PERSONAL FINANCE/JOHN NINFO: Some frequently asked questions
We have talked about the shortage of truckers, and the resulting supply chain issues — but from my perspective, there are seemingly as many trucks on the road in Western and parts of Central New York as there were before the pandemic. I travel to schools all over the area, down south into Horseheads and Elmira in the Southern Tier, west to Fredonia, and east past Ithaca to Spencer-Van Etten. In those travels, at all times of the day, sometimes starting as early as 5:30 a.m., there are plenty of trucks slowing me down on the Thruway, interstates, and back roads. It makes me wonder if the shortage is, in fact, regional.
On a different subject, in my CARE Financial Literacy presentations, when we talk about the need to save, I tell the students that the largest increase in individual bankruptcies pre-pandemic was people 65 and older. In part it was because many of them did not save enough for retirement, and they were still addicted to living above their means with credit cards. That is why I am a little concerned after hearing a recent report that the rate of retirements post-pandemic is three times higher than pre-pandemic. It is certainly something that I will continue to track and perhaps report on.
On another subject, we have talked a lot about Americans being willing to go into debt for non-needs in this hyper-consumer, debt-is-OK society. We also have talked about how, in November of 2019, 34 million Americans were still paying off their credit card charges from Christmas of 2018, as if Christmas snuck up on them that year, so they weren’t financially ready for it with savings for those expenses. That is why I wanted to be, but wasn’t, shocked at a recent report that indicated that 40% of those surveyed said that they would be willing to go into debt this holiday season to make themselves or someone else “happy.” Is it just because of the pandemic?
On yet another subject, I can’t tell you how many people come up to me and want to talk about “fair share” of taxes, and more and more of them seem to think that the idea of both a Flat Tax and a Goods and Services Tax seems to solve much of the fair share and taxing hidden/unreported income issues. By the way, none of them make over $400,000 per year.
We may have covered this, but an October Wall Street Journal letter to the editor once again laid it out this way: “Per the Tax Foundation: The top 1% earn 20.9% of all adjusted gross income and pay 40.1%of federal individual income tax, whereas, the bottom 50% earn 11.6% of the money, and pay 2.9% of the taxes.”
On a final subject, as I finished up my Financial Literacy Presentations going into the Thanksgiving holiday, I thought that I would share the most frequently asked questions from students.
First, If you just use a credit card for convenience — by only charging things that you can otherwise pay for that minute, so that you can pay the balance off in full every month and never pay interest, charges or fees — why don’t you just use a debit card? I think, in large part, that question comes from the fact that many high school students have debit cards now.
My answer is initially that there is nothing wrong with a debit card, as long as it doesn’t have over-limit protection, which to me is an oxymoron, and I explain what can happen with over-limit protection. Then I explain that the debit card company general takes the money out of your account within 24 hours, so you are no longer earning interest on the money in the account the card is tied to. I on the other hand may be earning interest for another 20 days or so, depending on when I charged the item, before the statement is due.
I tell them, yes, interest rates are low but it is about building good money habits, and that in my day you could get as 14% interest in a savings account (the looks on their faces are great). Then I explain that the credit card companies offer you things like protection from defective merchandise that the debit card companies do not, and I explain that if you have a defective purchase, you can often get 10 to 15 days to work something out with the merchant, because the credit card company will charge back the charge or not clear it. Finally, I tell them that for that reason they should not use a debit card for a big purchase item.
Second, you tell us that we should save something from everything we get in life. How much would you recommend we save? I generally recommend that they save 20%, explaining that when I grew up I had to save 50%. Then I tell them about a student from Churchville-Chili High School who told me he saves 80%, and already has $19,000 saved for college.
Third, who is liable for the debt if a couple gets divorced? I explain that debt is contractual, so you have to be on the debt in order to be liable for it. So on joint debt, like a joint credit card or a mortgage that both parties executed, they would both be liable. However, on a credit card that is only in one name or the other, the other is not liable. I may go into more detail, but that is the essence of it.
Last, if I want to invest what should I invest in? I tell them that I am not qualified to give investment advice, but to remember that investing involves risk, and at their age, they should not invest if they can’t afford to lose the money. If they have the money and want to invest, go to a fee-based advisor with their parents and discuss their options.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo.
This article originally appeared on MPNnow: PERSONAL FINANCE/JOHN NINFO: Some frequently asked questions
