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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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People who borrow money generally understand that they will eventually need to pay borrowed money back to the lender. This understanding, whether codified in a contract or not in any particular case, makes lending and borrowing money work as an economic mechanism. It’s interesting that regardless of what’s written in a contract, most debt can be legally ignored. Borrowers may feel bound by their pride to honor commitments, but every state in the country has laws that prevent lenders from chasing after deadbeat borrowers after a certain amount of time.

Time-barred debts are subject to a statute of limitations. After a certain amount of time passes with a borrower unable or unwilling to pay back a loan, the lender will no longer be able to sue the borrower for uncollected debt. The lender can still contact the borrower and try to convince him or her to pay back the loan, but the lender’s legal rights to the funds are limited.

This doesn’t mean that it’s a good idea to wait for the statute of limitations to pass on all your debt in order to avoid your obligations. There are consequences if you don’t pay back debt. Most importantly, the three credit reporting bureaus will significantly decrease your credit score, and it could take a long time for that number to return to normal. This will affect your ability to qualify for more loans, mortgages, and credit cards in the future.

This is a dilemma many homeowners have considered recently; with the market value of houses sharply decreasing in the last few years, and the resulting financial reality of owing the bank more on the mortgage than the house is worth, some in this situation have considered walking away from the house and mortgage. In some cases, this could be a tactic that is more financially responsible than continuing to sink money every month into a depreciating asset. Families considering this option have to weigh the consequences, including not being able to qualify for a mortgage again for many years, against the emotion-based drive to honor financial commitments.

Although lenders are legally barred from suing borrowers after the statute of limitations for a particular debt has passed, they might still try. If you’re able to show a judge that the debt is time-barred and no longer legally collectible, you have nothing to worry about other than the consequences.

Credit cards and other open accounts like home equity lines of credit, written contracts, oral agreements, and promissory notes may have different statutes of limitations, and each differs by state, as well. Here’s a list by state of time-barred debts.

The clock starts ticking on the statute of limitations from the day you miss your first payment. The moment you send a payment to the lender, no matter how small, the clock resets. For example, if the statute of limitations on credit card debt in your state is seven years, and it’s been six years since you’ve made a payment, you may determine that it makes more financial sense to refuse to make a payment for one more year rather than negotiate with the lender. If you are in financial difficulty and don’t expect to ever be able to pay off the debt, paying even a small amount means you’ll need to wait another seven years after making the small payment before you’ll be legally protected from paying back the debt.

Not all debt is time-barred; student loans backed or issued by the government have no statute of limitations. Anything you borrow under any of the loan programs that qualify in this category can never be ignored. The lenders are often willing to negotiate the terms in order to help you make payments you can afford, but these students loans are, for the most part, legally stuck with borrowers until the lenders are satisfied.

A few questions for discussion:

  • Do you think it’s right that borrowers can avoid agreements by patiently waiting for the statute of limitations to pass?
  • Have you ever been sued for debt you didn’t need to legally pay back?
  • Have you inadvertently restarted the clock by paying a small amount to a lender when it might have been better to wait?
  • Are you dealing with the credit consequences of letting a debt expire?

Note: I am not a lawyer, and nothing written on Consumerism Commentary constitutes legal advice. Always check with an attorney before making any decisions regarding the law.

Photo: Dave Stokes
Federal Trade Commission

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Whether you agree with it or not, the reason this country has supported programs like welfare, Social Security, the GI Bill, food stamps, Medicare, government-backed mortgages, FEMA insurance, and other social programs is because a modern society benefits when as many citizens as possible have opportunities to succeed financially. Social programs aren’t perfect and don’t always provide what they promise, and there’s always a small percentage who take advantage of the system.

The push-and-pull between the focus on the society and the focus on the individual existed even before the founding of the nation, and this particular Weeble that wobbles between left and right without falling down (yet) has allowed the United States to become the biggest economy in the world in a relatively short period of time, and that’s a good thing.

From an individual perspective, it might not be that intuitive that one needs to be concerned about the “very poor.” After all, with social safety nets, one might think that the “very poor” have little to worry about. Regardless of the existence of programs — both public and private — poverty is still an issue in this country, even if you don’t see it in your daily life as you shuffle in an office building from meeting to meeting or shuttle from city to city on business trips. It’s hard to be concerned about something if you aren’t faced with it every day.

If, however, you are concerned about the “very poor,” there are ways to help, even if you don’t believe that handouts are effective. The most popular rationalization for not caring about poverty is the idea that helping another individual teaches complacency rather than responsibility, interdependence rather than independence. The incorrect assumption is that families in destitute situations have no desire to work for their money like those who have built wealth for themselves and have earned the right to let their money do the work for them and receive income from dividends and interest rather than working in the middle-class and working-middle-class sense of the word.

The real problem is tied into that psychology 101 concept I turn to repeatedly, Maslow’s hierarchy of needs. If most waking minutes in your day are spent worrying about your shelter, your food, and having a safe place to sleep, “income mobility” is a fantasy. You’re a victim of “class warfare,” but in your reality, you don’t have time or energy for political arguments about class warfare.

If you are concerned about the very poor, there are options. Helping bring attention to poverty can form provide opportunities to those without them without much sacrifice from those with opportunities.

  • Give money directly to organizations that run programs focusing on providing opportunities. The top-rated charities focusing on poverty according to Charity Navigator are Direct Relief International (although International is in the name, they also work to eliminate domestic poverty, particularly in disaster-stricken areas), SOME (So Others Might Eat, focusing on the D.C. area), and the People’s Resource Center (based in Chicago). If you prefer to give a hand-up rather than a hand-out, focus on organizations that provide job training and placement, programs that expand the reach of educational opportunities, and programs that present positive financial role models.
  • Volunteer with the organizations that run these programs. Build houses. Build schools. Help at a food bank. When you are actively involved, you get to experience the results of your work much more closely than if you were to send a check every month. No, you won’t get a tax deduction for volunteer work, but that’s not the point.
  • Become a community leader. When people from poor communities manage to succeed financially, they often don’t return to be the role model their community needs. This is the reason financial illiteracy is a problem that will continue from generation to generation, keeping low socio-economic status communities from thriving.

Are you concerned about the very poor? Does paying your taxes and being satisfied with existing social safety nets relieve you from any other possible responsibilities for how the country fares as a whole? Do we even have any responsibilities to anyone other than ourselves and our families?

Related: Here’s how you might be able to avoid poverty for your family. Also, could you survive at the poverty line?

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This is a guest article by Jennifer Calonia, Junior Editor at GoBankingRates. In the article, the author encourages couples in failing relationships to break-up before holidays and their obligatory expenses are imminent.

While it may sound like the antithesis of romance, calling it quits with your other half before the Valentine’s Day can be advantageous to your heart and your checkbook. Gift-giving and travel (if your significant other is across country) on Valentine’s Day is poised to destroy the savings of those who are too apprehensive to raise the white flag of surrender when it comes to their dead-end relationship.

According to a 2010 report by graphic designers Lee Byron and David McCandless, more couples break up toward the end of the calendar year–peaking two weeks before Christmas and the month after Valentine’s Day.

Valentine's DayThe data were gathered by conducting a year-long search on Facebook statuses which included the words “break up” or “broken up.”

Many argue that data used by Byron and McCandless is drawn from a highly defined sample pool, noting that most Facebook users are younger in their years. Despite that limitation, this study raises significant questions for those in the midst of a turbulent or stagnant relationship.

Break up to save money on gifts and travel

As the saying goes, “breaking up is hard to do,” but it could be a wise financial decision to opt out of your relationship if it’s already hit a brick wall. Instead of waiting for the report’s break-up peak after Valentine’s Day, why not face reality before February lands on your doorstep?

Observances like Valentine’s Day are among the highest-rated gift-giving holidays among couples next to birthdays. According to the National Retail Federation, in 2011, the average expense on Valentine’s Day gifts to a significant other was $68.98 — a figure that is on the rise.

Further, all of the subsequent holidays in the year (i.e. Thanksgiving, Christmas, New Year’s and a sprinkled birthday) present an open door for extra out-of-pocket travel expenses when planning to attend your partner’s family gathering or scheming a romantic getaway.

At the risk of being denounced as cold-hearted or even cheap, severing strained relationships before Valentine’s Day is at minimum, a savvy move for your wallet.

Broken heart: better investment

Seeking out and fostering a relationship with a partner is at its root an effort in finding a spouse. Stringing your significant other along when you don’t see a future ahead is not only by many people’s standards cruel, it’s a fruitless investment. Whether you’re dealing with emotions or finances, keeping long-term goals in sight are an important aspect of achieving success and happiness, overall.

Struggling relationships may not see another opportunity to break up until March, and time is money. There is never a “good time” to break-up, so biding one’s time after the holiday season and into Valentine’s Day is not the most effective approach in the long haul.

Break up with civility before February 14 comes around and open yourself up to a well-rounded year of improvements in 2012.

Editor’s note: I can’t say I’m a fan of making relationship or romantic decisions with finances as a trigger. Personal finance experts tend to see the world in terms of money; if you’re a hammer, everything looks like a nail, or so the saying goes. Obviously finances must be a consideration in major decision-making, and ending a bad relationship earlier rather than later is a better choice than lingering. The worst case scenario is losing a quality relationship over the cost of a bouquet of flowers or a meaningful gift.

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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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Year End Reminder: Rebalance Your Portfolio

by Flexo
Balance

As the end of the year approaches, take a break from stressing about the holiday season by getting your personal finances in order. It’s a great time to finish your charitable contributions and adjust your 401(k) contribution. It’s also better to fund your IRA now than it is to wait until the April deadline. You ... Continue reading this article…

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Could You Survive at the Poverty Line?

by Your Finances Simplified
Thrift store

This guest article is written by YFS, owner and author of Your Finances Simplified. YFS was born and raised in west Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. If you and your family of four received an annual income of $22,350, could you survive? You would be ... Continue reading this article…

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The Financial Planner Who Lost His House

by Flexo
Great Expectations - Carl Richards - Behavior Gap

Carl Richards is one of today’s best writers focusing on personal finance. Originally keeping a great blog at behaviorgap.com, The Behavior Gap has moved to the New York Times, and early next year, Carl will release his first book. Look for The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money on January ... Continue reading this article…

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