Beware of the subscription-fueled future of online shopping, a business model that attracted a billion-dollar bet from venture capital investors. Bloomberg reported about this future of shopping that traps you in a club you didn’t know you join. Hailee Taylor purchased a lingerie item from an e-commerce website called Adore Me for $19.95 but ended up costing her more than $300. Adore Me maintains a subscription model in which it charges users a fee of around $40 a month, even if customers don’t purchase anything. Adore Me isn’t the only shopping portal or service that runs this sort of tactic. “It’s the new thing,” says Francisca Allen, the deputy district attorney of California’s Santa Clara County. “There’s thousands and thousands of companies that do this.” These companies have made it frustratingly difficult to cancel these subscriptions by making you to sit through a one-hour call to the customer representative. “Hundreds of customer complaints against Adore Me and other subscription e-commerce businesses are stacking up at the Federal Trade Commission, according to records obtained by Bloomberg. They follow a pattern: Shoppers believe they’ve been tricked into signing up for recurring credit card charges, often for a relatively small amount that can be easily overlooked in a monthly bill. Then companies make it an exasperating hassle to quit and get a refund.” (bloomberg.com)
Debt Management
National Finance: Debt Up More Than $1 Trillion In 6 Months
The federal debt has increased by more than $1 trillion in 6 months since budget deal was passed. As reported by CNSNews, “at the close business on Oct. 30, 2015, the total federal debt was $18,152,981,685,747.52. By the close of business on April 28, 2016—the latest date for which the Treasury has published the number–the total federal debt was $19,186,207,744,589.55. That is an increase of $1,033,226,058,842.03. The $1,033,226,058,842.03 increase in the debt in the six months since then equals approximately $6,828 for each of the 151,320,000 persons whom the Bureau of Labor Statistics estimated had a full or part-time job in the United States as of this March.” Uncontrollable debts are not good for individuals, families, cities or countries. (cnsnews.com)
Not Saving Enough And Getting Divorced are Among the Biggest Financial Regrets
Not saving enough money and getting divorced are among our biggest financial regrets, according to new research by Partnership Group. In a survey that asked 2,000 people what their biggest financial mistakes were, the vast majority (59%) said they wished they had saved more, while 15% said getting into debt was their biggest error. 7% said getting married and subsequently divorced was their biggest financial blunder. This figure jumped to one in ten for the over 40 age group. Mark Stopard, head of product development at Partnership, said: “Indeed not saving enough, especially into a pension, was the main regret for all age groups – a problem which implies that either they do not earn enough or that they don’t have a firm handle on their finances. While it is relatively easy to make minor financial errors, that one in 10 people cite issues around salary and employment levels adds weight to the first argument and is worrying as it suggests that for some ‘mistakes’ are almost unavoidable.” (partnership-group.com)
7 Things Debt-Free People Never Do
Charis Brown writes on ClarkHoward.com: “Even though two people could have the same education, come from the same financial background and make the same amount of money, the difference in their financial picture could be night and day, depending on how they view money. Debt-free people might have carried debt in the past or might have witnessed the havoc that carrying a large amount of debt has had on other peoples’ lives, vowing never to be in the same position. But the great thing is, when it comes to your money, no matter where you start, you get to decide where you go from here.” Here 7 things debt-free people completely avoid:
- Ignore their accounts
- Neglect saving
- Get duped by smart marketers
- Waste money
- Become addicted to shopping
- Succumb to lack of knowledge
- Waste opportunities to make money
Most College Grads Unwilling to Forfeit Luxuries to Reduce Student Loans
According to a new survey from Citizens Bank, average student debt for millennials is $41,286 and 60 percent of millennials expect to be making payments on their student loans well into their 40s. Despite the burdensome loan payments, a large share of millennials are unwilling to prioritize student loan repayment over spending on luxury and quality of life items. This is what the survey revealed when asked what they’d be willing to give up in exchange for lower student loan payments:
- Less than half (45 percent) were willing to cut what they spend on eating out.
- Just 46 percent said they’d cut their entertainment and social event expenses.
- A mere 40 percent were willing to limit their housing expenses (rent or mortgage).
- Only half of millennials were willing to slash their spending on clothes, shoes and accessories.
“They are very committed to living their life the way they want to live their life, and as frustrated as they are by student loans, they are not willing to make those lifestyle trade-offs,” said Brendan Coughlin, president of consumer lending for Citizens Bank. (moneytalksnews.com)
High School Senior With 3 Part-Time Jobs, 4.0 GPA Panhandling Way To College On Side Of Road
Eighteen-year-old Emily Stutz, a Lowell High School senior, tries to raise money for medical school in an unorthodox way – panhandling. Stutz has maintained a 4.0-4.5 GPA for the last four years and worked three part-time jobs. But she doesn’t have financial mean to attend the universities of her choice. “My parents have had immense financial struggles and simply cannot come up with $20,000-$30,000 a year, nor are they able to cosign a loan for me,” Stutz wrote on her fundraising page. “I have no other adults in my life who are able to cosign and I am at a loss. I see my dream of becoming a doctor slip further and further away as the days pass by so I’ve decided I am going to do whatever it will take to get myself to college. If people will give to the ‘homeless’ panhandlers then maybe they will consider sparing a dollar or some change to an aspiring doctor who has all the academic, but no financial means to attend college,” Stutz wrote on her fundraising page. Panhandling is her financial plan to pursue her college dream. (cbslocal.com)
Why You Should Buy the Biggest House in the Neighborhood
Economist Teresa Ghilarducci shares some personal finance advice about debt and consumption. She recommends that you should buy the biggest house in the neighborhood. That way you would feel fantastic since you don’t have the urge to upgrade as the people in the neighborhood aspire to be like you. Ghilarducci recommends that you shouldn’t hang around with people who buy things you can’t afford. Choose who to compete with in consumption smartly. By buying the best house on the block, you don’t feel jealous nor need to spend more money than necessary. Ghilarducci also explains that there are two kinds of interest, one you pay and one that you receive. You want to be on the side that gets interest such as savings account and investment. Don’t go into debts and get a mortgage that you can pay it off quickly. (time.com)
Meet One Danish Couple Who Gets Paid Interest on Their Mortgage
To stimulate growth central bank in Japan, Denmark, Sweden and Switzerland lower interest rate to subzero. As a result, Hans Peter Christensen in Denmark got an unusual news when he opened his most recent mortgage statement. Instead of paying interest on the loan he got a decade ago to buy a house, his bank paid him the equivalent of $38 in interest since the mortgage rate stood at negative 0.0562%. “My parents said I should frame it, to prove to coming generations that this ever happened,” said Mr. Christensen, a 35-year-old financial consultant, about his bank statement. When rates drop below zero, there’s an undesirable side effect as saving accounts pay no interest. It’s just not good for savers. (wsj.com)
How to Break the Living Paycheck-to-Paycheck Cycle
Miranda Marquit writes on Money Ning: “When my then-husband and I first married, we lived paycheck to paycheck, creatively looking for ways to make ends meet…Later, as we learned more about money management and as we began making more money, we stopped living paycheck to paycheck.” She explains the process to break the living paycheck-to-paycheck cycle. Here are three key points:
- Confront the realities of your situation
- What are your priorities?
- Boost your earning power
Feds Will Notify Disabled Borrowers Eligible For Student Loan Discharge
Ashlee Kieler writes on Consumerist: “Under the law, borrowers who are permanently disabled are eligible to have their federal student loans discharged. While the government has taken steps in the past to make the process more streamlined for consumers, the Department of Education will now proactively seek out eligible borrowers. The Department of Education announced Wednesday that it will work to identify eligible borrowers and guide them through the steps to discharge their loans.” (consumerist.com)
US Faces Disastrous $3.4tn Pension Funding Hole
Individuals can run into money problem if they don’t take care of their personal finance. It seems that many cities and states are not immune to bad money management after years of underfunding the pension and hiding the problems. Attracta Mooney writes on Financial Times: “The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies.” Just like individuals, cities will have to face bankruptcy if they keep on spending and can’t deal with the funding shortfall. “I do believe that US cities and towns will continue to suffer, and there will be additional bankruptcies following the examples of Detroit,” said Olivia Mitchell, a professor at the Wharton School at the University of Pennsylvania. (ft.com)
What to Do When You Forget to Pay a Bill
If you don’t pay your bill, your utility service might be shut off or you will be charged with late fees and interest on your credit cards. So it’s best to deal with the problem immediately. Kiplinger has some advice on what to do when you forget to pay a bill. If you have an excellent credit history you can ask for the late fee to be waived, said credit expert John Ulzheimer. Make sure you know some rights when collectors call you per Fair Debt Collection Practices Act. For instance, you can report the violations if debt collectors use obscene language or threaten you. Also they can’t contact you before 8 a.m. or after 9 p.m. (richmond.com)
7 Debt Payoffs That Boost Your Credit Score the Most
Improving your credit score can save you money in the long run. The difference between a good credit score and a low score can cost thousands of dollars per year. That means you can accumulate more wealth during your lifetime by having a higher credit score. Here are 7 debt payoffs that boost your credit score the most by Tim Lemke of Wise Bread:
- Anything that’s on time
- Debt with the highest interest rates
- Credit cards with the lowest credit limits
- Anything that gets your credit utilization under 30%
- Your student loans
- Small balances on numerous credit cards
- Any past-due bills
Wall Street Analyst Afraids the Big Short Movie Has Discouraged Investors From Buying Risky Auto Loans
Morgan Stanley Analyst fears that people might be worried about subprime auto bonds because of the Big Short movie. The risky auto loans bring profits to Wall Street by selling to naive borrowers then bundling into bonds and sold to investors. The analysis reads: “However, concerns about growing recessionary risks – and perhaps even the popularity of the recent movie The Big Short – have motivated investors to investigate any potential source of weakness. Consumer sectors that involve large initial outlays, such as housing and autos, provide a natural place to start. Combine that with recent headlines from Fitch suggesting that delinquencies in some sectors of the auto ABS market have reached 20- year highs, and you get a target sector for investors’ concerns. Those concerns are not without merit, at least as far as delinquencies are concerned. It is interesting to highlight that as the housing market continues to heal from its post-crisis depths, mortgage delinquencies have been on a steady decline while auto delinquencies have been going in the opposite direction.” (bloomberg.com)
Consumer Bureau Finally Shut Down Fraudulent Student Debt Relief Firm
The Consumer Financial Protection Bureau finally halted Student Aid Institute, based in San Diego, for illegally tricking borrowers into paying fees for federal benefits. Many companies in this shady industry prey on holders of the $1.3 trillion outstanding in student debt by misleading borrowers with terms like “student loan forgiveness.” The fraudulent companies pretend to help borrowers obtain lower student loan payments or a reduction in debt. “We see more and more companies and websites demanding large upfront fees to help student loan borrowers enroll in income-driven plans that are available for free,” said Richard Cordray, bureau’s director. Student Aid Institute received millions of dollars in fees by charging borrowers hundreds of dollars upfront and $39 a month in maintenance fees. Persis Yu, director of the National Consumer Law Center’s student loan borrower assistance project, said the debt relief companies were “a huge problem.” In some cases, she said, the companies take over management of a student’s debt, making the minimum payment to the lender but charging the student additional fees that it pockets. (nytimes.com)
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