Archive for June 2014
A parent recently asked me whether it was OK to require her kids to help pay for college.
By all means, I answered. By. All. Means.
It’s always a good thing when kids have skin in the game. Not only are they more likely to take the college process more responsibly, they will realize they’re part of a team effort of sacrificing and saving. It’s not just Mom’s and Dad’s problem to deal with.
And beyond the behavioral economics, simple math says every dollar your student contributes means one less dollar to borrow.
It appears more teens are getting religion.
A survey released in late May by the College Savings Foundation found that 82 percent of the high school students interviewed believed they have a responsibility to tap their funds to help pay for college. That’s a significant bump from the 74 percent who responded to that question in 2013.
At the same time, the foundation found that 41 percent of those students who were seniors had become more frugal — giving up electronics, a car and other material items to save for college. Moreover, more than half of those seniors have gotten jobs, and about the same percentage expect to work their way through school.
“There’s a growing recognition (among teens) that they need to help pull their weight,” Mary Morris, chairwoman of the nonprofit College Savings Foundation, a college savings advocacy group, said in an interview.
That attitude may have partly been shaped by how teens’ parents were affected by the Great Recession and the slowly recovering economy and by the growing realization that college costs and student loan debt burdens are not slowing down, said Morris, who also runs Virginia’s 529 college savings plans.
The foundation’s fifth annual “How Youth Plan to Fund College” survey provides a good sense of what’s going on in the minds of more than 500 high school seniors, juniors and sophomores pertaining to college financing and making affordable choices between traditional four-year schools, junior colleges and vocational programs.
While it’s admirable that the vast majority of the students surveyed feel they should be financially responsible for their own education, less than half of them have started. Part of that problem may be in goal setting and coming up with a targeted dollar amount to set aside, the survey noted.
There are plenty of online college financing calculators that can help deal with that problem. One of the newest planning tools was launched in mid-May by Sallie Mae, the educational financial services company. Check it out at SallieMae.com/PlanForCollege.
The College Savings Foundation survey also noted that the vast majority of students expect to receive some form of financial aid, from scholarships, grants or loans.
But at the same time, more than half of those students surveyed said their parents are saving for college and nearly 40 percent started when their children were born. Study after study has shown that starting to save for college at an early age can make a huge difference.
Which brings me to the critical role parents can play. Before shelling out big dollars to send your children to their dream school and short-circuiting your retirement savings in the process, talk as a family about what you can afford to pay and how the kids can help. And if your 18-year-old isn’t sure what he or she wants to study in college, consider a more affordable community college.
“The family that plans together is the family that will be well prepared” for handling college costs, Morris said.
When Washington, DC, restaurateur Richard Cervera filed for personal bankruptcy last year, he didn’t tell the court that he had gained a slice of ownership in several Capitol Hill restaurants just nine days prior.
Nor did he mention that he was negotiating a $200,000-a-year salary with the other owners who teamed up to buy the storied Hawk ‘n’ Dove, Molly Malone’s and six other restaurants from Mr. Cervera’s brother, Xavier.
With those restaurants now in bankruptcy, there’s a renewed focus on the personal finances of Richard Cervera. Mr. Cervera was hired as chief executive to handle the restaurants’ operations while lawyers try to deal with their biggest debt: more than $9 million that’s due to the group that sold the restaurants in late 2012 and agreed to be paid over time.
A timeline of key dates in the last 18 months shows inconsistencies in what Mr. Cervera stated in his personal bankruptcy case about his employment and assets and what has been revealed in the restaurants’ Chapter 11 case.
- Dec. 31, 2012: Xavier Cervera and two other investors sold eight operating restaurants and the unopened Willie’s Brew and ‘Que in the Navy Yard neighborhood for a multimillion-dollar price that hasn’t fully been disclosed yet. The deal gave Richard Cervera a 7.5% ownership stake in the group that owns the restaurants.
- Jan. 8, 2013: Richard Cerverausing Ricardo as his first namefiled for Chapter 7 protection in US Bankruptcy Court in Seattle. Court papers show that he owned a 1,500 square-foot condo in Miami that was in foreclosure with $346,214 in debt. Court documents filed at the time didn’t mention his 7.5% interest in the ownership group. Bankruptcy law requires a person who files for protection from creditors to list “interest in partnerships or joint ventures.”
- Feb. 7, 2013: When a court official asked Richard Cervera under oath for the address where he worked, he responded, “I’m unemployed.” Some of Mr. Cervera’s debts were later discharged, and his bankruptcy case was closed in October.
Fast forward to an April 23 meeting for the restaurants’ bankruptcy case: Mr. Cervera is under oath again, this time answering questions for the restaurants’ parent company. According to a transcript, Mr. Cervera said that he was employed by the restaurants in January of 2013.
Knowingly hiding assets or making false declarations is bankruptcy fraud, a federal crimeit’s even spelled out on Mr. Cervera’s court documents. The penalty for making a false statement is a fine of up to $500,000 or imprisonment for up to five years or both.
Transparency is a cornerstone bankruptcy principle. In order to have your debts discharged, you have to open your books to creditors and the public. However, honest mistakes happen. That’s essentially what Mr. Cervera’s personal bankruptcy attorney says occurred with the original asset list. The attorney recently filed an amended list of Mr. Cervera’s assets. This time, court papers listed Mr. Cerveras 7.5% stake in Barracks Row Holdings LLC. It was valued at $0.
Here’s what Mr. Cervera’s attorney, Richard J. Symmes, had to say about the changes:
“Bankruptcy permits amendments to be made to schedules when events warrant changes. Richard’s immersion in the Barracks Row cases made him realize that he should have disclosed his Barracks Row interest when he originally filed his own case, even though he believed that it was of no value at that time, given the companies’ extraordinary debt load. The amendment is not expected to change any result in Richard’s bankruptcy case.”
Hawk ‘n’ Dove and seven other restaurants that helped fuel the restaurant boom in Washington’s Capitol Hill neighborhood were put into Chapter 11 protection on March 28, a few days before the next payment was due to Xavier Cervera and other investors who sold the restaurants. The buyers have questioned whether Xavier Cervera intentionally tried to hurt the restaurants to take them back.
In court papers, the restaurants’ lawyer said the sellers could have “taken back their membership interests” in the restaurants if the new owners missed a payment. Filing for Chapter 11 protection temporarily stops that takeover.
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Montana consumers beware. Government officials have confirmed that the personal information of 1.3 million people has been hacked. State of Montana officials are now notifying potential victims that hackers broke into a Department of Public Health and Human Services (DPHHS) computer server .
So far, officials cannot confirm or deny that hackers gained access or used any of the information on the server. However, state and federal laws demand the state notify individuals whose personal information may have been compromised in the attack . The list of names includes current and former Montana residents, including some who are deceased.
“Out of an abundance of caution, we are notifying those whose personal information could have been on the server,” said DPHHS Director Richard Opper. “Again, we have no reports, nor do we have any evidence that anyones information was used in any way, or even accessed.”
Very Personal Information
According to state officials, information on the server included demographic information, such as names, addresses, dates of birth, and Social Security numbers. The server may also have included information regarding DPHHS services clients applied for and/or received, such as health assessments, diagnoses, treatments, health conditions, prescriptions, and insurance.
I encourage Montanans who are notified to sign up for the free credit monitoring and insurance that is being provided, Opper said. Montana is offering free credit monitoring and insurance to eligible individuals who receive letters from the state. The letters offer instructions for signing up for credit monitoring, including personal activation codes. Due to privacy laws, state officials cannot enroll individuals automatically.
According to State of Montana Chief Information Officer Ron Baldwin, the state upgraded its property insurance policy in 2013 to cover cybersecurity and data security breaches. The policy provides coverage of up to $2 million to cover costs associated with the toll-free Help Line, mailing notification letters, free credit monitoring and other services. State officials say insurance should cover most of the costs associated with the hack.
Money Still the Motive
We caught up with Tom Cross, director of security research at network security solutions firm Lancope, to get his take on the incident. Typically, he told us, medical records are stolen with the intent of committing identity theft.
“The criminals will apply for credit in the victims name, spend the money, and never repay it,” he said. “Ultimately, the victims credit may be damaged or they may be contacted by bill collectors. Fortunately, victims of identity theft can work with credit reporting agencies to remove fraudulent transactions from their credit reports.”
Montana state officials have taken “several steps” to further strengthen security. Some of the initiatives include safely restoring all affected systems, adding additional security software to offer more protection for sensitive information on its servers, and constantly reviewing security practices to make sure everything that can be done is being done.
By Peter Ashby
Learn more about Peter on NerdWallet’s Ask an Advisor
Being a parent has been one of the most rewarding experiences of my life. It has brought me so much joy to watch my baby grow up. As with many of you, I’m now faced with the reality of saving for my retirement at the same time I’m saving for my child’s college education. But every time I see how much college will cost, I feel a tinge of nausea as I wonder how it can cost as much as a house in 16 years. As a Certified Financial Planner, I’ve seen what works and here are five tips to help you succeed.
Put yourself first. This is the one time you are allowed to think this way. The reason is simple: Saving money is the primary, and sometimes only, way you can fund your retirement. With fewer of us receiving pensions and with Social Security’s future in doubt, this may end up being our only significant source of income in retirement. There are grants, loans, scholarships and other ways of funding college, but there are no retirement loans. Your child will also have their entire working career to pay off any debt they accumulate in college
Start early. The earlier you start saving for college, the smaller the drain will be on your budget, and this leaves more money for your retirement savings. For example, assuming a 7% return, if you start saving $250 a month when your child is born, you can expect to have about $107,680 by the time your child is 18. If you wait until your child is 5 years old to start saving, you can expect to have about $63,332. Not only do you have $15,000 less because of delayed savings, but you also have missed out on nearly $20,000 because of compound interest and returns.
Set realistic goals. Even though we would like to pay for all of our child’s education, it is important to be realistic about your finances. If you set a goal to pay for 25-50% of your child’s education, you are less likely to become discouraged and stop saving altogether.
Start small. I advise clients who have limited resources to set a goal to cover tuition, books and fees. This total tends to be smaller and more manageable than the numbers for fully funded college plans. If your situation changes, you can always increase the amount you are saving.
Minimize taxes. Many states offer tax deductions to residents who open a 529 Plan to save college. Go to your state’s 529 Plan website for more information.
Financial institutions and ATM deployers can also issue a cardless MCA application programming interface to other funded account providers to drive new transactions to their ATM fleets, thus increasing foreign ATM fees and promotional revenue. Using data analytics, Cardless MCA sponsors can provide targeted advertising and offers that complement the transactional credit, extending the sales opportunities before, during and after each ATM or mobile payment transaction.
The issuer of cardless MCA can create an ecosystem of offers and deals that complement the loan or credit extension through the issuers mobile wallet app. Some examples include transactional credit linked to consumer home equity loans with special deals with local home improvement and appliance retailers. Or business and construction loans integrated with promotions from equipment and materials providers. And insurance-related products such as health care providers or hospitals; auto repair shops; and so on against a qualifying insurance claim.
While most financial institutions and ATM networks focus on competing for share of existing ATM transactions and soon, mobile payments from rivals, mobile wallet issuers with cardless MCA will leapfrog them all by creating a whole new class of ATM transactions, thereby changing the economics for themselves, participating financial institutions and ATM deployers in general.
Richard Crone and Heidi Liebenguth lead Crone Consulting LLC, an independent advisory firm specializing in mobile strategy and payments. Crone Consulting has helped define the mobile commerce and payments strategy for financial institutions of all size, as well as core processors, payment networks, telcos, consortiums and investors. They can be reached at www.croneconsulting.com.
cover art: boston public library, print department
The mortgage interest tax deduction (interest deduction) is a benefit that may sway anyone to become a homeowner rather than a renter. This advantage is backed by the common notion that most monthly mortgage payments are interest only. Although the interest deduction is only good if you itemize on your tax return, as the largest personal tax deduction that is available to taxpayers, mortgages are large enough to contribute some value to your overall return. According to a Forbes article, average middle-class homeowners were able to save an average of about $615 over the 2012 tax season thanks to interest deductions.
If you are currently stuck with a higher interest rate from years ago and are unable to refinance, you may be able to potentially save a lot of money by itemizing on your taxes. With a $250,000 30-year fixed rate mortgage with an interest of about 6.5%, you could be able to deduct thousand of dollars a year on your tax return from the inception of your loan. Although the interest payments decrease over time, reporting this information when it comes to tax-time will ultimately help you save more.
Mortgage interest deductions are not for all borrowers and come with a variety of rules. One such rule is that some borrowers can use the deduction on all of their interest, while others cannot. The ability to use all of your interest on your tax return depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.
If you are not sure, borrowers who meet at least one of these three qualifications can deduct all of their interest:
– Home loans that were taken out on or before October 13, 1987.
– Loans that were taken out after October 13, 1987 that were used as home acquisition debt to buy build or improve a home. These loans must have a principle of under $1,000,000 ($500,000 or less if married filing separately).
– Home equity loans or lines of credit that total $100,000 or less (($50,000 or less if married filing separately) that were taken out after October 13, 1987 to buy, build, or improve your home. These loans must also not have totaled no more than the fair market value of your home reduced by (1) and (2).
If your mortgage interest expense for the year does not fit into these 3 categories, there is going to be some limits to how you can use the deduction on your tax return. When it comes time to file your taxes, you will have to submit certain information to the IRS regarding your loan. That information can be seen at this IRS link.
Types of interest that can be deducted on your taxes
A loan that counts as a secured debt can be defined as one that involved the signing of a deed of trust, a land contract or simple mortgage documents. Secured debt is a homeownership contract that verifies that you will pay off the debt, confirms that if you default on the debt that your home will act as the security for the missed payments, and protects the lender and borrower with local and state laws.
Borrowers have the right to file their qualified home as a secured or non-secured home when filing on their initial taxes. This being said, no one can just flip flop if they just feel like it. Switching a qualified home back to a secure debt during tax time indeed requires the consent of the IRS. Some borrowers may benefit tax wise to declare their mortgage as not secured, if they can benefit more from declaring the interest as a business expense. Consulting a tax professional during circumstances like this one is a must.
Under tax laws, first and second homes can be declared under the interest deduction sections of tax returns. Because a large chunk of, “mortgage,” borrowers are indeed homeowners, this allows a good portion of individuals to get as much back as they can on their taxes. First and second homes can be classified through various properties such as houses, condominiums, cooperatives, mobile homes, trailer homes, and boats.
Another thing to keep in mind is that interest for mortgages that was used for additional deductible purposes such as businesses, and investments may also be used. Mortgage funds used for personal interests other than renovations cannot be used as an interest deduction.
Specific house types and limitations that can qualify for interest deductions include:
1. Main homes
Keep in mind that only one home or the house where you live your ordinary life can be used under this category at a time.
2. Second homes
Second homes can be properties owned by you but not treated as a main home otherwise known as a primary residence. Second homes do not have to be rented out to count as a tax deduction, but if you have a second home that you rent out for only part of the year, you must use the property for your own use during 14 or more days or 10% of the year to make it qualified. If you do not use it for that long during part of the year, this rental property cannot be classified as a second home. Instead you will have to file it as a residential rental property.
3. More than one second home
Only one second home can be recorded as a qualified deduction for the year. The properties’ status can be changed if:
– The property you want to use as the deduction was just purchased.
– Your main home now qualifies as a second home.
– Your existing second home was sold during the year and you wish to maintain a second home deduction.
4. Home that has divided uses
Depending on if you use part of your home as something such as a home office, you must differentiate your primary residence from the part you are using for something else. You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. This calculation may affect the amount of your home acquisition debt and your home equity debt limit.
5. Partial rental
A property can be divided between a primary residence and a rental property if:
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Security expert Jody Brazil analyses the Precision Planting breach.
Monsantos decision to house customer and employee data on one server is a simple mistake made all too often, according to the president of security firm FireMon.
Jody Brazil, who is also the chief technology officer at the security company, commended the farming company for its haste in informing the relevant authorities and bringing in forensic experts after its subsidiary Precision Planting was breached, but reproached the firm for not segmenting its data.
He said: Segmenting a network and distributing sensitive information across different servers on appropriate network sub-segments can and will limit the damage of a data breach – the cybersecurity equivalent of not putting all your eggs in the same basket.
Speaking on behalf of Monsanto, Christy Toedebusch said that fewer than 1,300 farmer customers were affected by a breach discovered on March 27, in which financial information, social security numbers and customer addresses had been compromised.
In a letter to the Attorney General of Maryland, the company said they believed the breach was not an attempt to steal customer information.
As an apology the chemical and farming firm will offer credit monitoring services to those whose data was compromised, and the firm will revise its security measures.
While no system can be completely secure, we believe our new security protocols will provide significant protection for customers data, Toedebusch said.
Brazil added that it was easy to criticise companies for bad security practices, but that making such information public would allow others to learn from the mistakes.
What is clear is that Monsanto has done everything in their power to limit the damage of the data breach by informing relevant government organisations, calling in forensics experts, and contacting the FBI to assist in dealing with the breach, he said.
As Nashville-area homeowners ramp up home renovations or take on new expenses, they are increasingly looking to home equity loans, which lost favor during the recession.
The growth in home equity lending mimics a national trend. Home equity credit lines and home equity loans generated $13 billion in lending in the first quarter, the highest level in that quarter since 2009, according to statistics from Inside Mortgage Finance.
“Demand is up,” said Rob McNeilly, president of the Nashville division of Atlanta-based SunTrust Bank. He estimates demand for home equity loans has increased by double-digit percentages in the past 12 months. “Most people delayed significant home improvements during that recessionary period, and they were a little less confident in ultimate home value. … People are more confident about the value of their home than they were.”
Regions Bank area president Jim Schmitz said home equity loans began gaining momentum toward the end of 2013.
With a smaller inventory of new homes on the market than in years past, homeowners in many cases are looking to add space to their homes, rather than purchase a new one, and improved consumer credit allows them do so. “Now people are saying, ‘I can go out and maybe borrow again,’ ” he said.
The increase is happening in areas with stronger real estate markets, where home prices are appreciating and where lenders are less fearful of losses, according to Keith Gumbinger, vice president of mortgage information site HSH.com in Riverdale, NJ
“Their books are in better shape and they are actively looking for clients to lend to,” Gumbinger said. “These were always great relationship products and interest-bearing products in the past. Now that we are getting past the downturn, things are getting better.”
Before the financial crisis, lenders may have been more willing to loan 100 percent of a home’s value. That percentage has dropped closer to 80 or 85 percent to protect both lenders and homeowners, he said.
Richard Herrington, who founded Franklin Synergy Bank in Franklin in 2007, said he has seen 15 to 20 percent annual growth in home equity loans in recent years, with customers using them to pay for weddings, tuition, a car or opening a business. “It is a very good alternative for consumers for short-term borrowing.”
Schmitz cautioned consumers not to take on higher loan ratios than necessary. “Think long term about what impact that could have on you if values go down,” he said. “There are a lot of banks that are trying to be much more prudent, learn the lessons of the past, but there are always going to be folks out there that push the envelope.”
WISCONSIN RAPIDS — Wood County UW-Extension Family Living is promoting the Check Your Free Credit Report Campaign: 2/2, 6/6, 10/10, to remind people to view their three free reports each year on Feb. 2, June 6 and Oct. 10.
Each date represents a day to set aside five minutes to pull one credit report from one credit bureau, according to J. Michael Collins, UW-Extension family and consumer economics specialist and director of the UW-Madison Center for Financial Security.
Consumers are responsible for checking the accuracy of their credit reports, which are prepared by the private firms Equifax, Experian and TransUnion and sold to other businesses, according to a news release from the extension office.
There is only one legitimate source for a free credit report, and there are many imposters. AnnualCreditReport.com and its mailing address and phone number are the only truly no-cost ways to obtain the free credit reports everybody is entitled to by law, according to Collins.
Other websites claim to offer free reports, scores or monitoring, but they often charge significant one-time or ongoing fees. Unsolicited e-mails, pop-ups or phone calls offering free scores or reports are not official.
Checking one free credit report every four months lets people do their own credit monitoring without having to pay $10 or even $20 a month, which are typical amounts charged for these services, according to the release.
Contact Sarah Siegel, Wood County UW-Extension Family Living Educator, 715-421-8440, or email firstname.lastname@example.org for more information.