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A group of fresh, unemployed lawyers have banded together to sue law schools. 73 alumni have filed at least fifteen class-action lawsuits, alleging the schools inflated employment figures and salary data to attract students and increase rankings. The real goal of the lawsuits seems to be to effect systemic change in the education industry and associations that accredit law schools, like the American Bar Association.

Schools are in the business of generating alumni, and to a great extent, use as many marketing tricks that any company uses in order to influence public opinion. It’s true that a 90% graduate employment rate looks better than a 75% rate on paper, and I’d be more inclined to choose a school with a higher employment rate, with all other factors being equal. But a 90% graduate employment rate doesn’t guarantee that I would receive the job I want after graduation, even if I were in the top 10% of the class.

Furthermore, I’ve come to the conclusion over the years that any statistic used for marketing purposes is subject to manipulation in an attempt to further the goals of marketing. Hard numbers give the impression of fact. From an early age, we’re trained to believe that one plus one equals two, in all circumstances, and numbers are truth. Statistics can be misleading in many ways, and are used more often to try to convince others of a point of view rather than quantify facts in reality.

Law school graduationThe group of lawyers probably can’t prove that the blame for their unemployment situation rests with the law schools. There are many factors that contribute to unemployment, including the overall economy, local job markets, and the effort, skills, and self-marketability of each alumnus. It doesn’t appear as if the former students are suing to have the schools compensate them for the lack of expected income from working, but they are suing to enlighten the public to the issue of misleading statistics throughout the educational industry.

Mutual funds must advertise that “past performance does not guarantee future results.” Even if a graduate employment rate were perfectly measured and accurately reflected exactly what a potential student understood the number to be, a good rate today is no indication that the rate will continue to be high by the time the school awards a degree or certification. If my index mutual fund returned 12% last year and lost 8% this year, I can’t sue the fund manager or the stock market for not providing the dividends I was hoping for. If fraud was involved, it might be a different situation. Perhaps misleading statistics like graduate employment rates are somewhat fraudulent, but I don’t see a parallel as schools do not typically promise that students will be employed at the level they’d like after graduation — and in the case of lawyers, after passing the bar exam.

There might be better ways of raising the issue of misleading statistics in the marketing endeavors in which institutes of education engage. Using the courts to make a point is only one tool that’s available to increase awareness of an issue. When you’re a hammer, though, everything looks like a nail.

Several years ago, while I was completing my Masters in Business Administration degree, I considered attending law school. Ultimately, I decided not to pursue a law degree and to focus my energy on my business instead. I think I made the right decision.

Photo: CubanRefugee
WNYC

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This is one of my biggest financial mistakes. My failure to learn some basic skills and my willful ignorance of the trouble I was in cost me thousands of dollars and major inconveniences.

When I was younger, I didn’t have that much of a positive track record with cars. In high school after receiving my license and throughout college, I drove my parents’ car, but I drove infrequently and was never really responsible for maintaining the car. After I graduated with a bachelor’s degree in music education and found my first teaching position, I needed a car. My parents were kind enough to buy me one as a graduation gift — a 12-year old Toyota Celica in good enough condition.

Well, I made a stupid mistake, though it’s a mistake that befalls many people who don’t take the time to learn about basic car maintenance when owning their first car. I never added any oil to the engine, and certainly never changed the oil. Even if the 3,000 mile “standard” for changing oil is too aggressive for modern cars, letting the motor run dry will quickly damage the car. The mistake of not learning the bare minimum for owning a car got me into trouble.

I replaced the motor after it was destroyed and the car ran well for another few years, but I made more mistakes. These were of a more financial nature. My car seemed to attract police, who seemed almost delighted to pull me over for speeding.

Although it had a rebuilt motor, the Celica was unreliable. Before it was completely undrivable, I used it to trade in for a slightly used car, a Honda Civic, and a three-year loan to make the purchase more affordable for me. I might have changed my driving habits, or the car might not have attracted police as much, but I was pulled over less frequently for speeding. But I continued to ignore the tickets.

Although speeding tickets are expensive and I had no money, it would have been more manageable in the end had I paid the fines and moved on. I was working for a non-profit, and I was broke. For some reason, I thought my life would be better if I stuck my head in the sand and ignored the tickets and fines. I was also moving around a lot in this period of my life, and I didn’t receive notices from the DMV letting me know my license was suspended for my failure to pay these fines. Since I didn’t know my license was suspended, I kept driving, blissfully ignorant of the situation I was in.

One day, soon after I left the non-profit job I had after my short stint teaching after college, a police offer pulled me over for speeding. Since my license was suspended, they impounded my car. My biggest concern was no longer finding a new job, it was determining if and how I could avoid jail time. Good news: I didn’t go to jail.

From this point on, I needed to redesign my life so that I could survive without a car. This was soon after I left the non-profit job I started after teaching, and I was in the process of looking for a new teaching position. My search was on hold because there weren’t many schools in New Jersey I’d be able to travel to without a vehicle. I did find a job, working for a financial company, and moved somewhere that would allow me to have a convenient commute using mass transportation. I gave up my Civic to a relative.

Eventually, I had my license reinstated and the relative returned the Civic. As a result of my problems, though, I still had large auto insurance bills that plagued me for years. Through this debacle, I learned a few lessons about responsibility. Today I can look back and be glad I’ve been able to make better choices this past decade.

Here are some things I’ve taken away from my earlier mistakes, and maybe they’ll be appropriate for you.

  • When you first get a car, learn how to take care of it.
  • When someone sends you a bill, don’t ignore it.
  • If police are involved, take care of the problem as soon as possible.
  • If you owe money to the courts, it’s not going away, and it could become a legal issue.
  • If you have no money to pay traffic fines, find the money.
  • Keep your address current and on file with the division of motor vehicles.
  • Don’t speed.

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Prenuptial agreements are on the rise, as more individuals are concerned about losing their assets in the wake of the recession. Prenups, when handled correctly, can protect an individual’s assets in the increasingly likely event of divorce. Without a prenup explicitly defining how assets should be divvied up, if a divorce occurs, any income earned during the marriage, including any money added to retirement accounts, could be split between the two individuals. Depending on the state, this split could be 50% to each or it could be some other method considered fair by the courts.

Regular earned income isn’t the only type of wealth that could be affected. Any increase of the value of an asset, whether stock investments or a business, that occurred during the marriage could be considered marital property and divided by a court. For example, even if one spouse purchased a house before marriage, the increase in the value of the house during the marriage will likely be distributed partially to the spouse who doesn’t own the house. A business that’s started years before the marriage but thrives during the marriage, even if the non-owner spouse is not involved with the business, could be split in the event of a divorce.

For someone who has worked hard his or her entire life to build a solid financial future, a divorce is one of the most financially devastating events one can endure. We buy insurance to protect ourselves against loss of health, we diversify investments and choose an appropriate asset allocation to help shield us from financial downturns. A prenup is just another way of protecting assets.

Although we don’t feel edgy about discussing insurance with someone we plan to spend the rest of our lives with, prenups are one of the most taboo topics within the broader taboo topic of money. No one wants to seem greedy. The point of marriage is to make two lives one, not to continue living two independent lives within the same household. A prenup would indicate that divorce is an option down the road, and many couples would not be interested in facing that possibility at a time, before marriage, when the only thought should be living a happy life together.

Classically, couples who opt for prenups usually have one or two individuals who fall into these descriptions:

  • Wealthy, either by inheritance or by effort. When one individual has a much higher level of wealth than the other, the wealthier spouse often wants to protect his or her money in the event of a divorce.
  • Unequal income. Like an unequal net worth, unequal income or income potential can tilt the balance of power within a marriage. A prenup can either protect the balance or protect the tilt.
  • A business owner. For someone who owns a business, a divorce could mean the end of that business. Selling the business is an option for liquidating enough cash to pay for the expenses of breaking up a marriage. If the business is location-based and the owner prefers to move, this, too, could have a devastating affect on the business.

State laws govern prenuptial agreements, and each state falls into one of two categories. In 41 states, divorce without a prenuptial agreement falls under equitable distribution, where the court considers the individual case, circumstances, and finances to determine the most fair division of assets. In the remaining nine states, courts divide all marital property. Prenups can override these state defaults.

Prenuptial agreements are often in the news when celebrity couples move towards marriage. Most recently, Kim Kardashian, who earns about $12 million a year according to Forbes and has a home in Beverly Hills, has signed a prenup with fiancé Kris Humphries, who earns only $3.2 million a year. Kim will be protected through the prenup; in the event of a divorce, she will keep everything she owns now in addition to any income she earns during the marriage.

For engaged couples whose wealth and income are already evenly split, there is still a case for a prenuptial agreement. The court system can be complicated and expensive. A couple that doesn’t discuss financial issues could have a harder time during a divorce. A prenup can smooth some of these difficulties and help both partners leave the marriage with most of their own wealth intact. While prenups have traditionally been instruments of the wealthy, the recession has affected many people’s approach to protecting their assets. More middle-class couples are considering prenups now.

Would you or did you consider a prenuptial agreement before getting married?

Photo: david_shankbone

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Savings accounts and money market accounts are different from each other practically in name only. From a saver’s perspective, there is no difference between these types of accounts. There are many misconceptions about the supposed differences between savings accounts and money market accounts, and if you’ve ever tried to learn about these differences online, even from reading major banking industry websites, you may have received a great deal of misinformation.

I am not infallible; if you believe any of the information included below to be incorrect, let me know.

Withdrawal limits

Whether you open a savings account or a money market account at a bank in the United States, the bank applies your cash to their books as an asset and records a liability in the form of your deposit. The government considers both savings accounts and money market accounts as deposit accounts, not transaction accounts. Savings and money market accounts are not meant for frequent transactions. They are both limited by Regulation D, a Federal Reserve Board regulation that indicates that customers may make only six pre-authorized withdrawals from deposit accounts. ATM and teller withdrawals do not count against this limit, but debit card transactions, checks, and online transfers do. You may have read in various places online that only money market accounts are limited to six withdrawals, or you may have read that only savings accounts have this limitation. The limitation applies to all deposit accounts.

Interest rates

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Giving Your ZIP Code to Cashiers

by Flexo

One of my first jobs as a teenager, twenty-some years ago, was a salesperson at Radio Shack. Our point-of-sale system functioned on phone numbers for some reason, so whenever a customer wanted to purchase something, we asked the customer for his or her phone number. Even if the customer was buying a pack of AA ... Continue reading this article…

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Podcast 93: Debt Free for Life, David Bach

by Flexo

Today’s guest on the Consumerism Commentary Podcast is David Bach, author of Debt Free For Life: The Finish Rich Plan for Financial Freedom, the latest in the Finish Rich series of books and online tools. David, Flexo and Bryan discuss financial changes in the last year, the national trend toward paying down debt, the Done ... Continue reading this article…

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Who Really Owns Your Mortgage?

by Flexo

A family in New York is suing Citigroup. The bank’s mortgage servicing branch, CitiMortgage, is seeking a foreclosure claim against their house. The suit alleges that CitiMortgage does not own the mortgage, and can therefore not foreclose upon the property. The mortgage is owned by Fannie Mae. The D’Amelio family has been in default on ... Continue reading this article…

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Consumerism Commentary Terms of Service

by Flexo

PLEASE READ THESE TERMS OF SERVICE. BY USING CONSUMERISM COMMENTARY, YOU AGREE TO ABIDE BY THIS AGREEMENT. 1. Acceptance of and Modification to this Agreement. Welcome to Consumerism Commentary (the “Site”). The owners and operators of Site (“we” or “us”) provide the service at the Site (the “Service”) subject to these terms and conditions. By ... Continue reading this article…

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