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There’s a chance you could become a multi-millionaire after repeatedly slamming your head into other people and suffering through the resulting mini-concussions and minor brain damage, but not everyone can be a professional football player in the NFL. There’s a safer and less harmful path toward financial independence.

Cognitive ability is an important part of your human capital, and your human capital measures, among other things, how likely you’ll be able to support yourself financially, particularly through difficult economic times. Cognitive ability is important because many jobs requiring intricate skills and the best careers that offer opportunities for advancement require the ability to learn and adapt, and that’s the core of cognition.

The ability for the brain to process information changes throughout one’s lifetime, and without stimulation, cognitive ability can decline. When companies like Google or SAS ask puzzling interview questions, they’re testing, among other things, cognitive ability. To be hired as a software engineer, you would need to show that you have a strong command of whatever primary programming language is popular at the time, but in an industry that changes so quickly, strong cognitive ability will show that you can learn and adapt to the changing environment.

Rubik's CubeThe key is instilling cognitive ability in children at an early enough age. As we get older, we can continue to refine cognitive ability, but only to a small extent. These tactics may no longer work for me; the best adults can generally do to keep cognitive skills sharp is to get enough sleep and exercise, and eat nutritious food.

If you’re interested in helping your child prepare for a life full of challenges, there are some tactics you can employ.

Learning a new language

As a child, I enjoyed learning languages. I never became fluent in anything other than English, but I enjoyed the process of learning the rules. As a kid, I was fascinated by languages, and spent time learning a little bit of as many as possible. Like many kids, I learned a little Spanish from Sesame Street. I learned Hebrew and tried to teach myself Yiddish. I studied Latin in middle school, was taken out of usual classes to study Greek independently, and took five years of German. I learned programming languages like BASIC, Pascal, lisp, and C. And as a younger kid, I dabbled with creating my own languages and codes.

Music and mathematics have features in common with languages, as well. Music, particularly learning to play an instrument instead of just listening to Mozart, has been shown to improve cognitive ability.

As an adult, learning a new language or a musical instrument is a time-consuming task. There are programs that help frequent travelers learn languages quickly, but you could get a bigger cognitive benefit by learning a language through a more academic curriculum or through immersion. Rather than focusing on key phrases that help you get by in a foreign land, incorporating a new language into the way you think can help keep your brain active. On the other hand, young children, even those learning their first language or languages, can often learn multiple languages concurrently without being confused. Language skills not only improve cognitive ability, but they can make someone a more marketable employee around the world or increase the chance of international success in their own businesses.

Completing puzzles

Elementary school is a great time to focus on solving puzzles whose solutions require thinking “outside the box.” I seem to remember this being called “lateral thinking” when I was younger, but I don’t know if that term is widely used today. These are the types of puzzles that stymie job applicants at companies like Google. But puzzle solving as an adult won’t have the same impact as puzzle solving when the brain is at its most impressionable.

  • Logic puzzles are kind of like the game Clue. You often have two or more dimensions to work with, and the goal is to pair each of the dimensions together based on a limited number of clues. A grid helps eliminate incorrect pairings to discover what’s correct. The more dimensions included in the puzzle, the more brain power necessary to solve the puzzle.
  • For a child, a Rubik’s Cube can be an engaging puzzle. While the answer now comes packaged with the toy, and there are numerous Youtube videos describing how to solve the puzzle in about twenty moves, the cognitive challenge is in working to find patterns of movement that move closer to the result.
  • Text adventure games open up a child’s mind to being able to control their environment. Video games have changed since I was a kid, but I enjoyed the early text adventure computer games like Scott Adams’ Adventureland. (Classic game lovers can play Adventureland here.)

Reading and writing

Reading and writing help develop important cognitive skills focused on processing information the same way they’ll need to make sense of problems as adults. Writing, particularly creative writing, improves the command of language and can help children find clarity when expressing their ideas. Writing is a skill that will easily set someone apart from the competition, as might be necessary in tough job markets. I’ve personally seen atrocious written communication among co-workers throughout the many jobs I’ve had. I will never say I’m a great writer, but these skills are lacking in my former non-profit and corporate environments.

When I compose a well-worded communication, the supervisors shouldn’t be surprised. Every employee with a college education should be able to express himself or herself somewhat eloquently.

These cognitive skills nurtured at an early age can help prepare children for financial success in life. The best careers need smart and flexible employees to take on unforeseen challenges. People often predict what the hottest careers may be one generation from now, but the specific opportunities are irrelevant if children are prepared today to handle any problem that presents itself.

What did you do as a child to improve your cognitive ability? If you have children, how are you helping them prepare for the future?

Photo: Don Wright

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Cash back credit cards can help consumers practice responsible spending while earning a little extra for their efforts when used properly. It wasn’t long ago that the best cash back credit cards were offering rewards as high as 5% for all purchases, but that is unfortunately no longer the case.

Today’s cash back credit cards are all similar in nature, generally offering 1% cash back on all purchases. However, if you look hard enough, you’ll find a number of credit cards with higher cash rebates than just 1%. This article lists the best cash back credit cards you can find today, and I update the article when there is new information to share. Along with a brief description of each of these best cards, I have included the cash back percentages and any tiers or restrictions, so there are no surprises if your cash back credit card isn’t earning as much as you first thought. Keep in mind that in order to make credit card with rewards program worthwhile, you must avoid interest charges and late fees by paying your bill on time and in full every single month.

Editor’s choice

Chase Freedom® Visa - $200 Bonus Cash BackChase Freedom® Visa – $200 Bonus Cash Back. The Chase Freedom Visa – $200 Bonus Cash Back offers a standard 1% cash back on all purchases, as well as the opportunity to earn 5% cash back on select purchases throughout the year, subject to a maximum. Every three months, the categories in which you can earn 5% cash back change, so for example January through March could be gas stations and Amazon.com, April through June might be grocery stores and movie theaters, July through September could be gas stations and restaurants while October through December could be hotels, airlines, Best Buy and Kohl’s. In order to qualify for the 5% cash back, you must have an account in good standing and follow the terms and conditions set forth by Chase. Categories will be announced to cardholders before they happen, so look out for updates from Chase.

The Chase Freedom® Visa – $200 Bonus Cash Back also offers up to an additional 10% cash back (up to 11% total cash back) on purchases made at select merchants when you shop online through the Chase website. The card also carries no annual fee. To qualify for the $200 cash back, you must spend only $500 during the first three months, making it the easy choice for best cash back credit card.

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The Worst Celebrity Tax Problems

This article was written by in Taxes. 10 comments.

It’s with a tinge of schadenfreude that people are fascinated with the failures and foibles of famous celebrities. Every year, the IRS chases people who evade or underpay federal income tax, and actors and popular figures in the media, who often don’t manage their own finances, make the news.

The latest is Lindsay Lohan. You may remember her from such films as Mean Girls, Freaky Friday, and Herbie Fully Loaded. TMZ has discovered that the IRS has obtained against Lindsay for almost $100,000, representing tax she didn’t pay for her income in 2009. Like many busy people, Lindsay employs an accountant to handle her finances, and she says the oversight will be handled immediately.

Lindsay LohanThe sum Lindsay owes is small compared to the problems other celebrities have had with the IRS.

Wesley Snipes failed to pay up to $17 million to the IRS for his income taxes, not including penalties and interest. After his trial and a failed appeal, he was sentenced to prison for three years.

Nicolas Cage also blamed his accountant for his failure to pay a $14 million tax bill in 2010; even more recently, Nic failed to pay over $600,000 for a gift tax.

Pamela Anderson owed $2 million to the IRS and to the state of California.

Annie Leibovitz isn’t a movie star, but she is at the top of the list of famous modern photographers. She owed $2.1 million in back taxes, and pledged to sell her ownership of her photography to pay the bills.

Martha Stewart owed $220,000 to New York for taxes, but she believed she didn’t need to pay this tax because she didn’t spend time in that state.

Celebrities often have tax situations that differ from people who aren’t performers or professional athletes. They need to handle state tax returns for every state in which they’ve earned income each year, just like all taxpayers, but in any given year, performers may have earned income in a large number of states. Celebrities will almost always be too busy to handle their own tax returns, so they trust accountants to handle the paperwork and the payments.

On the other hand, it’s safe to say that some famous individual who owe the government money for failure to pay their tax bills are aware of the situation and are trying to skirt the law as much as possible, until they are forced to pay.

Photo: Rafael Amado Deras
TMZ via Don’t Mess With Taxes, New York Times, UPI, Back Taxes Help

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Good Debt and Bad Debt

This article was written by in Debt Reduction. 16 comments.

Misuse of credit can destroy a family’s financial life. A household can crumble under the weight of debt, whether it has increased from a poor house-purchasing decision, a drastic change in the real estate market, a shopping addiction, an unexpected medical bill, or the lack of preparedness for an emergency. It’s no surprise people consider debt to be “bad.”

Is there any situation where debt can be “good?”

I have a problem with the good debt vs. bad debt argument. Good and bad are polar opposites, and most issues tend to sit somewhere on a spectrum between two extremes. In fact, issues don’t often sit; they can shift position. The requirement to declare anything, particularly “debt” as a concept, as either good or bad is oversimplification. There’s a tendency to want to make issues simple. Catchy soundbites reducing issues to the most basic terms attract people, and no one ever won a Presidential election while talking about nuances.

See-sawPeople who are looking to sell you something, like car salesmen, college recruiters, investment professionals, and real estate brokers, are more likely to be willing to point out how debt can be used effectively.

  • In real estate transactions, debt allows more families to afford a house, and in some cases, that could mean a healthier environment for raising children. Leverage also helps you reflect a higher rate of return if your home value increases and you decide to sell.
  • If you can borrow money at a low interest rate and use that cash to invest at a higher rate of return, you are using someone else’s money to benefit yourself financially. You can pocket the difference in interest rates or rates of return.
  • Getting a college education increases your lifetime earning potential, and going into debt for a bachelor’s degree could pay off.
  • If you work in a career where image is important, a higher-priced and otherwise-unaffordable car could help you succeed in your business.

Risk makes debt dangerous. There’s a risk that house prices go down. Since the housing bubble burst, that risk should be more apparent. Leverage may amplify your return, but it also makes losses more severe. You could lose your house. If your hot investment doesn’t pan out, you might not be able to pay back your borrowed money. If you find yourself in a career not earning much money, you could struggle to pay off your student loan debt. Using debt to focus your image doesn’t always pay off.

You can only determine whether a risk, like borrowing, is worthwhile after the fact. Hindsight provides perspective. If borrowing allowed you to triumph financially, it was “good” debt. If the debt was unmanageable or caused financial ruin, it was “bad” debt. Taking on debt to purchase an asset that increases in value would always be “good,” while using debt to finance an asset that decreases in value would always be “bad.” The problem is being able to accurately predict the future. The assets we hope will increase would be a house, an investment portfolio, lifetime earning potential, and career opportunities.

The determination of whether debt is “good” or “bad” also depends on the individual or household involved. What could be a good use of debt for one family might not be a good use for another.

There are often other options rather than increasing debt. While it may be expensive to attend an out-of-state private college, you could save money by enrolling in an in-state public college or by taking advantage of grants and scholarships. The Consumerism Commentary Podcast interview with Zac Bissonnette, author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents, can offer more insights on how to obtain a valuable college degree without going into debt.

If you are able to postpone desires until you’ve diligently saved for a purchase, you can avoid debt and its possible pitfalls. Not everyone has the opportunity to save, though. A college graduate without any money might need to buy work-appropriate clothing in order to get a job. The credit card comes out, and she buys a week’s worth of outfits to get her to the first paycheck. This may not be “good” debt, but if she didn’t earn and save enough money while achieving her degree, it could be a short-term necessity.

Then again, another way to look at this need for credit to prepare for the first week in a professional environment is an excuse for not following a solid financial plan over the course of her higher education and the start of her life as an adult.

In another example, a savvy investor could use borrowed money to invest in a business that succeeds. Financial analysts can often determine whether a risk is acceptable, and individual investors can use the same approach. For example, if you could borrow a sum of money at an introductory rate of 0% APR on a credit card for 12 months with no fee, as new customers of this Discover More Card offer can do right now, deposit that in a savings account with 1% interest, you can keep the proceeds as long as you pay the credit card bill on time each month and in full by the end of the introductory period. Back when interest rates were higher, this “credit card balance arbitrage” was a more worthwhile endeavor.

Today, however, most investments that would make borrowing money from a 0% APR credit card worthwhile are riskier than a savings account. Even when the safe interest you could earn was more favorable, there was always a risk of missing a credit card payment and owing penalties and interest to the issuer. If you completed the arbitrage scheme and succeeded in increasing your bank account balance, you’d consider that debt to be good. If not, the debt would be bad.

Do you believe that all debt is bad debt, or are there some situations where it’s worthwhile to pay interest and accept the risk of defaulting?

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How Student Loans Affect Your Credit Scores

by Gerri Detweiler
Student loan debt

This is an article by Gerri Detweiler. For the past twenty years, Gerri has been an advocate helping consumers find reliable answers to their credit questions. Just as student loans can be “good debt” or “bad debt” depending on how they are used, they can be good or bad for your credit scores, depending on ... Continue reading this article…

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Discover More Card No Balance Transfer Fee Offer, 0% APR

by Flexo

In my review of the best credit cards for 2012, I lamented the fact that for the most part, no credit cards waive balance transfer fees in their introductory offers. In years gone by, some cards offered no-fee 0 percent APR introductory offers on balance transfers, and offers like these can, if used properly, go a ... Continue reading this article…

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How to Love Cooking

by Forest
Toast

This is a guest post by Forest from Frugal Zeitgeist. Forest writes about frugality, finance, minimalism and lifestyle. In this article, Forest shares his experiences in the kitchen. Cooking great meals is a great way to save money and stay healthy, but it’s a skill that I haven’t developed for myself. Passion can boost motivation, ... Continue reading this article…

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Year-End Personal Balance Sheet, December 2011

by Flexo
Net worth balance sheet, December 2011

I’ve spent the last decade of my life focused on my finances. I started because I had no money and a job that was taking more from me than it was providing in income. I knew I had to make some changes if I wanted to build any kind of future for myself. Soon into ... Continue reading this article…

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