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As featured in The Wall Street Journal, Money Magazine, and more!

Congratulations to the owners of LearnVest, a financial planning start-up that is in the process of finalizing a deal with Northwestern Mutual wherein the latter will be acquiring the assets and business of the former. In a deal of more than $250 million in cash, a company that provided early funding for the start-up will now be the sole owner.

LearnVest entered the market as a service that put women in touch with resources, including financial planners, to help them reach their financial goals. The company later expanded its reach to men, as well.

But it’s quite probable, as Michael Kitces points out, that the value Northwestern Mutual sees in LearnVest isn’t in its small advisory clientele, it’s in the membership base for personal financial management software. This part of the business caters to more than 1.5 million customers.

The acquisition doesn’t come as much of a surprise. It behooves old financial companies to integrate businesses that have been successful in attracting younger customers. Millennials are more inclined to be customers of businesses that started online, use marketing that is catered to how the generation perceives itself, and are led by people who seem to have more in common with them.

But it’s those old financial companies that have the money, thus they provide capital funding for start-ups and are the most interested in making acquisitions like these. And you can be sure that the companies that provide the funding are those who benefit the most in an eventual sale and have influence in the management of the start-up companies during their funding periods.

But where does this leave LearnVest advisory customers? Are they now clients of Northwestern Mutual? In short, yes.

There is a legal regulation that prevents this from happening automatically. In order for one financial advisory to turn clients over to another which is the case in this acquisition, the Investment Advisors Act requires that customers give consent to the change.

And LearnVest is making this “easy” for customers. Any customer not taking an action is considered to have given his or her consent; in order to refuse consent, a customer must close his or her account. While LearnVest claims this is to make the change easy for customers, it’s really just an “opt-out” option, assuming customers agree with the change even if they don’t know about it.

This is the same tactic that consumer groups have fought against in other areas. Many services require an “opt in” confirmation of subscription, or even multiple confirmations just to be safe.

It’s unlikely that much will change immediately with this acquisition. Customers will likely retain their membership as is, and will be assigned to the same advisers. But if one of the reasons for becoming a customer with LearnVest was the opportunity to get financial advice from outside the “establishment,” financial industry’s old guard, and work with a company that seemed to be geared to you, you may not be interested in being a part of this new evolution of the start-up.

And LearnVest hasn’t yet communicated the acquisition to all of its customers. The company has presented a few social media posts with a link to a list of answers to frequently asked questions, and I expect emails to customers will be forthcoming. One of LearnVest’s Twitter posts was the first I heard of the acquisition, and that led me to check the news for the details.

Considering LearnVest has only managed to obtain 10,000 advisory customers over six years, this does not seem to be a huge concern for the company.

Born in 1976, I don’t quite fit the description of the Millennial generation (or Generation Y), yet I probably have more in common with the generation than I do with Generation X. It’s hard to say. Like Millennials, I’ve lived most of my life with technology like email, but only because I was a geeky kid and ran bulletin board systems from my house, learned how to code in various programming languages on my own, and built my first website in college when the cast majority of colleges didn’t even have their own websites.

Yet I hate text messages. So I obviously can’t be a Millennial.

I prefer desktop Quicken to Mint.com and other online personal finance management software — but I do have dreams about designing a successful financial mobile app that Millennials — and I — would want to use. I prefer talking in person to a financial advisor over allowing algorithms to suggest my financial actions. This would make LearnVest better for me than other “automatic” or “robo” advisers.

LearnVest’s advisory might be something I would explore if Vanguard didn’t present me with access to a Certified Financial Planner any time free of charge and if I didn’t have friends and colleagues with the CFP designation all happy to offer me their advice.

Northwestern Mutual plans to keep LearnVest’s operations separate, at least for the immediate future, so potential and existing advisory clients shouldn’t be too concerned about the change. The source of the company’s funding is still and has always been the financial industry and venture capitalists, except for the $75,000 CEO Alexa von Tobel reportedly invested with her own money.

The influence within the company doesn’t change much other than giving other investors a cash distribution to exit their ownership and leaving Northwestern Mutual with complete control. Maybe that’s a big change. Maybe it will mean very little. But if it’s affecting only 10,000 of the 1.5 million LearnVest customers, I think the bigger question is what the insurance company will be able to do with any data stored by the personal financial management software.

Are you a customer of LearnVest? Do you think this is a move in the right direction for the company?

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Accumulating money is not a real goal for anyone’s life. Growing wealth is not the point. People don’t work hard because they want to see their bank balance grow; those of us who track our finances and chart our net worth over time aren’t trying to compete in some financial competition.

I imagine there are individuals who do have an approach to money wherein the increase of the bank balance is the ultimate goal. But this approach misses the point. Perhaps these savers and earners haven’t given enough thought to why they want to grow their wealth, other than believing that society dictates that they do so — or they idolize people in the media who flaunt their wealth.

Money exists to be used in some kind of transaction — that’s all. So there’s no point in accumulating money just for money’s sake.

This is a concept I’ve covered on Consumerism Commentary in the past, but I bring it up again because it’s always relevant, and maybe it’s good to have reminders once in a while.

I don’t write about my own business much on this website. My business is based in the act and process of blogging. Consumerism Commentary has been my business. And while I think it would be fun to write about it more, as any business owner would like to write about his own business, I wanted to avoid that. If my business was a store I had planned with a friend, I would write about that here.

Writing about blogging as a business just didn’t seem right for this website, because I’d be “blogging about blogging.” The only people who may be interested in that are other bloggers, and Consumerism Commentary reaches a much wider audience than “other bloggers.”

Therefore I’ve stayed away from writing about how I earned money from my business, how I built that business, and how I eventually sold that business for an amount of money that would be potentially life-changing. And it’s a shame I’ve avoided the topic, because it’s really interesting, and I think other people, both those who consider themselves bloggers and those who don’t, would like to hear more about it.

I took the opportunity to write about my experiences and what I’ve learned from turning a hobby into a business for the new Plutus Awards website.

(For those of you who don’t know, The Plutus Awards is an award ceremony I founded. The awards highlight the best in financial media and products. It was born from my own enjoyment of running awards ceremonies, something that started in college with my creation of awards with superlative and funny awards for members of my university’s marching band, with the ceremony at an annual banquet.)

This epic article was influenced by questions I get all the time from other bloggers who want to find a way to earn consistent income from their websites. Of course I’m happy to answer any questions privately, but I haven’t had an outlet in which I’ve felt comfortable sharing all the details.

And the massive more-than-4,000-word article just touches the surface — I could write a book about what I experienced over the past twelve years with my unintentional business.

I expected to receive some criticism from the article. I wrote about how I focused primarily on this hobby-turned-business and didn’t seek work/life balance between my work and social life. One reader felt sorry for me, as if I had missed out on something in pursuit of the almighty dollar. I probably took more offense to the reader’s remark than I should have.

There are probably some things that I’ve missed out on in life. I guess I could have spent more time watching movies with friends. I guess I could have tried harder to start a family. But I don’t think my life is any less whole right now.

But for me in the year 2000, earning a tiny salary from a nonprofit and living in one of the most expensive areas of the country, I had to do something about my financial situation. Life wasn’t about the money, but I needed to start paying attention to my finances, and I needed to figure out how to get my life moving in the right direction.

When you have no money and you begin thinking about what the future consequences will be, money starts to plays an important role in your life. The trick is being able to prevent yourself from seeking money above all else. You can prevent that by keeping larger goals in mind, by thinking about what the point of having money is. It’s more than just “freedom.” What would you do with “freedom” if you had it?

For me, it was starting a foundation. In 2000, I knew that if I had enough money, I’d start a foundation that focused on arts education. It might have been a little naive to have that as my plan, but the idea isn’t too far-fetched.

And if you’ve read How I Built a Seven-Figure Blog, you know that I didn’t start a business to reach that goal. I didn’t start a business at all. I focused my blogging, something I had already been doing for years, on a topic I wanted to learn more about — personal finance and money management. All I wanted to do was get better at managing the money I had.

After several years as an adult ignoring my finances, I had to make my life about money, at least a little bit, in order to improve my situation. Having been born into a middle class family in the wealthiest country in the world, I had been failing at maintaining that level. My situation, goals, and needs would have been different had I been born in poverty or to a wealthy family.

Now that I’m in a different financial situation, after seeing that hobby turn into a successful business that I later sold, perhaps it’s easy to say that life isn’t about money. When you have enough in the bank to be secure — you don’t have to rely on income from an employer, for example — it’s easier to focus on the grander goal.

Speaking of which, I’m happy that I’m able to reach some of my bigger goals before the age of forty. Remember that arts foundation I’d dreamed about? Well, I’ve changed my approach, but I’m still in the general vicinity.

I’m establishing a scholarship at my undergraduate university for music interns. Did my music education degree relate to how I’ve built my “career” over the last decade? Not directly, and that’s why it might not make sense to people why I want to give back to my university. But my experiences at my college did shape me and my approach to life.

But more importantly, I was required to take an internship for my minor that got me started with the organization that allowed me to get into a financial mess in the first place. The stipend through my scholarship should help students be able to afford to take the best internship opportunities without having to worry about how they’re going to earn a living while working for little or no money.

This will help level the playing field, so the best internships can go to more than just the wealthiest students who can afford avoiding work for a semester.

In addition, I’m also starting a foundation — but this will be related to financial media, like the Plutus Awards. I’ll be announcing more information about that soon.

So I’ve written quite a bit about the work side of my life, and lest anyone thing I don’t have perfect balance between work and non-work aspects of my time on this planet, there’s been a lot going on. Last month, I mentioned my apartment received storm damage. The landlord is still trying to repair the apartment — this is over a month after the incident — and I decided to exercise a clause in my lease that allows me to leave.

There is a world of choice available to me right now. I could do virtually anything. But, I made a commitment to work with a music group based in Princeton, New Jersey throughout the rest of the summer, so I won’t be leaving. I am signing a seven month lease, moving just over the border to Yardley, Pennsylvania, to an affordable but smaller apartment.

I’m downsizing, getting rid of some furniture and other items I’ve accumulated over the years. The lease will get me through this year’s Plutus Awards, and once that is over, I’ll be ready to think about leaving the area, spending the winter on the west coast with my girlfriend and family, and giving myself the opportunity to travel more.

Of course, I’ll need to “balance” these changes with working on my new projects.

Unless I decide to stop and live off my investments for the rest of my life. I’m just not ready to retire, though.

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For a few years, a ring of criminals believed by the U.S. government to be based in India have been involved in a pervasive tax scam. Callers impersonate IRS officials, connect with American taxpayers, and convince many that they have an outstanding bill for tax payments.

The scam has been so pervasive that it has generated more than $15 million from panicked taxpayers.

CNN offers a story from a recent victim of the scam:

One of those victims was former NFL player Frank Garcia, who is now a sports radio host in Charlotte, North Carolina. When he got the call, it sounded so authentic, he left the radio station in a panic, scramming to get the money they wanted.

“The only thing running through my head is, I’m going to jail. I’m gonna be on television, in handcuffs, for tax evasion,” he recalled. “I had to follow specific steps not to be arrested. That the authorities had been contacted and in fact, they are on the way and will be there in 30 minutes.”

Garcia says he spent five hours driving to various stores around Charlotte, depositing $500 each time into a PayPal account set up by the woman on the phone. He ended up losing about $4,000.

Public figures tend to be more anxious than most people about being guilty of a crime. The destruction of a career in the public eye and a happy life is easy given the public taste for scandal and the American system of justice through trial by media.

And when you believe you might be in major trouble, the ability to think rationally sometimes disappears. To a reader, the idea that the IRS would have a PayPal account to collect past due tax bills sounds fishy, if not ridiculous. But in the heat of the moment, when you’re being threatened with jail time, you just want to problem to go away, and all possible resolutions sound legitimate.

the prevalence of media warnings about the scam has certainly helped slow down the perpetrators’ attack on taxpayers. I’ve even seen warnings on my local news broadcasts (but it probably won’t be totally effective and pervasive until reality show producers incorporate scam warnings into their shows).

Money offers a few tips, summarized below, for preventing yourself from being a victim of this scam, so while knowledge does help, as I’ve already mentioned, under stress logical reasoning often fails.

Scammers spoof caller I.D. The call may be coming from somewhere on the other side of the world, but the caller I.D. might say it’s coming from a number with a 202 area code (Washington, D.C.).

In reality, the IRS does not call taxpayers, and the organization especially doesn’t call taxpayers to inform them of an overdue tax bill. If a taxpayer truthfully owes tax, the IRS sends a bill, and offers instructions for the taxpayer to respond.

But I get how people can fall for this. Sometimes the U.S. Postal Service isn’t reliable. Sometimes you accidentally discard legitimate mail, mistaking it for junk mail. A caller can easily convince someone that they had sent notices through the mail which, from their perspective, were ignored.

Scammers ask for immediate payment. The real IRS doesn’t ask for payment over the phone, and are not in the business of setting up PayPal accounts to receive the funds or of instructing taxpayers to purchase prepaid debit cards. The IRS takes personal checks sent to official addresses and electronic payments through a government gateway, the Electronic Federal Tax Payment System (EFTPS) or DirectPay. That’s it.

This fact doesn’t change for taxes owed from previous years, even if you settle with the IRS for a lesser amount.

Even to taxpayers falling for the scam, it sounds like the callers are working somewhat outside the “system,” especially when they agree to settle. So an alternative form of payment might not raise any red flags.

Scammers threaten to arrest or deport their victims. The IRS wouldn’t do that. But it’s hard to believe this is not an IRS tactic when we know from media reports that tax evasion is a crime that results in arrest and deportation. If the scammers make victims believe that they could be guilty of tax evasion, the fear of being arrested is in their mind before the scammers “confirm” that will be the result of failing to pay.

And if you happen to be an immigrant fearing deportation, either because you are in the country illegally or believe it’s easy to be mistaken for someone in the country illegally, the threat of deportation could be so frightening (especially if you are escaping a dangerous home country) that you’re willing to do anything to remain in the United States.

Here’s what happens when you really do owe back taxes.

First, if you earn a paycheck from an employer and haven’t filed your taxes, the IRS will eventually catch on, and you will be expected to pay what you owe if you haven’t already through paycheck withholding. If you have paid taxes every year you owe taxes, but haven’t paid enough, you will still be expected to pay the remainder of what you owe.

The IRS will send you a notice in the form of a bill, identifying how much the government believes you owe and give you a deadline to pay. You will owe penalties and interest beginning with the date that tax payment was due, and that will be included on the bill.

If you disagree with the IRS assessment, you can call the IRS at 800-829-1040 to discuss the matter. But if you do owe the money, you will have to come up with some solution to pay. That solution could be paying immediately, as the IRS requests, agreeing to an installment plan, where you can pay the taxes over a period of time, or coming up with an offer in compromise.

The offer in compromise is available to people with a financial hardship, but the IRS must determine it would never be able to receive the full amount of tax owed.

If none of the above can resolve the issue, the IRS can resort to filing a federal tax lien, a legal claim to your property. The IRS may issue a levy, seizing your wages or bank accounts. These can continue until your tax bill is paid in full or the IRS can no longer legally seek repayment. You can lose your house, your retirement funds, and your income.

Because these consequences are so dire, it’s understandable that people are on edge when they receive a call purportedly from the IRS and therefore vulnerable to this widespread and successful scam.

Have you received one of these calls from someone claiming to be from the IRS? What happened on the phone call?

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Best Buy, the big box retailer that most shoppers have abandoned sometime in the last decade and a half in favor of Amazon.com, announced better-than-expected earnings for the last three months of 2014, which includes the all-important holiday season.

The announcement sent the financial media into a frenzy, as many had all but dismissed Best Buy, even after positive results from the third quarter of 2014. To exemplify Best Buy’s performance and overall sentiment at that time, the Motley Fool presented this five-year chart, comparing Best Buy’s stock price changes over that particular time to the performance of the S&P 500, a popular benchmark for stocks.

Here we have a stock that returned -10.9% while the rest of the stock market returned a cumulative 87.35%.

When it comes to the stock market and companies that have public stock available to trade, everyone in the industry including the journalists would prefer if you just look at the charts and make decisions based on the data they choose to show. It’s all in the charts.

And by “all” I mean lies and manipulation, hidden in the “truth” of absolute numbers.

The visual implication with this chart is that Best Buy is a company to keep out of your portfolio. Unless Well, there are some who believe an underperforming stock is a good bargain, if they feel there is some inherent value that the rest of the market is ignoring — a highly unlikely situation. That’s not the impression a reader would get from the article that accompanies the chart.

Compare the chart above with one released today by CNN Money on the occasion of Best Buy’s most recent announcement.

This chart from CNN Money, comparing Best Buy’s stock with an exchange-traded fund that represents the retail industry (XRT), begins tracking the comparison on some undefined date in 2012 and boldly announces a conclusion based on these cherry-picked data.

Maybe everyone was wrong about Best Buy after all, and not only does the retailer’s expectation-beating performance for the latter half of 2014 signal that the company is not focused on the past, and is not depending on what is becoming an antiquated model of shopping for technology, but it has also been a good investment all along!

Well, just for fun, I made my own chart with a comparison between BBY and XRT.

This chart, as accurate as the other charts above, clearly shows that Best Buy (blue line in the chart) has been a bad investment at the same time CNN Money tries to show it has been a good investment. Over this period of time, the stock has returned -8.16% while the retail sector (red line in the chart) returned a positive 16.26% overall.

You can as easily and inaccurately draw whatever conclusions you like from my set of data (aided by Google Finance’s charting facility) as you may draw from CNN Money’s chart. “Best Buy has been better buy than other retail stocks” — but not for customers who invest at times that would invalidate that conclusion!

In fact, if you bought Best Buy stock on the day The Street discussed Best Buy’s third quarter results from 2014 and held that stock until yesterday, the investment would have grown 8.68%, compared with 8.90% for the retail sector measured by XRT. Marginally worse than the industry — and a bad sign for a company whose outlook was more positive.

I’m not accusing anyone of lying. But it’s easy and simple for the media to design “accurate and truthful” stock market charts that show almost whatever they want in order to support the conclusion on which any particular writer has already decided. The visual charts have more power to convince people of an opinion than they probably should have, thanks to their ease of being manipulated and their immediate communication of a message.

Let’s go back a little farther in Best Buy’s performance history. When Best Buy announced its results for the second quarter of 2014, its performance was worse than expected. Here’s what Fortune Magazine had to say at that time:

Revenue dropped 4% to $8.9 billion for the quarter ended Aug. 2, worse than the $8.98 billion projected by analysts surveyed by Bloomberg. Domestic same-store sales dropped 2%, while they fell 6.7% in international markets. Both declines were worse than what Best Buy reported in the year-ago period.

Best Buy has faced a tough challenge from online retailers, which have reported higher sales growth than brick-and-mortar stores. Online purveyors like Amazon.com also provide customers greater clarity about where to get the best deals for the latest gadgets.

Here’s what you do when you run a public company. When you beat the analysts’ predictions, explain how your good management and leadership resulted in success. When your company doesn’t perform as well as expected, explain how forces beyond your control (systemic failure, market trends, government regulations, etc.) prevented success.

How do you reconcile performance in one good quarter with an analysis that explained bad performance in a previous quarter? In Best Buy’s case, did people start seeing Amazon.com’s dominance as just a phase? Is online shopping just a fad, good enough for day-to-day purchases, but when the importance of holiday shopping is clear, consumers start wandering around big box stores? Now that Best Buy has had two positive quarters, is it finally in a position where it can stop adapting to a changing consumer culture?

Imagine how things would sound if companies reversed their attribution theory, if they took credit for short-term failures and blamed others for short-term success?

  • “We performed worse than the market’s expectations this quarter because our CEO failed to lead the company through changing consumer trends.”
  • “We are excited about new tax incentives that have allowed us to show a profit in our financial records when we otherwise would have lost money.”

Who would invest in a company whose public relations department said these things?

There’s a kernel of truth to everything, but picking which truths apply to any particular time period’s stock price performance is pure guesswork. Investors continue to read the financial media’s commentary and make decisions based on the advice, explicit or implicit, therein.

Wall Street analysts do work hard, as do the journalists who make sense of an interpret those analyses. The system keeps a fair amount of individuals employed — but they are employed in the entertainment industry.

The best thing any consumer can do it keep the following in mind:

If you see a stock market chart, someone is trying to manipulate you and your opinions.

Just for fun, here’s another chart that compares Best Buy’s performance since roughly the beginning of XRT’s existence in 2006. Best Buy looks like a pretty big loser today.

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Which Money Script Do You Live By?

by Luke Landes
Couch

Your money script is a story you tell yourself about money. This story, the way you approach your finances, an outlook on a certain segment of your life, can have a significant effect on your behavior. In the growing field of financial psychology, the money script is a key element for clients and patients. Financial ... Continue reading this article…

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Three Overlooked Tools for Repairing Credit

by Luke Landes
Sue the creditor

This is a guest article by Neal Frankle. Neal is a Certified Financial Planner® in Los Angeles. He is also the senior editor for WealthPilgrim.com, MCMHA.org and CreditPilgrim.com. Your credit report is like a financial passport. If it’s clean you’ll find the doors to the financial world wide open. Your credit journey will be carefree ... Continue reading this article…

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When It Makes Sense to Work For Free

by Luke Landes
Intern

How much is your time worth? This is a terrible question, and it usually begets a terrible answer. It’s a question that motivational speakers use to encourage people to make sure they’re optimizing their ability to earn an income. There’s nothing wrong with that per se, but it leads to some poor conclusions. For instance, ... Continue reading this article…

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Should All Financial Advisers Be Held to a Fiduciary Standard?

by Luke Landes
Money

Over the last year, a friend of mine has been trying to convince me to move my financial assets. I currently have a taxable investment account at Vanguard, and my portfolio consists of a mix that includes a domestic stock index fund, an international stock index fund, and tax-advantaged municipal bond funds. This friend believes ... Continue reading this article…

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Burst Sprinkler Line, Property Damage, and Renter’s Insurance

by Luke Landes
Dining Room and Kitchen Ceiling

A week ago today I was in Phoenix. I had been there for a few days, and I had been planning to spend a month with my girlfriend away from the cold New Jersey weather. It wasn’t a vacation. We each needed to continue working, but figured we might as well do so where the ... Continue reading this article…

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8 Tips for a Frugal Valentine’s Day

by Luke Landes

For several years, it was a February tradition on Consumerism Commentary to look for moderation on Valentine’s Day. Many young couples would like to use the day to express their love, but might not have the financial means to do what television commercials make you believe is normal. If you have additional ideas, feel free ... Continue reading this article…

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