Student Loan vs Mortgage
News came that outstanding student loans will top $1 trillion this year. The Obama administration recently announced some tinkering on the edges to help lower the interest on student loans. Some say student loans have become a burden that could place a drag on the economy.
How did student loans become such a large problem? It’s obvious to me that, like the mortgage problem, the student loan problem is also an underwriting problem.
The prevailing opinion is that we have a mortgage problem because banks didn’t do an adequate job in underwriting the loans. People who couldn’t afford loans got loans. When house prices stopped going up, we ended up in a mortgage crisis.
Free Credit Score After Credit Application
I wrote several times on this blog I don’t care much about credit scores. Most people shouldn’t either because they have a good enough score that will give them the best rates anyway. Improving a good enough score doesn’t really make a difference.
I don’t buy my credit scores. Nor do I give my Social Security Number to websites that show a score, whether the score they show is a relevant score or not. But I will take a credit score if it just comes to me from a bank.
When the Dodd-Frank financial reform law included a provision that requires lenders to disclose your credit score if your application didn’t get the best terms, some credit experts speculated that banks may just disclose the credit score to every applicant regardless, even though they are not required to, so that no one can fault them for violating the new law.
Social Security Benefits Increase More Rapidly For Retirees Than For Those Still Working
Retirees on Social Security will receive a 3.6% increase in their monthly Social Security checks in 2012. For those who aren’t yet eligible for Social Security (myself included), do our future Social Security benefits also increase by 3.6% due to this cost of living adjustment?
The short answer is no. All else being equal (no changes to the law, etc.), projected benefits will increase by only 2.36% in 2012 for the rest of us.
If you are eligible for Social Security or if you are already drawing Social Security, your benefits increase by an inflation index Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If you are not yet eligible, your benefits increase by the National Average Wage Index (AWI).
November 2011 I Bonds Rates
With the release of September 2011 CPI number, we can also calculate the variable rate on Series I Savings Bonds ("I Bonds") after November 2011.
Since the yield on 5-year TIPS is still negative, the fixed rate on I bonds issued between November 2011 and April 2012 will no doubt stay at 0%. The variable rate adjusts for inflation by the changes between CPI-U in September 2011 and that in March 2011.
The semi-annual change is 226.889 / 223.467 – 1 = 1.53%. Double the number for the annual change and we get 3.06%.
2012 Social Security COLA Increase
The Bureau of Labor Statistics released CPI changes for September 2011. With that, we can calculate the 2012 Cost of Living Adjustment (COLA) increase for Social Security recipients.
Social Security COLA adjusts with changes in CPI-W. We take the Q3 average CPI-W and compare it with the Q3 average in 2008 because the 2008 number is higher than the number in 2009 and 2010.
The average CPI-W in Q3 2011 is 223.233. It was 215.495 in 2008. That’s an increase of 3.6%. Therefore Social Security recipients will receive a 3.6% increase in their benefits in 2012.
AT&T U-verse Unbundled Internet Service
This must be old news to some (most?) of you, but it wasn’t to me. So I figured I’d share in case it’s also news to some others.
I had DSL through AT&T up to sometime last year. DSL requires a landline, which I don’t use, but I still have to pay for it. Even with the least expensive service (metered local calls), the bill comes out to about $15 a month when taxes and FCC Subscriber Line Charges and Universal Service Fund contributions are included. DSL and land line together cost me about $40 a month.
AT&T had been sending me glossy brochures about their U-verse service, which provides TV, phone, and Internet services. According to Wikipedia, it’s done with using fiber optics to the neighborhood and then regular phone lines to homes.
Boomerang By Michael Lewis FREE On Vanity Fair
2012 401k and IRA Contribution Limits
The IRS made the official announcement for 2012 401k and IRA contribution limits in IR-2011-103. Here are the results:
| 2011 | 2012 | Increase | |
| Limit on employee contributions to 401k, 403b, or 457 plan | $16,500 | $17,000 | $500 |
| Limit on age 50+ catchup contributions to 401k, 403b, or 457 plan | $5,500 | $5,500 | None |
| Traditional and Roth IRA contribution limit | $5,000 | $5,000 | None |
| Traditional and Roth IRA age 50+ catchup contribution limit | $1,000 | $1,000 | None |
| SIMPLE 401k or SIMPLE IRA contributions limit | $11,500 | $11,500 | None |
| SIMPLE 401k or SIMPLE IRA age 50+ catchup contributions limit | $2,500 | $2,500 | None |
| Maximum annual additions to all defined contribution plans by the same employer | $49,000 | $50,000 | $1,000 |
I will show you how these numbers are calculated.
Don’t Save Money on Groceries With Coupons
Do I need to tell you coupons are hot? Groupon is often in the news. You hear about how many billions it’s worth, its anticipated IPO and its controversial accounting metric ACSOI (now dropped).
Of the top 10 personal finance blogs compiled by Wisebread, at least 6 are in the coupon and bargain shopping category, above long time leaders The Simple Dollar, Get Rich Slowly, and I Will Teach You To Be Rich. According to the estimated traffic charts posted by Wisebread, Money Saving Mom blog had twice as many visitors in August 2011 as Get Rich Slowly. The gap is also increasing. The estimated number of monthly unique visitors to Money Saving Mom grew by 1/3 over the last 12 months. It shrank by 1/3 at Get Rich Slowly. Coupon-sharing moms are beating out content-producing guys.
Forget about getting out of debt, better budgeting, saving more in 401k, or earning a side income. Those are old news. Coupons! Coupons are the secrets to success. People want to know what coupons to use where this week, and they will come back again and again every week.
Pre-Tax Spending Accounts Are No Cure for Tax Increases
New York Times Your Money columnist Ron Lieber got into some hot waters with readers after he wrote his column A Tax Plan That Might Not Be So Painful. I guess that’s because he used Dodging the Proposed 2013 Tax Increase as the headline for his blog post.
I feel really sorry for him. Ron writes good columns. The article in question had a good intention. It simply reminded people of benefits from underutilized pre-tax spending accounts: health care flexible spending accounts, dependent care flexible spending accounts, and transit pass and parking reimbursement programs. Making the best use of these programs will save you money, whether you are in a high tax bracket or a low tax bracket.
Ron actually tried to sugar coat the proposed 2013 tax increases by tying the tax increases with savings from the pre-tax spending accounts, saying that the tax increases aren’t a big deal — you only have to get smart about your pre-tax spending accounts to offset the increases, or “dodge” them as the title of his Bucks blog post says.
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