vastly diminished challenges and social engagement is absolutely loony.

Sure, some people hate their jobs and can’t wait to grab the gold watch and walk away. But that doesn’t mean they can’t wake up the next day and start a new vocation doing something they love. There’s nothing about reaching your mid-60s that should consign you to the hell of afternoons with “Maury.”

So you can imagine my eyebrows arching heavenward when I came across an article two weeks ago entitled, “Retirement: A Good State of Mind.”

“Is retirement good for one’s mental health? The evidence is all over the place, ” the report discloses. “A new study of the United States and 11 European countries finds that it improves subjective well-being, measured both in terms of satisfaction with one’s life and the incidence of depression.

“The study is based on two comparable sets of surveys of age-50-plus Americans and Europeans taken in 2004, 2006 and 2010.”

Based on preliminary findings across a dozen countries, the study concluded that retirement reduces depression, has a significant positive effect on life satisfaction, and that incomes have relatively little effect on retirees’ levels of depression or their satisfaction with their lives.

The entity that funded this research? That would be the U.S. Social Security Administration, through the Retirement Research Consortium.

Hazardous to health, wealth

Again, based on what I’ve seen of a good many retirees, a more accurate picture might have been painted in a June article by Paul Irving called “Retirement is bad for your health, and your wealth.” The article’s message? The retirement years aren’t what they once were, and that might be a very good thing.

“It’s clear that the old model of retirement — days of decline and disengagement, a period of withdrawal and mass leisure — is thankfully on its way to being retired, as our goals and values change with the times, ” he wrote.

“As the world moves toward its largest-ever population of older citizens, both scientific and financial opportunity offer an encouraging new path.”

In the article, the author cites research that shows working longer confers substantial health benefits. Older folks who stay mentally and physically active give themselves an immeasurable gift, Irving writes. “Those who work and are active are less likely to develop diseases associated with aging, ” he adds. “They have a greater possibility of living longer lives, mostly free from disability.”

Engaging, enjoyable and purposeful work after age 66 can mean income, and that in turn spells less worry about outliving savings, which in turn is likely to bring enhanced health and longevity. “Work is good for self-esteem and for purposeful, financially secure and healthy aging, ” Irving concludes.

I’m not surprised the downstairs neighbor in my building hasn’t gotten this message and found something to keep him busy. Why am I not surprised? Well, he has never impressed me as the sharpest instrument in the drawer.

The same can’t be said for his key and switchblade.

Planning a fun, frugal Halloween

• Consumer•Family & Life•Frugality
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Tis’ time for the spookiest holiday of the year and a record number of Americans are planning to participate in the scare festival. According to the National Retail Federation, more than two-thirds (67.4 percent) of celebrants will buy Halloween costumes for the holiday, the most in the survey’s 11-year history. The average person will spend $77.52 this Halloween and the total spending on Halloween this year will reach $7.4 billion. That is a lot of money. Here are some tips on how to stretch the budget for everyone so there’s more fun for everyone on All Hallows’ Eve.

Costumes

The forecast is that partygoers will spend $1.1 billion on children’s costumes and $1.4 billion on adult costumes. Fido and Fluffy will also participate, with consumers planning to spend $350 on costumes for their pets. If you’re looking to slash costs, what can you do?

  • Do it yourself: Social media, especially Pinterest is full of ideas to do pretty much anything yourself and costumes are a piece of cake for a crafty person. Even if you are not a crafty person, there are still plenty of ideas and excellent step-by-step tutorials to help you whip up a great costume in an hour or two.
  • Look for a swap: I am a member of a local swap group on Facebook and it is now filling up with costume swap requests. Most people wear their costume just once, so it is pretty much brand new. Why not trade last year’s costume for something new (to you) for this year? Rinse and repeat every year, your costume spending is $0.
  • Layer up: Buy something that can be worn throughout the year and make it spooky or funny or whatever your style is, by adding some layers to it.
  • Shop your closet (or your mom’s): If you or any of your older relatives have really old clothes, like an old prom dress, that can be a great dress up. You can always create a costume from your closet by adding a few embellishments.

Party and decorations

One-third of Americans will throw or attend a Halloween party this year; and almost half the country (46.7 percent) will turn on the spooky meter and decorate their homes and yards.

  • Use what you already have:
    • Use cheap tissue paper to cover lights you already have to create an eerie glow.
    • Drape your furniture with cheap black sheets from a dollar or thrift store
    • Design your menu using an image editor like Picmonkey where there are special Halloween fonts and print them out
    • Use cheap cheesecloth to create cobwebs
    • Collect tree branches from your backyard, spray them with black spray paint and hang them from the ceiling.
  • Be creative with the menu: Again, Pinterest has plenty of great ideas from two-minute witches fingers with carrots and almonds to a much more elaborate menu that can serve your entire neighborhood. You don’t have to make special items. Simple menu items can be modified to make it a little more scary and appropriate for the occasion.

Candy

Fully 71.1 percent of America plans to hand out candy, and my family won’t be the exception. In fact, this is the major cost for us as there are quite a few kids in our neighborhood. Last year, we ended up buying bulk at Costco; this year, I am trying to be better prepared.

  • Keep an eye on candy deals: Blogs like TheCouponMom.com and TheKrazyCouponLady.com have all the deals listed out by state and store name. They also match coupons if any are available. Keep an eye on those deals for candy. Sometimes you can hit the candy jackpot at drug stores with a Sunday coupon.
  • Skip the dollar stores: I have seen a lot of sites recommend dollar stores or discount stores for candy. Personally, I don’t find that they offer good value for the money. Yes, they are cheap; but the quantity is lower than the regular stores, so you end up paying more per piece. Candy is something you need a lot of, so it is better to look at the cheapest by piece price and stock up.
  • Begin with a budget: As with any holiday or event, it is always good to begin with a budget and keep track of it as you spend on each item.
  • Don’t wait until the last minute: Planning is the best way to spend less and not go broke celebrating a holiday. If you wait until the last minute, you might have to buy everything in your over-priced neighborhood Halloween super store.
  • Get everyone in the family involved: Involve everyone in the planning and make it fun. You can have several weeks of fun for super cheap (or even for free) — make a jack-o-lantern, plan your decorations, bake pumpkin pie, involve everyone in making the costumes.
  • Hit the after-sales: Plan for next Halloween now. When the item goes on clearance, stock up on decorations and other items that can be used for a long time.
  • Use cash-back sites: When you shop, use a cash-back site like Mr. Rebates or Ebates to get something back to your wallet.
  • Stock up on some delicious pumpkins and gourds: This is not a Halloween tip per-se, but this is the time when they all go on sale. Stock up on them, prepare them however you like — pies, jams, curries, etc. — and preserve them to enjoy throughout the year.

Are you planning to celebrate Halloween this year? What are you planning to do? How are you planning to save money? Any tips you want to add?

5 Ways to Keep Email From Taking Over Your Life

• Uncategorized•Working
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This post comes from Cathie Ericson at our partner site LearnVest.

Woman Checking Email

Do you feel like you spend half your day processing emails instead of actually working?

You aren’t alone.

Marsha Egan, C.E.O. of InboxDetox.com and author of “Inbox Detox and the Habit of Email Excellence, ” says that a full inbox is “an immediate source of stress—it reminds you of everything you’re not going to get done.” According to Egan, the average worker receives 100 to 200 emails per day. Even if you only spend a minute addressing each one, that’s two to three hours on email alone!

To fight back against the inbox black hole, she says, we don’t need to pay for fancy plugins or shiny apps. ”The issue is self-management, ” Egan explains. “Outlook and Google already have built-in tools, but few people use them. The key is to manage yourself and your email habits rather than hoping technology will do it for you.”

That sounds reasonable, but how do we do it? Below, Egan shares her top five tips for minimizing an overwhelming inbox and maximizing productivity during the day.

1. Turn Off Notifications

Egan advises turning off all the “dings and flashes, ” so that office updates and team-wide invitations don’t distract you from your current task. That could mean disabling push notifications to your phone, muting the volume on your computer, or closing your email tab when you aren’t using it. It’s not enough to promise yourself you won’t look—”You have to actually shut them down, ” she says, “because you can’t help but wonder who’s trying to reach you.”

“If you’re interrupted, even if you handle it in one minute, it takes another four minutes to get back to what you were doing before, ” she explains. “It’s death by a thousand paper cuts. If you can reduce 15 interruptions a day, you’ll find yourself with at least an hour more of productivity. If you do this for a week, that’s five more hours of uninterrupted working time.”

2. Choose When You Check In

Of course, you can’t just turn off your email for the entire day. The key to minimizing the interruptions you can’t eliminate is to deal with your messages in batches.

“Think of the longest amount of time you’ve gone without checking your email, ” Egan suggests. “We’ve all been in those meetings that went an hour and a half and the sky didn’t fall.” Depending on your industry (after all, a journalist who needs to process breaking news will have different email needs than a fashion buyer), she finds that most people don’t need to check their email more than five times a day.

For maximum productivity, she suggests, limit your checks to just three times a day: first thing in the morning, after lunch and near the end of the day. If that seems completely unreasonable, add in a mid-morning and mid-afternoon email fix. “Anything but the direst emergency—which shouldn’t be conveyed in email anyway—can wait 90 minutes or more, ” she says.

RELATED: 10 Signs You’re Suffering From Job Burnout

3. Don’t Default to Email

Email, Egan advises, shouldn’t be your default method of communication. “A lot of people make their own email trouble by sending too much email, ” she says. “Email begets email.” If you need something in less than three hours, she instructs, “use another mode of communication, such as a phone call, a visit or even a text. This allows people to work on other things without fearing the ‘ding.’”

By modeling the behavior you want other people to use (namely, not flooding their inboxes), you encourage them to do the same—especially if you’re a manager. “If a boss sends an important note two minutes before the meeting, ” Egan explains, “then everyone in the company has learned they can’t shut their email down.”

Also, she reminds us, email is for communication of facts, not feelings. “If an email can be misinterpreted, it will be, ” she cautions. If you aren’t sending facts, figures or documents, Egan recommends making use of that antiquated tool on your desk: the phone. “Even if you have to leave a voice mail, the voice inflections and other verbal communication aids make it easier for someone to recognize intent than with an email.” And, of course, beware the dreaded “reply all.” Every time you hit “reply all” when it’s not needed, you invite people to “reply all” to you.

4. Sort Your Messages

Email does have its uses, but probably not the ones you think. “Your email is a delivery tool, not a dysfunctional to-do list, ” Egan says. “People keep messages in their inbox to remind them of upcoming tasks, which means they waste a lot of time surfing their inbox to find out what they need to work on next. What if you treated your U.S. Postal Service mail that way?” she asks. “It’s like pulling out your mail, recycling half of it, and then putting the bills and other correspondence back in the mailbox to go through the next day.”

A better strategy is to triage your email during your designated ‘checking periods’ (see tip number two), responding to the simple and urgent messages, filing away those that don’t need addressing, and flagging the ones that need some more thought. “Create folders within your inbox, sort the emails that need action, and then set a calendar reminder to remind you when to revisit any deadline-oriented messages, ” Egan suggests.

“Your email is a delivery tool, not a dysfunctional to-do list.”

5. Resist Your Inbox on the Run

If you can’t give your email the appropriate attention, don’t bother checking it. “Check your email only when you have time to respond, not just react, ” Egan advises. “Why would you check your email five minutes before you go to sleep? If someone sends a scathing note, you’ll stew about it all night, and there’s nothing you’ll be able to do about it.”

Plus, studies show that exposure to a bright screen before bed (like the one that displays your email, whether that’s a computer, phone or tablet) may make it harder to fall asleep and to get high-quality rest.

RELATED: WorkWeek 2.0: Are You Spending 72 Hours on the Job?

And trying to “quickly check email” when spending time with friends or family isn’t doing us any favors—LearnVest research has found that while 30% of workers take all of their vacation time, 13% of them spend it working. Does that sound relaxing to you? Instead of getting lured off the beach by a “quick check, ” wait until you have the time to respond as needed … after all, no one does their best work in a bathing suit.

Email, when used properly, can be a powerful tool. But you have to be the one in charge.

Did Apple Just Improve Card Security?

• Banking•Consumer•Credit Cards•Customer Service•Identity Theft
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applepay
image: apple

Which side are you on?

The universe these days seems to be split into Apple lovers and Apple haters. The lovers anxiously awaited Apple’s annual model change, wondering what they were going to do to save us from that most dreaded of modern conditions: gadget deprivation. Everyone knew the iPhone 6 would come in two models, both with larger screen sizes, so they patiently endured Tim Cook’s late-night TV commercial spokesman imitation, waiting for the inevitable, “But wait, there’s more!”

They were not disappointed. I’m not talking about the ridiculously overpriced watch — logic says half the population have stopped using watches because their cell phones are good enough, but who said gadget freaks were anything approaching logical? If any company has made a living proving that, it’s Apple.

I’m talking about Apple’s new payment system, ApplePay. (Apparently, iPay, or iAnything has now gone the way of Steven Jobs, its creator. Now it’s AppleAnything.) Apple’s new iPhone and watch incorporate near-field communication (NFC). That in itself could not possibly be news — my ancient Blackberry, soon to be retired, had NFC before anybody knew what to do with it, so this is Apple catching up with the rest of the world, not leading the way.

But, like many things in life, it’s not what you have, but what you do with it, that matters. And this is why ApplePay may be the next iTunes — something everybody uses, pouring big bucks into the company with a bite missing in its logo.

What is NFC?

Don’t feel bad if you thought it stood for “Not For Cheap”; you wouldn’t be the only one. Near-field communications allows two NFC-equipped devices to exchange data without a physical connection, like with a cord.

You might ask, so what’s so new about that? Haven’t we had Bluetooth since the previous millennium? Yes, we have; but if you’ve ever paired two Bluetooth devices, you know the “Make device discoverable … search for the device … enter passcode” shuffle each and every time. NFC doesn’t require any of that, making it much more suitable for something like payment.

The other attribute that makes NFC so desirable is the fact that the devices have to be very close together, an inch or less, for communication to happen. Would you feel comfortable walking into a Target, knowing they have Bluetooth cameras capturing all your bank account information for their hacker friends? Didn’t think so.

The next NFC benefit is it uses far less power than Bluetooth. It’s nice to know you can do an entire day’s shopping with your cellphone before its battery needs a recharge.

The final benefit this technology brings to payment processing is security.

Security, a la ApplePay

What jumps out at you when you hear or read about ApplePay is the way they are putting this new technology to use: When you make a payment with your phone, none of your card information is given to the retailer. So, no matter how heavily Target gets hacked, if you pay with ApplePay, they won’t have any of your information to hack.

image: Apple
image: Apple

Here is what happens: The cashier rings up the total. Then, you simply hold up your phone to an NFC payment terminal. In a split second, the terminal tells your phone the amount. Your phone (or watch) takes that information and reads a secure chip (hardware, not software or data) with all your cards and their balances.

The chip approves the transaction and computes a unique transaction code, specific only for that transaction. Then your phone transmits only that unique, one-time code back to the terminal. No personal data, no drivers license, no address and, most importantly, no card or account information reaches the merchant.

That whole process takes less than a second.

Because the merchant never receives anything identifying you in any way, they can’t ever have any data about you which crooks can steal and use for some form of identity theft.

What, you might ask, if you forgot your phone on the counter (like I’m prone to do) and someone scooped it up and started buying up the whole store? See that thumb in the picture? The payment transaction only works if the thumb on the sensor matches your thumbprint.

Compatibility

Apple had a choice with their new technology. Had they gone the PayPal route, they could probably have become a very significant player in the $11 trillion payment-processing market. Instead, they chose to keep the user experience as simple as possible, with as little change as possible. ApplePay integrates seamlessly with your existing accounts and relationships. You don’t have to apply for any new accounts or change any of the accounts you already have.

The way they do it is you take a photograph of your card with the on-board camera. Apple then uses that image to verify your account with your bank. Once the card is confirmed, it gets added to something akin to a personal electronic wallet. Before you pay, the app will display all your cards and then (just like in real life) you pick the one you want to use, and voila!

Will It Work?

The idea of a “swipe” means of fast payment has been around for a while. You might recall Mobil’s Speedpass, launched in 1997, which allowed you to pay for your gas by simply swiping a little dongle attached to your key chain. That relied on radio frequency security, which was proven not to be so secure. Now Speedpass customers have to enter their zip code as an additional layer of security, defeating the goal of speed and convenience.

What sets Apple’s proposed system apart is its reliance on your thumbprint. On the face of it, it doesn’t look like crooks will easily be able to break that code.

It’s a sad commentary on the human race that no attempts at preventing dishonesty have proven to be foolproof. Technology relying on biological data like iris patterns or fingerprints appear promising. Of course, the downside is now there is even more of your personal information stored on some Big Brother’s computer. (Does anyone else find it a bit ironic that Apple put themselves on the map with the famous 1984 Super Bowl ad deriding Big Brother, and now they are Big Brother?)

My wife and I have gone to cash for most of our purchases. Unfortunately, there are still more than a few places where a card is necessary equipment; so as an alternative strategy, cash doesn’t cover all situations. And so it happened that my bank (Key Bank) called me last week to ask if I bought gas in Mexico. Whenever we travel internationally, I call them ahead of time to give them approximate dates and destinations. They know that, and they’re able to spot the fraud right away. Thankfully, it cost me nothing and I received a new card less than a week later.

Still, it would be nice to know there’s a new level of security making it harder for identity thieves to perpetrate their fraud. The competitive market being what it is, I suspect it won’t be long before every maker of smartphones and smartwatches implements some form of bio-security in a fast and easy-to-use package. Will it be perfect? Is anything? Even cash has its drawbacks, so to expect perfection is unrealistic. Billions of transactions are made every day. The proper question is: Will this be an improvement? It sounds like it will … and any improvement in security can only be welcome.

Will this make me toss my ancient Blackberry? (I know that marks me as a cheapskate dinosaur. So fire me. Haha!) Maybe I’ll wait to see if someone does something as good for a lot cheaper. I’ve never been disappointed doing that.

How about you? Will this make you get a smartphone (or smartwatch) e-wallet?

Student Loan Reality Check

• Education•Planning
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With college students back in classes for the fall semester, their parents can only hope that they are making the best use of their time and money. There is a lot at stake — the amount of student loans outstanding is approaching $1.3 trillion, having mushroomed by over 50 percent in less than three years.

We all know the standard line about education being an investment in the future. It certainly can be; but with the amount of student debt increasing so rapidly, there is good reason to suspect some of this is being done out of desperation rather than as a logical path to an opportunity.

For one thing, the job market has been so hard on young people that many are returning to school out of frustration with not being able to find a job. However, unless you are acquiring in-demand skills in the process, doing this simply delays the inevitable struggle to find work and racks up debt in the process.

Also, the marketing of education has clicked into high gear in recent years. Overall, this is good — opening students up to new and potentially more efficient ways of getting degrees and training. But unfortunately, some of it is designed to sell programs that may sound relevant but which have little value in the job market.

So before you or someone you love takes out a student loan, you need a reality check. See if these questions don’t help focus your decision:

  1. Are you getting the right degree for your chosen field? Education advertisements often focus on degrees related to popular fields. What you need to find out, though, is not what the ads say, but what degrees hiring managers are looking to fill in the profession. This relates both to the subject and the level of the degree. It is of little use to get an associate’s degree in a profession where a bachelor’s is the norm.
  2. Does your school have credibility in your target profession? First, you should make sure both your chosen school and the specific program have been properly accredited by a nationally recognized accrediting agency. A good place to start is with the Department of Education’s accreditation database. Beyond that, though, you need to get a sense of which schools have a good reputation with hiring managers in the profession and which are dismissed as turning out substandard graduates in that major. Looking at relevant want ads and even talking to some hiring managers before you enroll in a school is a good way to make better choices about your education.
  3. Are your grades likely to be competitive enough? It’s all very well to aspire to an elite profession, but if you have always been a C student and don’t have a good reason to believe that will suddenly turn around, you have to question whether your credentials will be competitive enough to get you the type of job you want.
  4. Do you have reason to believe you will enjoy the profession you’ve chosen? One of the saddest things is when someone goes through four or six years of college in a given field, only to enter the job market and find they don’t like the reality of the profession. Workplace reality is often very different from the classroom, so try to get a relevant internship before you go too far down a given educational path. This will help you get a taste of what the profession will be like from day to day, and will also help you make useful contacts for when you eventually enter the job market.
  5. Is there healthy job growth in that profession? If there is a small job market — or even worse, a shrinking one — for your chosen profession, you are going to find it hard to get work no matter what degree you get. The Bureau of Labor Statistics has an Occupational Outlook Handbook that is a good place to find out about the size and projected growth of the job market for various professions.
  6. Is an advanced degree really the answer? Going back to school is often a knee-jerk response of people who are having trouble getting promoted, but you need to take an honest look at whether it is your performance and not your resume that is holding you back.
  7. Does the income potential justify your level of borrowing? Just getting a job is not enough if you have taken on a staggering level of debt to do it. Before you borrow, try some advance budgeting. Look at salaries in your chosen profession, and compare them to the loan payment schedule you would be taking on to see if you could make a budget work under those circumstances.

Using a student loan to further your education can still be a wise decision, but only if you approach it purposefully like an investment and not impulsively like buying a lottery ticket.

Are You LinkedIn Optimized?

• Working
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This post comes from Shana Lebowitz at our partner site LearnVest.

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What if you had the chance to impress 277 million professionals at once—convincing them you’re exactly what each of their organizations is missing?

As it turns out, you already have that opportunity on LinkedIn. According to a 2013 Jobvite survey, 96% of recruiters use the professional networking site to search for potential hires. Yet many job seekers are unaware of the profile features that could land—or cost—them the job.

The most important thing to remember is to make your LinkedIn profile public, Jenny Foss, president of the Ladder Recruiting Group, told MarketWatch.

Next, your bio is a key part of your profile, so make sure to include your current job title, industry and location, says Nicole Greenberg Strecker, managing director of recruitment agency STA Worldwide.

Even the seemingly small details of your profile are significant. If you’re aiming to work in a specific city, use that area (instead of where you actually live) as your location. And make sure your job title reflects exactly what you do, Jeremy Roberts, editor of Sourcecon, a blog and conference series for recruiters, told MarketWatch. A title that reads, “Blogs and Features Editor” is preferable to one that simply says, “Editor.”

Just like where you sit in the high school cafeteria, the groups you join on LinkedIn say a lot about you. Particularly if you’re looking to switch fields, join industry groups and blogs, as that’s where employers will be searching. And when it comes to getting feedback from your peers, recommendations from people you’ve actually worked with are much more meaningful than endorsements from acquaintances.

If you’ve mastered these tips, double-check your profile to make sure you aren’t committing some other common LinkedIn faux pas, like forgetting to add a photo or using the default connection request.

More stories from LearnVest:

10 All-Inclusive Resort Secrets—Revealed

How I Did It: Opened My Own Etsy Shop

8 Ultimate Opening Lines for Fearless Networking

Are Your Adult Children Destroying Your Retirement?

• Debt Reduction•Family & Life•Frugality•Retirement•Saving & Investing•Travel
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I can still remember the days when the term “generation gap” was all the rage. Back in the late 1960s and early 1970s, that term was bandied about to describe the yawning philosophical chasm between Baby Boomers and their parents on topics as diverse as the Vietnam War, the length of one’s hair, and different attitudes toward sex.

Over the years, though, the term has faded from widespread use. But another gap in inter-generational thinking grew steadily more evident when it came to saving and spending. The folks Tom Brokaw called “The Greatest Generation” grew up in Depression-era America, fought World War II, then scrimped,  saved, and made their way through college on the GI Bill, somehow managing to land jobs that enabled them to squirrel away enough scratch for an FHA-financed suburban starter home.

They might have arrived in Eisenhower-era prosperity. But having seen how tough a dollar could be to come by, they learned the value of every greenback they earned.

Around the same time, the dawn of TV and its benefactor, the Great American Marketing Machine, ushered in the idea that saving, budgeting and spending wisely were as passe as Zoot suits. “Why Wait? Buy now!” became the catchphrase of the Pepsi Generation. Their parents, who had experienced hardship in the gritty, teeming urban enclaves of the 1930s, weren’t easily hoodwinked by the hype. Not so their kids, who knew little other than full stomachs and leafy suburban idylls.

This two-cent history lesson easily explains a phenomenon that got its start about six years ago. It’s one that worries a great many financial advisers.

Once a parent . . .

Please note that reference to six years ago, the year that ushered in the Great Recession. Suddenly the generation that had rarely denied themselves anything began to find themselves in straits seen infrequently since the Great Depression.

As they lost their marriages, their jobs and in many cases their homes, those in their 40s and 50s turned to the only people they knew would be able to provide financial assistance. Those were the same people who, scarred by early exposure to deprivation, never lost the belief that you save for a rainy day.

Now you had the 70- and 80-year-olds of the Greatest Generation, folks who had been careful about finances to the point of always searching for the best savings account rates (crude as their methods were back then), being called upon to help bail out their overindulgent middle-aged sons and daughters.

Among the financial advisers who have flagged for me this lamentable state is Gregory De Jong, a Certified Financial Planner with Savant Capital Management in Naperville, Illinois. He estimates one quarter to one third of his retirement clients are providing some form of financial assistance to their adult offspring.

“It’s a bitter irony that the children who have treated themselves to larger homes, fancier cars and more lavish vacations than their parents ever had are now relying on mom and dad to bail them out, ” he told me, adding the parents’ desire to help their sons and daughters is jeopardizing their own retirement security.

Of particular concern to De Jong is that some elderly moms and dads may actually be enabling the poor fiscal habits of their sons and daughters.

“They would not think of pulling $20, 000 out of their IRA to take a vacation for themselves, ” he points out. “But they won’t hesitate to pull that much out to pay off their children’s credit card debts… It keeps the child from getting the financial advice they need regarding debt management.”

Also observing the trend is Gary Marriage, Jr., founder and CEO of Nature Coast Financial Advisors in Crystal River, Florida. “It’s like the parents are coming in to bail out their kids, ” he says. “Parents will always bend over backward for their children. But if they don’t set it up right, they’re going to go broke themselves.”

Involve third parties

The big problem with elderly parents aiding their middle-aged daughters and sons is emotion, experts say. When faced with the choice of giving aid or jeopardizing relationships with children and grandchildren, the older adult often falls victim to emotion and gives in to the pleas of his or her offspring.

Marriage and De Jong both strongly urge third parties to get involved in the loan of money from older to younger family members. “We tell them, ‘Bring in your adult children and let’s all sit down and see if this can be worked out, ‘” Marriage says. “I want to show the kids the effect on their parents of getting this loan.”

The loan terms should be agreed to by parent, offspring and third party, whom De Jong says can also be an accountant or business-savvy family friend. If the issue was caused by poor financial decision-making or debt management, the offer of financial assistance should be contingent on the younger adult taking credit counseling or a course on debt management, De Jong says.

Adds Marriage: “I tell my clients this is not a 100 percent foolproof plan. But at least it’s a structure, and they have something in writing everyone will follow. Just as you get a contract from the bank, you should give your child a contract, and make sure they follow it.”

I say it’s time to close the “generation gap” separating elderly parents from middle-age kids on issues of financial responsibility — and that should happen before the elderly are separated from their life savings.

10 Negotiation Tips for Introverts

• Automotive•Consumer
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After our home, our next major purchase will be a car. I am an introvert and I hate conflicts, so naturally negotiation is stressful for me. But if I don’t speak up, I know I will get the short end of the stick and pay a lot more money for the car. Last time I bought a car, I handled the entire negotiation via email; I only went to the dealership to pick up the car. I am not sure if I can do the same thing this time. I am going to assume the haggling will be harder this time and be prepared. As a result, I compiled a list of tips to help me develop a strategy whenever I need to negotiate.

1. Knowledge is power: Do your research. An introvert’s strength is listening and staying focused; use it. Collect as much information as possible so that, when needed, you can immediately decide what a fair offer is. It is also helpful to carry a printout of all the information that you have collected to support what you think is fair. This serves two purposes:

  • It gives you something to focus on when you are overwhelmed.
  • If you are tired of saying the same thing over and over again, showing the evidence on paper to the salesman might kick things up a notch.

2. Decide on a budget: Know how much you want to spend on a particular item and stick to it. This should be self-explanatory. Knowing this will let you decide whether it is even worth spending your energy negotiating or if you have to save more cash to make your offer more attractive.

3. Negotiate one thing at a time: A lot of times, the salesman will try to talk you into thinking about the price of the car differently; if you are not prepared it might overwhelm you. For example, when we went shopping for my husband’s car, we had a dollar amount we wanted to pay for the car. But the salesman kept trying to steer us into thinking about the monthly payment vs. the price of the car. He kept increasing the loan period to reduce the monthly payment, which meant he essentially increased the price of the car without making us think about it. If we had not stuck to just negotiating the price, we would have paid a lot more for that car.

4. Know what you want (and don’t): This goes hand in hand with tip No. 3. Write down the exact product you want and any accessories you might like and how much you are willing to pay for those. This will help you avoid confusion when there are too many unnecessary accessories thrown into the mix.

5. Have the script ready: I started following the script strategy after reading it on Ramit Sethi’s site and it has served me well. I have scripts for pretty much everything – negotiating the rate down with the cable company every three months, negotiating to get lower rent and negotiating a telecommuting arrangement with my previous company.

6. Do it all via email (or other social media channels): I like working via email. It lets me put down all my thoughts without someone interrupting me and re-read/edit it as many times as I want before sending it. It also helps me to bring the conversation back to one focused topic if it gets distracting. Personally, it helps me avoid the anxiety I get with face-to-face haggling.

7. Have a list of options you can offer to make the deal better: What are you bringing to the table? Having this list right in front of you will help you steer the conversation to highlight the options you have to make the transaction more attractive to the other party. Can you pay cash? Can you buy right away? Do you have an excellent credit score? Why should they agree to the deal you are offering?

8. Go for the win-win: You are having this conversation only because each of you has something the other person wants. If you go with the mentality to “win” the negotiation, you might probably walk away empty-handed. This might not be the style of negotiation for everyone, but for me it works best when both parties reach a happy medium.

9. Don’t make it personal: Not all negotiation ends with a transaction. Just because you didn’t get the deal you wanted doesn’t mean something is wrong with you or that the other person had something personally against you. It just was not the best deal for both parties. Keep your bottom line – your budget, in mind and be ready to walk away if the deal doesn’t work out. You don’t have to buy something just because you want to be the nicer person.

10. Walk away: Walk away from the deal if it is not what you wanted. Sometimes, walking away is part of the negotiation to show you are not desperate, other times you really have to give up the deal; be prepared to do that.

Negotiation is a difficult skill to master even for experts who deal with people a lot. For introverts, we just have to prepare, play our strengths and plan wisely.

Are you an expert negotiator? What are your strategies?