DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Holiday Blues? Get Inspired by Dani Johnson's Homeless to Millionaire Talehttp://www.dailyfinance.com/2011/11/24/holiday-blues-get-inspired-by-dani-johnsons-homeless-to-millio/http://www.dailyfinance.com/2011/11/24/holiday-blues-get-inspired-by-dani-johnsons-homeless-to-millio/http://www.dailyfinance.com/2011/11/24/holiday-blues-get-inspired-by-dani-johnsons-homeless-to-millio/#commentsFiled under:

The holidays can be difficult for people suffering financial and personal setbacks. Dani Johnson, who went from homeless to millionaire, has been there -- and talks with Laura Rowley about overcoming despair and finding hope as the holiday season approaches.



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]]>dani johnsonDaniJohnsondespairfeatured videoFeaturedVideohomlessnesshow to get richHowToGetRichLaura RowleyLauraRowleymillionairemoney and happinessMoneyAndHappinessovercoming adversityOvercomingAdversityLaura RowleyThu, 24 Nov 2011 03:10:00 ESTHow Retirees Can Get Better Returns on Their Nest Eggshttp://www.dailyfinance.com/2011/11/21/how-retirees-can-get-better-returns-on-their-nest-eggs/http://www.dailyfinance.com/2011/11/21/how-retirees-can-get-better-returns-on-their-nest-eggs/http://www.dailyfinance.com/2011/11/21/how-retirees-can-get-better-returns-on-their-nest-eggs/#commentsFiled under: , , ,

A retiree named Bob is confronting a dilemma many of his peers face: His nest egg is parked in safe cash investments, like certificates of deposit, and earning barely any interest. What can he do to get a better return? Laura Rowley looks at an increasingly popular alternative.





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]]>CDscertificates of depositCertificatesOfDepositdividend stocksDividendStocksfeatured videoFeaturedVideoFinanceindex fundsIndexFundslow interest ratesLowInterestRatesmoney and happinessMoneyAndHappinessretirementRetirementPlanningSafe InvestmentsSafeInvestmentsLaura RowleyMon, 21 Nov 2011 08:45:00 ESTYour Money Brain Explained: Why Saving Is So Hardhttp://www.dailyfinance.com/2011/11/17/your-money-brain-explained-why-saving-is-so-hard/http://www.dailyfinance.com/2011/11/17/your-money-brain-explained-why-saving-is-so-hard/http://www.dailyfinance.com/2011/11/17/your-money-brain-explained-why-saving-is-so-hard/#commentsFiled under:

Why do we procrastinate about financial decisions when we know that putting them off hurts us in the long run? Why do we splurge today instead of saving for retirement? And when is the brain at its prime in terms of decision-making? Harvard economist David Laibson joins DailyFinance's Laura Rowley in New York's Central Park with his insights.



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]]>401kDavid Laibsondementiafeatured videoFeaturedVideofinancial planningFinancialPlanningimpulse buyingImpulseBuyingLaura RowleyLauraRowleymoney and happinessMoneyAndHappinessprocrastinationretirementretirement planningRetirementPlanningsaving moneySavingMoneysenilitysplurgeLaura RowleyThu, 17 Nov 2011 08:30:00 ESTHow to Take a Tax Loss When Property Values Fallhttp://www.dailyfinance.com/2011/11/16/how-to-take-a-tax-loss-when-property-values-fall/http://www.dailyfinance.com/2011/11/16/how-to-take-a-tax-loss-when-property-values-fall/http://www.dailyfinance.com/2011/11/16/how-to-take-a-tax-loss-when-property-values-fall/#commentsFiled under: ,

A reader named Sally bought property that has since fallen in value. If she sells it for less than she paid, what effect will it have on her taxes? DailyFinance's Laura Rowley has the answer.



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]]>capital lossesCapitalLossesdeductionsfeatured videoFeaturedVideoInvestingmoney and happinessMoneyAndHappinessproperty valuesPropertyValuesreal estateRealEstatetax loss sellingTaxLossSellingLaura RowleyWed, 16 Nov 2011 10:20:00 ESTThe Alternative to Low-Interest Saving: How to Invest in Dividend Stockshttp://www.dailyfinance.com/2011/11/15/the-alternative-to-low-interest-saving-how-to-invest-in-dividen/http://www.dailyfinance.com/2011/11/15/the-alternative-to-low-interest-saving-how-to-invest-in-dividen/http://www.dailyfinance.com/2011/11/15/the-alternative-to-low-interest-saving-how-to-invest-in-dividen/#commentsFiled under: , , ,

The Alternative to Low-Interest Saving: How to Invest in Dividend StocksBob is a 70-year-old retired hospital administrator who has spent the last decade volunteering in West Africa with his wife, a nurse, to help improve the hospital systems there. (He asked his full name not be used.) Now back home in California, the Vietnam veteran and father of two is worried about the nest egg he built over four decades.

"I have too much money in a money market account, and it's hard to watch its purchasing power decline as inflation eats up the paltry earnings," Bob says.

Bob's dilemma is one that's shared by millions of retirees. With interest rates at historic lows, there are far fewer options for drawing a steady income stream from your nest egg. Just over a decade ago, someone who had $1 million saved for retirement could park it in simple CDs and get more than 5% interest, providing an annual income above $50,000. Today, the same investment strategy would yield about 0.3% -- or an income of $3,000.

That's why Bob and many other retirees are looking more closely at stocks that pay dividends -- a portion of the company's earnings -- to shareholders, typically each quarter. Dividends are usually quoted in the dollar amount per share. An investor who owns 10,000 shares of a company with a dividend of 8 cents a share will receive $800 over the course of the year. But simply choosing a handful of the highest-yielding shares is not the best approach, experts say.

'High Yield Isn't Necessarily Safe Yield'

"Prior to the financial crisis, the dividend yields on a lot of bank stocks and other financial stocks were quite attractive before they cratered," says Cal Brown, a Virginia financial planner. "You can't just go by the dividend yield thinking it will protect you on the downside." Dividend yield refers to the dividend as a percentage of the current stock price. Back in December 2007, the dividend yield of IndyMac Bancorp was 11.8%. It filed for bankruptcy eight months later.

"High yield isn't necessarily safe yield," agrees Farrell. "You really have to think about owning a collection of operating companies diversified across industry sectors to protect yourself against a couple that may flame out." Farrell's firm, Northstar Investment Advisors, has developed its own dividend-focused index, with returns certified by S&P, that it uses to model client portfolios.

The ideal is to own a broad mix of blue-chip companies that produce meaningful income -- but also grow that income. For example, Standard & Poor's assembles an annual list it calls the "Dividend Aristocrats" -- companies that have paid and increased their dividends for at least 25 years. "It's the growing dividend that's really important for people, because otherwise you won't have a portfolio that outpaces inflation," says Farrell.

To get the advantages of dividend-paying stocks without buying individual shares, consider an equity-income mutual fund, in which a professional manager chooses the stocks in the fund. Managers look for dividend-paying stocks that also have the potential to appreciate in price (offering solid total return). Examples include the Vanguard Dividend Growth Fund (VDIGX) and the T. Rowe Price Equity Income Fund (PRFDX).

Corporations Have Big Cash Stockpiles

Investors should also consider value funds, says Brown, even if they are not dividend-specific. "If it's truly in the value category, almost assuredly it will have reasonably good dividend yields because those are the kinds of stocks they are going to be buying," says Brown. He advises investors to diversify their portfolios with a mix of large-cap, small-cap and international value funds, which may also contain bonds.

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Also consider an exchange-traded fund that focuses on dividend-paying stocks. ETFs track the performance of specific market indexes - such as the S&P 500 - but trade like stocks. (Mutual funds, by contrast, are priced just once a day, when markets close at 4 p.m. Eastern.) ETFs often claim to be have lower costs and better tax-efficiency than mutual funds (although some studies have found low-cost mutual funds can beat ETF returns). Examples include the iShares Dow Jones Select Dividend Index (DVY), the SPDR S&P Dividend (SDY) and the recently launched Schwab U.S. Dividend Equity (SCHD).

Whether you choose a mutual fund or ETF, make sure the basket of investments isn't dominated by a handful of big names, says Farrell. Most of the broad market indexes, such as the S&P 500, are "market cap-weighted" -- meaning the index holds a larger percentage of the biggest stocks. Wild price swings in those shares can have a dramatic effect on the overall value of the index, fund or ETF.

The outlook for dividend growth is positive, given that companies are sitting the biggest stockpile of cash in nearly 50 years.
"There's plenty of money that can be delivered to shareholders through increased dividend payouts," says Farrell.

If you do choose the route of simply buying a diversified basket of dividend-paying stocks, be prepared to ride out the market's ups and downs, advises Brown. "You can buy individual stocks right now with a 4% to 6% yield, but you've got to be prepared for the downturn and say, 'I believe this stock is not going out of business and will eventually recover,'" he says. "Take the dividend check and be happy and don't pay attention to the volatility. A lot of people say they can do it until the price drops by 20% to 25%, and then they're not so sure."

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]]>CDscertificates of depositdividend stocksETFexchange traded fundsinterest ratesInterestRateslow interest ratesretirement planningS&P 500Safe InvestmentsSafeInvestmentsStandard & Poor'sT Rowe Price Equity IncomeVanguard Dividend GrowthLaura RowleyTue, 15 Nov 2011 08:15:00 ESTFree Retirement Help You're Probably Ignoringhttp://www.dailyfinance.com/2011/11/14/crucial-retirement-help-youre-probably-ignoring/http://www.dailyfinance.com/2011/11/14/crucial-retirement-help-youre-probably-ignoring/http://www.dailyfinance.com/2011/11/14/crucial-retirement-help-youre-probably-ignoring/#commentsFiled under:

Free Retirement Help You're Probably Ignoring In late October, the Labor Department issued a rule that allows companies to offer more personalized retirement planning advice to workers enrolled in 401(k) plans. The advice must be set up in a way that ensures it's unbiased and in the worker's best interest.

That's the good news. The bad news is that most people probably won't take advantage of this terrific opportunity. The Wall Street Journal recently reported that just a quarter of workers who currently have access to such advice use it.

I found this astonishing, because retirement investing requires the average worker to morph into a financial wiz. You have to ballpark how long you expect to live, and get a sense of how much risk you're comfortable taking. You have to be familiar with terms like asset allocation, mutual fund, stock, bond, growth, value, small-cap, large-cap. And it helps enormously to understand how to minimize the costs of investing, which means learning to decipher an expense ratio.

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But most people don't even know what a money-market fund is, according to Shlomo Benartzi, a UCLA behavioral finance expert and creator of Save More Tomorrow, a program that helps workers increase their 401(k) contributions gradually over time. The most successful 401(k) plans, he says, automatically enroll people at a high percentage of salary, boost their contributions every year, and default the money into a target-date fund, which invests in a mix of stocks and bonds, and becomes more conservative as the participants near retirement and need the money. (I have issues with target-date funds, but they're a better option than defaulting worker contributions into a money market account.)

But the majority of plans aren't set up that way -- which is why taking advantage of good advice is so crucial. So if advice becomes a benefit at your job, set up an appointment. But first, ask yourself a few questions about what you value:

  • What does your ideal retirement look like? Where do you live? How do you spend your time? Who do you spend it with? What aspects of retirement are you looking forward to the most? What experiences would you enjoy most? What activities will give you a sense of purpose and meaning? Write down your ideal day in retirement. Research has found when people are asked to come up with concrete images of retirement, they contribute more to their 401(k) plans.
  • How much does my life cost right now on a monthly basis? What costs do I expect to disappear in retirement (i.e., work- and child-related costs) and show up (travel, dining out, etc.) The best first step to retirement planning is tracking exactly where your money goes now, so you have a ballpark idea of the monthly income you will need to sustain your lifestyle in retirement.
  • How much do you expect to receive in Social Security benefits? You can estimate them here.
Now ask the planner:
  • What's my number? How much do I need to save overall to maintain my lifestyle in retirement? What percentage of my salary do I need to set aside every paycheck in the 401(k) plan to achieve my desired monthly income in retirement?
  • How can I figure out my comfort level with investment risk?
  • What's the best, low-cost mix of diversified investments to achieve my goal? How often should I check back in with a planner to review their performance and make changes?
  • What's the best way to balance my need to save for retirement with other goals, such as saving for college or paying off my mortgage?
  • I'll spend my working years building this nest egg. What are the recommended strategies to spend it down? What do I need to think about in terms of taxes?
  • Finally, ask the planner what happens if you can't save the recommended percentage of salary. What kinds of lifestyle adjustments and tradeoffs does he or she see people who are close to retirement making because they are short of their goals? Then ask yourself honestly if you're willing to do the same -- or make some changes to your spending now to improve your outcome down the road.

For more free advice, check out the Labor Department's guide Taking the Mystery Out of Retirement Planning.

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]]>401kadvicebudgetFinancegoalsinvestment riskInvestmentRiskportfolioretirement planningRetirementPlanningtarget-date fundsTarget-dateFundstipsLaura RowleyMon, 14 Nov 2011 10:35:00 ESTHow Having a Vision of the Future Helps You Manage Your Money Todayhttp://www.dailyfinance.com/2011/11/14/how-having-a-vision-of-the-future-helps-you-manage-your-money-to/http://www.dailyfinance.com/2011/11/14/how-having-a-vision-of-the-future-helps-you-manage-your-money-to/http://www.dailyfinance.com/2011/11/14/how-having-a-vision-of-the-future-helps-you-manage-your-money-to/#commentsFiled under:

Researchers have found that people who create concrete mental pictures of their goals are more likely to save money for them. Here's the story of one woman who looked into her own crystal ball, got a clear vision of what she wanted, and implemented a financial strategy that allowed her to achieve it. DailyFinance's Laura Rowley shares the lessons learned along the way.



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]]>featured videoFeaturedVideofinancial goalsfinancial planningFinancialGoalsFinancialPlanningmoney advicemoney and happinessMoneyAdviceMoneyAndHappinesssaving moneySavingMoneystrategytipsLaura RowleyMon, 14 Nov 2011 08:30:00 ESTThe Best Defense: Financial Planning Moves to Protect Your Familyhttp://www.dailyfinance.com/2011/11/10/the-best-defense-financial-planning-moves-to-protect-your-famil/http://www.dailyfinance.com/2011/11/10/the-best-defense-financial-planning-moves-to-protect-your-famil/http://www.dailyfinance.com/2011/11/10/the-best-defense-financial-planning-moves-to-protect-your-famil/#commentsFiled under:

Last Will and TestamentIn financial planning, people usually play offense: It's about finding the right strategy to get to the goal. But it's just as crucial to have a good defense -- one that protects you and the people you love from life's calamities. Cal Brown, a Virginia financial planner and author of the new book When Life Strikes: Weathering Financial Storms, shares some of his defensive plays with Daily Finance's Laura Rowley.




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]]>changing careersChangingCareersfeatured videoFeaturedVideofinancial planningFinancialPlanningLast Will and TestamentLastWillAndTestamentLife InsuranceLifeInsurancemoney and happinessMoneyAndHappinessterm life insuranceTermLifeInsuranceLaura RowleyThu, 10 Nov 2011 09:30:00 ESTHow the Taxes Work on a Roth IRA Conversionhttp://www.dailyfinance.com/2011/11/09/how-the-taxes-work-on-a-roth-ira-conversion/http://www.dailyfinance.com/2011/11/09/how-the-taxes-work-on-a-roth-ira-conversion/http://www.dailyfinance.com/2011/11/09/how-the-taxes-work-on-a-roth-ira-conversion/#commentsFiled under:

When you contribute to a traditional Individual Retirement Account, the government lets you deduct that money from your taxable income that year. When you contribute to a Roth IRA, you don't get that immediate tax benefit -- but you get to withdraw your money from the account tax-free in retirement. The government also allows savers to convert from a traditional to a Roth, but they have to pay taxes to do so. A reader named Ron is thinking about converting his traditional IRA to a Roth, but wants to know when he would have to pay the taxes. DailyFinance's Laura Rowley explains.





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]]>deductionsfeatured videoFeaturedVideoIraConversionmoney and happinessMoneyAndHappinesspretax deductionsPretaxDeductionsretirement planningRetirementPlanningroth IRARoth IRA conversionRothIraRothIraConversionTax-free savingsTax-freeSavingstraditional IRATraditionalIraLaura RowleyWed, 09 Nov 2011 08:30:00 ESTDecades Later, Student Loan Default Still Haunts Borrowerhttp://www.dailyfinance.com/2011/11/08/decades-later-student-loan-default-still-haunts-borrower/http://www.dailyfinance.com/2011/11/08/decades-later-student-loan-default-still-haunts-borrower/http://www.dailyfinance.com/2011/11/08/decades-later-student-loan-default-still-haunts-borrower/#commentsFiled under: , ,

Student Loan Default Still Haunts Borrower President Obama recently announced a plan to provide relief to federal student loan borrowers by limiting their payments to 10% of their monthly discretionary income starting next year. After 20 years of payments, any remaining debt would be forgiven. The Obama plan will help an estimated 1.6 million Americans.

But there are millions more borrowers who are already in default on federal loans and who won't qualify for the plan. At the end of fiscal 2008, more than $39 billion in federal student loans were in default. Among borrowers who started repaying their loans in that year alone, about 14% percent have already defaulted -- more than 450,000 people, according to the Department of Education.

What does life look like down the road for those who default? Casey Zimmerman Thompson, 42, is a cautionary tale. She originally borrowed about $7,100 to attend school.

Over the years, her loans have gone in and out of default. Since 1987, Thompson, a self-employed airbrush artist who lives in rural Maryland, has paid more than $13,400 toward the debt, according to 2010 Department of Education documents examined by DailyFinance. Thompson says she paid another $1,600 last April when her tax refund was garnished, and another $3,000 in the 1990s that wasn't included in the Department documents, for a total of $18,000 -- or two and a half times the amount she borrowed.

Despite that, her outstanding balance is more than $9,800.

Why? Interest snowballs while the loans go unpaid and is added to the principal. Then penalties and fees -- including collection agency charges -- are rolled in. Under federal law, any "partial or installment payments" that Thompson makes are applied "first to outstanding penalties, second to administrative charges, third to interest and last to principal," according to Federal Claims Collections Standards.

Thompson's household income is less than $30,000 a year, and the mother of four teens qualifies for the Earned Income Tax Credit. But every April, the government garnishes her refund. "They tell me it's going to nothing but interest and not a single penny to the principal," Thompson says. "I'm at my wits' end because every year, no matter what's paid, my balance is still more than $9,000. I'm constantly getting calls from collection agencies. I don't know how I will ever have the ability to pay it off."

A Hopeful Start Meets Hard Luck

Her story begins in 1987, when Thompson's parents dropped their 18-year-old daughter off at the now-defunct American College of the Applied Arts in Atlanta. They told her they had saved a college fund of $20,000. But when Thompson went to register for classes, the school informed her nothing had been paid. She borrowed $500 and attended for just one trimester. Her parents divorced shortly thereafter, following years of money-related marital strife.

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Thompson returned to Pennsylvania and got a scholarship to attend the Moore College of Art & Design in Philadelphia, but dropped out after a year. "I couldn't even afford the art supplies I needed on regular basis," she recalls. She took out a student loan for $6,640 to complete a certificate program at a Head Hunters Academy, a cosmetology school that has since failed. She got her state license and a job training stylists for a hair product manufacturer.

Thompson later developed a tremor that ended her hair styling career and quit working to raise her kids. In the late 1990s, her husband grew violent and was diagnosed with bipolar disorder. She ended up living in a shelter with an order of protection. They divorced. Three years ago in Florida, he committed suicide.

Thompson hasn't made a voluntary student loan payment since 2003, when her ex-husband stopped paying child support. Although Pennsylvania law hits deadbeat parents with jail time, fines and bank account seizures, Thompson's ex-husband was never charged with contempt. She was told her county's courts were backlogged with cases. Money she might have used to pay the student loans went to feed her kids. When her ex died, he was nearly $26,700 in arrears.

"The state let me down -- there was a written law that was supposed to protect me and no one enforced it," Thompson says. "If I had had that $26,000 my student loans would have been paid."

Thompson's congressman, Rep. Roscoe Bartlett, contacted the Department of Education on her behalf in 2010. In a response obtained by DailyFinance, the Department wrote: "The legislation for the loan program administered by the Department does not provide for a borrower to receive cancellation or reduction of his or her loan because of financial hardship."

A Life Without Credit, and Without Options

Short of a lottery win, for student loan borrowers like Thompson, there is literally no way out. The government can garnish the income tax refunds and eventually the Social Security checks of defaulters. Changes to bankruptcy law in 1984 and 2005 mean borrowers can't charge off their obligations the way they can escape mortgage, credit card and even gambling debt when they file -- unless they can prove "undue hardship." But just 29 of the 72,000 student loan debtors in bankruptcy in 2008 were able to do so, according to Mark Kantrowitz, founder of the student aid website Finaid.org.

Thompson's student debt has curtailed her economic life. She has never owned a home, and buys cars at "buy here pay here" lots that offer their own financing (and quick repossession if payments are missed). Kantrowitz contends that the growing student loan default problem will have a "cascading effect" on household finances, and ultimately the U.S. economy over the next decade.

Thompson takes whatever work she can find, airbrushing motorcycles and cars, and painting at carnivals and festivals. Her 14-year-old son comes along to help with airbrush tattoos while Thompson does face painting and T-shirts. Her twin daughters are sophomores and her oldest son is 19. He's been working in restaurants since high school, and wants to go to culinary school in New York -- and take out student loans to help pay for the program.

"With all the knowledge I've gained from my situation, I've told him he can't do it," says Thompson, who is encouraging him to get the skills he needs on the job or attend a local school where he can save up and pay cash for an associate's degree. "I have lived my entire adult life without any credit because of these loans. I don't want my children in the same position."

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]]>bankruptcyBarack ObamaDepartment of EducationFinancegarnishLocalmoney and happinessMoneyAndHappinessobamapersonal financePersonalFinanceRoscoe Bartlettstudent debtstudent loan reformStudent LoansStudentDebtStudentLoanReformStudentLoansU.S.Laura RowleyTue, 08 Nov 2011 11:05:00 EST3 Tips for Cleaning Up Your Finances After a Credit Card Debt Stormhttp://www.dailyfinance.com/2011/11/07/3-tips-for-cleaning-up-your-finances-after-a-credit-card-debt-st/http://www.dailyfinance.com/2011/11/07/3-tips-for-cleaning-up-your-finances-after-a-credit-card-debt-st/http://www.dailyfinance.com/2011/11/07/3-tips-for-cleaning-up-your-finances-after-a-credit-card-debt-st/#commentsFiled under: ,

When you get deep into credit card debt, it can feel like you've been through a financial storm. That's the story for a social worker named Heather, who has $30,000 in credit card debt. DailyFinance's Laura Rowley looks at key steps to clear the debris from her path to a brighter financial future.




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]]>credit card debtCreditCardDebtfeatured videoFeaturedVideoFinancefinancial planningFinancialPlanninghousehold budgetHouseholdBudgetminimum paymentsMinimumPaymentsmoney and happinessMoneyAndHappinesspaying off credit cardsPayingOffCreditCardsLaura RowleyMon, 07 Nov 2011 08:30:00 ESTThe Most Affordable Places to Retire in 2012http://www.dailyfinance.com/2011/11/03/the-most-affordable-place-to-retire-in-2012/http://www.dailyfinance.com/2011/11/03/the-most-affordable-place-to-retire-in-2012/http://www.dailyfinance.com/2011/11/03/the-most-affordable-place-to-retire-in-2012/#commentsFiled under: ,

The Most Affordable Places to Retire in 2012 Financial planner Thomas Corey has a new book revealing the most affordable places to retire in 2012, highlighting cities and towns that also offer lifestyle benefits. He unveils the winners for DailyFinance's Laura Rowley.
(Special thanks to Chris Crowley for providing this photo of Holly Hill, Florida.)








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]]>best place to retireBestPlaceToRetirebooksfeatured videoFeaturedVideofinancial planningFinancialPlanningmoney and happinessMoneyAndHappinessretirementThomas CoreyThomasCoreyLaura RowleyThu, 03 Nov 2011 06:15:00 ESTWhy Even the Wealthiest 1% Are Fed Up With Wall Streethttp://www.dailyfinance.com/2011/11/02/even-the-1-are-fed-up-with-wall-street/http://www.dailyfinance.com/2011/11/02/even-the-1-are-fed-up-with-wall-street/http://www.dailyfinance.com/2011/11/02/even-the-1-are-fed-up-with-wall-street/#commentsFiled under: , , ,

Why Even the 1% Are Fed Up With Wall StreetLike many Americans, Al Checchi is fed up with Wall Street. But the 63-year-old isn't joining the protestors at Occupy Wall Street. Checchi is a multimillionaire. His beef is with the institutions that he chose to manage money for him, assuming the returns they'd achieve would at least keep pace with the broader market averages. That isn't what happened.

"I won't name names, but I invested with all the usual suspects -- name-brand investment banks and commercial banks, hedge funds, private equity and venture capital funds," says Checchi, who retired a few years ago after a career that included top positions with Marriott (MAR), the Bass brothers, Walt Disney (DIS) and Northwest Airlines (DAL), where he engineered a leveraged buyout and served as chairman. "I assumed they were professional. I was appalled."

The loss of faith in the professionals on Wall Street is a sentiment that has reverberated across the American investment landscape since 2008, amid mounting criminal convictions and civil fines for insider trading, and fraudulent marketing. Monday's bankruptcy filing by MF Global and the news of discrepancies in its books have only added to investor concerns.

But what's unique about Checchi's story is that he is willing to openly discuss what few wealthy investors will admit: Scandals aside, much of the harm caused to portfolios comes from standard operating procedures in the industry, practices Al Checchi calls "the difference between being a fiduciary and being predatory."

Checchi's story begins after he retired, when he asked his son Adam, a Harvard-educated computer science major and MBA, to analyze the family fortune, which Forbes listed at $600 million in 1997. (The Checchis wouldn't reveal the portfolio's current value.)

"I did the analysis on it and I was horrified," Adam says. "When I compared where they started and the money they put in relative to owning a basic index of stocks and bonds, they were far below that."

No Smoking Gun

Al Checchi, who was born into a middle-class Italian-Catholic home in Boston, and who spent $40 million in 1998 on an unsuccessful campaign for California governor, admits he wasn't paying close attention, and he makes no claims that his money managers engaged in illegal behavior -- they simply displayed an abysmal lack of ethics.

"There wasn't a smoking gun or a Bernie Madoff or a huge blow up in an investment," says Adam Checchi. Rather it was expensive advisory fees, brokerage costs, and short-term trading resulting in high taxes -- compounded over a quarter century - that diminished the portfolio. Those practices skimmed 4% to 5% off the family fortune each year, he estimates.

The Checchis do have a self-serving motive for sharing their disenchantment: Three years ago, they opened their own wealth management firm, Checchi Capital Advisers. Using technology to develop a proprietary trading platform, that claim they can give clients who have $5 million to $100 million maximum diversification -- exposure to every equity and bond globally -- at the more efficient pricing. Clients have separately managed accounts in which they own individual equities and bonds and greater flexibility to customize their portfolios.

The Checchis say their portfolio is built for very low turnover, to minimize trading costs and taxes. The management fee is 0.75%. While competing wealth managers can be close to that range, typically 1% to 2%, the Checchis say they don't have the hidden costs that wreaked havoc on their portfolio, nor do they steer clients to expensive products on which they make commission.

"In almost every other business, when technology improves, the customer gets better experience and a lower price, but not in money management," says Adam Checchi. "The gains in efficiency have been kept by Wall Street and not passed on to the customer. It's not transparent, you have no idea where they are making money and we want to change that."

'An Easy Get'

Nomi Prins, a former managing director with Goldman Sachs, described some of the Street's practices in her 2006 book, Other People's Money: The Corporate Mugging of America. Now an author and senior fellow with Demos, the liberal think tank, she confirmed the Checchi's assertions.

Wealth managers aren't necessarily given a specific percentage they are expected to extract from clients' assets, says Prins. "But it's a basic idea: If you have the ability to make money out of a certain set of clients, you will try to do that," she says. "The mandate from the top is to be profitable, and if you have an effectively captive fund that you can use to increase your bottom line, then it's kind of an easy get."

Adam Checchi said his family mistakenly expected an institutional philosophy to guide their asset management. "Some of the big banks will say, 'Welcome to Bank XYZ, where obviously your money is managed on an institutional basis.' The truth is, the person who manages the money has total discretion. You may be getting someone who is listening to mutual fund wholesalers tell them how much they can make selling those products to you."

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Moreover, the big investment banks have inherent conflicts of interest that boost client costs. For example, the firm is paid to underwrite a corporate bond offering, and "you are now the distribution channel for them, whether that fits your portfolio or not," says Al Checchi. "Second, they are selling you things they want to get rid of from their inventory where they mark them up and you don't know how much the mark-up is. Third, they are putting you into hedge fund investments where they have a relationship with the fund. In many cases, we'd find the hedge fund managers used to be members of the institution and there was now mutual backscratching going on."

Prins agrees the conflicts are problematic. "The companies that create securities that go in your portfolio should not be the companies managing your portfolio, even if they are separate parts of the firm," she says.

A former investment manager with a major Wall Street bank who had several hundred million dollars under management before she retired called that view a sweeping generalization. "I managed money and I could not care less what my firm was underwriting," says the manager, who asked not to be identified. "I didn't take bonds and place them in my clients' accounts. My clients wanted an underwriting more than I wanted to give it to them because they hoped it would be a hot one. I thought the best way to retain the most assets long-term was to make my clients money -- and the way to do that was to be decent and honest and have a good rate of return."

Beating the Indexes

The last few years have also reminded investors that few money managers can beat the returns of an index fund, which mirrors the performance of the market as a whole. And index funds are a lot cheaper.

Over the 23 years ending in 2009, actively managed funds trailed their benchmarks by an average of one percentage point a year, according to a Wharton research paper. Meanwhile, the average actively managed stock fund costs 1.3% annually (or $1.30 for every $100 under management) and the average bond fund 1% -- while index funds fees run as low as 0.5%.

Here's what that looks like for rich people: If you put $10 million away for 20 years and it grew at an average of 8%, and you paid 2% in excessive costs, you would lose $14.5 million, or 145% of your original principal. (That includes the compounded rate of return on those fees if they'd been left in the portfolio.) "If you were to ask me what my folks missed out on, it was somewhere around that factor on their savings," says Adam Checchi.

"People buy into brand names thinking their guy or gal sitting in the office can outguess collective millions of investors across thousands of assets out there," he continues. "It makes no sense but that's what people believe. The compact people had with their broker-advisers was they knew how to zig and zag, and that's what they paid them for. Suddenly, their faith in the guy or gal went away because everybody had the same experience [in 2008] and it was terrible."

Greed and Defensiveness

The Checchis skepticism deepened after Wall Street handed out $18.4 billion in bonuses in 2008, the sixth-largest payout on record, according to the New York State comptroller. The haul rose by 17% in 2009 to $20.3 billion.

"I truly don't think Wall Street has done itself any favors in the last couple years by continuing to demonstrate a level of greed and defensiveness that's unjustifiable," says Adam Checchi. "We all watched on TV as the heads of banks spoke [before Congress] and they didn't seem credible. It was so clear so many people were acting irresponsibly just to turn a buck."

For Prins, that's a recurring theme: "The managers didn't protect [investors] from Enron either and told them to buy the stock when their own companies said it was a piece of sh--. We have periods where it becomes more known to more people and then it's forgotten about. But it's the same idea: You're giving a lot of trust to people who have the incentive to milk you."



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]]>Al Checchibad investmentsBadInvestmentsbrokerage costsBrokerageCostsChecchi Capital AdvisersChecchiCapitalAdvisersconflict of interestConflictOfInterestDelta Air LinesfeesFinanceinvestment adviceInvestmentAdviceMarriott InternationalOccupy Wall StreetOccupyWallStreetreturn on investmentReturnOnInvestmentshort-term tradingShort-termTradingwealthiest 1 percentWealthiest1PercentLaura RowleyWed, 02 Nov 2011 10:55:00 ESTWhat's the Fallout From Defaulting on a 401(k) Loan?http://www.dailyfinance.com/2011/11/02/whats-the-fallout-from-defaulting-on-a-401-k-loan/http://www.dailyfinance.com/2011/11/02/whats-the-fallout-from-defaulting-on-a-401-k-loan/http://www.dailyfinance.com/2011/11/02/whats-the-fallout-from-defaulting-on-a-401-k-loan/#commentsFiled under: ,

Brian borrowed $5,000 from his 401(k), and now he can't make his $150 a month payments. DailyFinance's Laura Rowley looks at the fallout from failing to keep up, and what Brian should do.





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]]>401k401k loans401kLoansAsk an Expertdefaultfeatured videoFeaturedVideoFinanceirsmoney and happinessMoneyAndHappinesspenaltypre-taxtaxLaura RowleyWed, 02 Nov 2011 06:30:00 EST'Money and Happiness': Laura Rowley Helps You Find Bothhttp://www.dailyfinance.com/2011/11/01/introducing-money-and-happiness-personal-finance-expert-laura/http://www.dailyfinance.com/2011/11/01/introducing-money-and-happiness-personal-finance-expert-laura/http://www.dailyfinance.com/2011/11/01/introducing-money-and-happiness-personal-finance-expert-laura/#commentsFiled under:

Irene Lieber was living in a Brooklyn apartment, scraping by on $759 a month in Social Security, when I met her in 2007. Her credit card had been stolen, and a collection agency was hounding her for charges she never incurred. She ignored them. The agency won a $46,000 claim against her.

That same year, I met Paddy Page, a single mother of four in Idaho. After leaving an abusive spouse, she earned her GED and got a full-time job as a bill collector. Making ends meet on $12 an hour was tough, but her bank made it tougher: Instead of rejecting her debit card when the account ran dry, it socked her with $500 in overdraft fees.

These are the sorts of commonplace household money disasters that have moved me to spend the last quarter-century working as a journalist, helping ordinary people navigate the minefield of personal finance while exploring the relationship between money and happiness. These are the sorts of voices I will be drawing on often as I now launch my new column here at DailyFinance -- a column aimed at helping you make enlightened decisions about how to manage your money, while steering clear of the pitfalls.

The pitfalls have been multiplying. Never in recent memory have so many conventional ideas about household finance been so strenuously tested. For generations, Americans could count on hard work and common sense being rewarded with a decent standard of living. But today, with nearly 14 million people unemployed (and that's just the "official" number), retirement savings subject to a volatile stock market, a foreclosure crisis continuing, and growing fears that we may face a double-dip recession, the very notion of the American middle class seems in peril. Opportunists prey on those in desperate straits, while all but the wealthiest confront anxiety and confusion.

The Devil Is in the Debt Tales

At the center of many of our troubles is an untenable debt load, the result of years of speculation on real estate, and an over-reliance on credit cards to compensate for inadequate income.

Debt is a subject on which I've done a lot of thinking. I grew up the tenth of eleven children in an Irish Catholic family on the South Side of Chicago. My parents believed in hard work, education, board game tournaments and marching into church on Sunday in the order you came from God. Being Depression-era kids, my parents also avoided debt in all its forms.

Gallery: Money & Happiness With Laura Rowley

I got my first job at age 13, earned a degree from a reputable (and affordable) state university, moved to New York City and worked hard, stayed debt-free and started saving for retirement as soon as I got a paycheck. In the late 1990s. I was working as a producer/reporter for CNN Business News and went to seminary at night to get a master's in divinity.

I was motivated by a reporter's curiosity about what the Bible said in its original languages and context. But I came away from the experience fascinated by values, which dovetailed with my interest in personal finance: What drives people to do the things they do with money? What role does money play in happiness? Why do so many people trade what they want most in the world for what they want this minute?

So I wrote a book, Money & Happiness: A Guide to Living the Good Life. My theory: If you can figure out what you truly value, and use money as a tool to get those things, you'll be happy. By happiness, I mean what Aristotle called eudaimonia, or flourishing.

What Do You Really Value?

Flourishing demands wise, creative and intentional choices about earning, saving, investing and spending, based on your values. Because this is about who you are and why you were put on the planet. It's about giving yourself the freedom to make meaningful choices. That's really hard to do with excessive debt, no savings or retirement plan, living paycheck to paycheck, comparing and competing with the Joneses - things that come from not understanding what you really value and how to make the most of financial tools.

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In my late 30s, I found myself working 14 hours a day as a television reporter with two kids under age 4. All those years of avoiding debt and building retirement savings gave me the confidence to make different choices. I started my own business, working mainly from home, wrote six books, a weekly personal finance column and a blog; taught a class in moral decision-making at Seton Hall University; and volunteered as a financial coach to help people achieve their goals. This made me happy.

In short, to flourish, it helps tremendously to understand how to manage your money. At the same time, it hasn't been this hard to get ahead in decades. Annual wages have been essentially flat since the 1970s, while the cost of food, health care and college have skyrocketed.

Millions of Americans loaded up on debt to cover the gap when they lost their jobs in the downturn. Their home values have been ravaged and their savings pummeled by the sickening swings of the stock market on the one hand, and by the Federal Reserve's rock-bottom interest rate policy on the other.

I'm From DailyFinance, and I'm Here to Help

My mission -- and frankly, my passion -- is to help people, in whatever circumstances they find themselves, to achieve financial peace. Money, when poorly understood and poorly managed, derails dreams. The dysfunction and trickery that are rampant in the financial landscape today demand a militant commitment to defending your financial goals. It takes discipline and action. As the Irish saying goes, you'll never plow a field by turning it over in your mind.

At the same time, money isn't everything. Attitude, character, creativity and generosity of spirit count much more. And I suspect some of our dreams are a bill of goods sold to us by Madison Avenue. I doubt I'll ever afford a gigantic designer kitchen renovation (at least not without a budget-crushing rise in my property taxes). So I try to reframe my aspirations and remember what's meaningful. I recognize it's not the size of the kitchen that matters, but how many laughs you share there. Similarly, I hope this column will help you identify what you really value.

I'm not a zillionaire pundit issuing edicts from on high, but someone who faces the same challenges as American families everywhere -- paying the mortgage, educating the kids, trying not to argue about money with my spouse of 19 years, keeping pace with the rising cost of living, getting a decent return on investments and balancing the needs of the future with making memories today.

My daughters are now 14, 12 and almost 9, and I had been itching for some time to work again in a newsroom in New York City with smart people (bouncing ideas off the dog was getting a little old). I was delighted to find a home at DailyFinance.

I don't believe in moralistic lectures or financial smack downs, because there are an awful lot of ways to trip up these days. I hope to provide an independent, trustworthy source of smart guidance, from the holistic perspective of well-being. This column is about your aspirations and challenges in the money and happiness journey, so I welcome your questions but it's also about your wisdom, ideas, and experiences that may help other readers. Email me at laura.rowley@teamaol.com. You can also follow me on Twitter @MoneyHappiness.

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]]>adviceAdviceColumnColumnsdebtfeatured videofeaturedvideoLaura RowleyLauraRowleymoney and happinessMoneyAndHappinesspersonal financePersonalFinancesavingsLaura RowleyTue, 01 Nov 2011 18:00:00 ESTFacing Your Budgeting Fears and Taking Control of Your Financeshttp://www.dailyfinance.com/2011/10/31/facing-your-budgeting-fears-and-taking-control-of-your-finances/http://www.dailyfinance.com/2011/10/31/facing-your-budgeting-fears-and-taking-control-of-your-finances/http://www.dailyfinance.com/2011/10/31/facing-your-budgeting-fears-and-taking-control-of-your-finances/#commentsFiled under: ,

In the midst of a divorce, a mom of five faces a financial horror story: $40,000 in credit card debt, a huge mortgage payment and minimal college savings -- and she has no idea how to budget. DailyFinance's Laura Rowley offers a few ways she can begin her escape from the financial twilight zone.




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]]>advicecost-cuttingfeatured videoFeaturedVideoFinancehousehold budgetHouseholdBudgetmoney and happinessMoneyAndHappinesssaving moneySavingMoneyLaura RowleyMon, 31 Oct 2011 06:00:00 ESTA Switch List: Items to Remember When You Change Bankshttp://www.dailyfinance.com/2011/10/28/a-switch-list-items-to-remember-when-you-change-banks/http://www.dailyfinance.com/2011/10/28/a-switch-list-items-to-remember-when-you-change-banks/http://www.dailyfinance.com/2011/10/28/a-switch-list-items-to-remember-when-you-change-banks/#commentsFiled under: , ,

If you decide to switch banks to avoid fees, here's a list of handy reminders to make the transition smooth and complete, courtesy of NetBanker, an online finance and banking website:

o. Register for online banking at the new financial institution and reset your preferences and security settings.

o. Find convenient and free ATMs that support your new financial institution.

o. Contact the merchants, insurance companies and financial institutions who use preauthorized debit to grab money from you each month, and switch them to the new checking account. (Keep this list and verify that they have done it in the time period they promised.)

o. Contact your HR department to switch payroll direct deposit to the new account

o. In your old bank's online banking, write down biller and payee contact info and capture any history you want to record. Enter the biller info into your new account.

o. If you used e-statements, download and save all prior statements on your computer.

o. Keep the old account open until online bill payment is up and running at the new account. Then re-enter those upcoming payments into the new online billpay (double checking that they will be processed before the due dates so you won't incur late fees.) Then cancel all the pending payments in the old account.

o. If you have a car loan or mortgage at the old financial institution that offered a discounted rate for automatic payments from their checking account, you may want to keep the old account open with enough cash in it each month, until those loans are paid off.

o. Establish email and mobile alerts at the new financial institution.

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]]>ATM feesAtmFeesFinancehow toHowToOnline bankingOnlineBankingswitching banksSwitchingBanksLaura RowleyFri, 28 Oct 2011 14:20:00 ESTHow to Beat the Big Banks at the Fee Gamehttp://www.dailyfinance.com/2011/10/28/how-to-beat-the-big-banks-at-the-fee-game/http://www.dailyfinance.com/2011/10/28/how-to-beat-the-big-banks-at-the-fee-game/http://www.dailyfinance.com/2011/10/28/how-to-beat-the-big-banks-at-the-fee-game/#commentsFiled under: , , , ,

How to Beat the Big Banks at the Fee GameI haven't paid much attention to the hysteria over Bank of America's (BAC) new $5 monthly fee to use its debit cards, and the announcement by competitors that they won't follow suit. Why? Because I keep my money in two local banks that pay me for using their debit cards. And the accounts are free -- no fees.

What I can't figure out is why everyone else doesn't do this.

I moved my entire emergency fund into two high-yield checking accounts back in 2007, a local one for convenience, and an institution with three branches in a Southern state that I opened online. Back in those days, you could get really juicy returns -- up to 5%. Now, the best accounts offer half that. But hey, I still prefer to keep my money in a bank that pays me rather than me paying them.

Here's how high-yield checking works: You must swipe your debit card, using a signature rather than a pin number, about 10 times month. You agree to get your statements by email, use online bill-pay, and make one direct deposit or ACH transfer a month. (An ACH transfer is when you sign up at the website of some entity you pay monthly -- power, cable, mortgage company, etc. -- and they automatically withdraw the money from your account).

In return for this, one of my banks pays 2.15% on balances up to $25,000. The other offers 3% on balances up to $15,000. There are no minimums, no fees, no ATM charges -- and I get reimbursed for fees charged by other banks' ATMs. If you blow it -- as I did last month by only swiping nine times -- you get either no interest or nominal interest for the month. But so what? At least I got pocket change for the parking meter, and I didn't pay anything. (Failure to meet the requirements also means you won't get reimbursed for foreign ATM fees, though, so I make it rule only to use my bank's ATMs).

An Hour of Your Time

I found these accounts by entering my zip code on CheckingFinder.com, a website run by BancVue. It's a Texas-based software company and the technology backbone of the vast majority of the high-interest checking accounts provided by small banks and credit unions. BancVue monitors and analyzes the profitability profile of each customer within each institution to ensure that collectively, the accounts offer enough profit to the bank to justify the interest rates on its checking accounts. (If they don't, you'll see the rate offered drop.)

Local banks can offer interest on checking because the requirements described above reduce processing, printing and mailing costs, and the debit transactions generate interchange fees -- charges paid by merchants for debit swipes -- for the banks. New regulations just shrank those fees, capping them at 24 cents per transaction. The previous average was 44 cents. But small savvy banks figure out how to share that 24 cents with you. Big greedy banks take the 24 cents per swipe and also charge you another $5 a month for using the card.

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Now don't give me any excuses about what a giant pain it is to switch to a new checking account. Balderdash. Of course banks want you to think it's a huge deal, so you'll stay put and pay stupid fees. But it's not. One year, I switched accounts three separate times. It takes all of an hour to open a checking account online and write down the addresses of all the companies in your online bill pay and reenter them into the new account.

If Bank of America is going to charge you $5 a month, that's $60 a year. Spend an hour changing banks and you've made $60 in a 60 minutes. Personally, I'd invest the hour as a matter of principle. (Repeat after me: I will never pay a bank for the privilege of keeping my money.)

If you aren't organized, if you don't like jumping through hoops, you'd still do better with a free account than a fee account. I jump through the hoops because it's fun to beat the big banks at their own game, and it's fun to make interest every month that I can spend on something fun. It helps that I'm a personal finance geek who tracks my spending to the penny using online software. (The technology does the heavy lifting; I only spend five to 10 minutes a week on it.)

And I'm sure some of you will question the wisdom of keeping my emergency fund in a checking account because of fraud issues. But most banks have the same zero liability policy on their credit and debit cards if you report the fraud promptly. The difference is if thieves steal your credit card, you can protest the charges and refuse to pay them; if they pinch your debit card and pin number, say adieu to your cash - and hello to the hassle of getting it back. I don't really worry about this since I see my transactions every day in the two minutes I spend online with my budgeting software. (The software is linked electronically to all my accounts so transactions appear automatically within 24 hours, and sometimes in real time.)

So come over from the dark side. Even if you don't jump through the hoops, you may still do far better in a free high-yield checking account with a small bank or credit union, where your money won't suffer the death of a thousand fees.



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]]>ATM chargesATM usage feesAtmChargesBancVuebank feesBankFeesCheckingFinder.comDebit CardsDebitCardsFinancehigh-yield checking accountsHigh-yieldCheckingAccountsmoney and happinessMoneyAndHappinessOnline bankingonline bill payingOnlineBankingOnlineBillPayingSci/TechLaura RowleyFri, 28 Oct 2011 14:15:00 ESTWant to Retire Early? You Don't Need Richeshttp://www.dailyfinance.com/2011/10/28/secrets-to-retiring-early-its-not-just-for-the-rich/http://www.dailyfinance.com/2011/10/28/secrets-to-retiring-early-its-not-just-for-the-rich/http://www.dailyfinance.com/2011/10/28/secrets-to-retiring-early-its-not-just-for-the-rich/#commentsFiled under: , ,

Secrets to Retiring Early: It's Not Just for the Rich One in five Americans plans to retire before age 65, according to a new study, and they're not just the ultra-wealthy. There's hope for everyone to bail out of the daily grind before age 65, if they adopt the behaviors and attitudes of these savers.

The Transamerica Center for Retirement Studies, an organization funded in part by the Transamerica Life Insurance Company, surveyed more than 4,000 U.S. employees and delved deeply into the responses of the group they label "future early retirees."

"We had two hypotheses: They were privileged and ultra-affluent or wildly optimistic," says Catherine Collinson, president of the center. But just 52% of the future early retirees had a college degree, and 49% reported an annual household income of less than $100,000. They are equally divided among men and women; half are over age 40.

"They are far more likely to be like the 'Millionaire Next Door' than a Bill Gates or Warren Buffet," Collinson says, referring to the 1996 best-selling book that found many U.S. millionaires lead relatively modest lifestyles.

The future early retirees weren't pathological optimists either. The study authors extrapolated from the data on their savings behavior, and found they were actually "well on track to meet their goal," she says.

So who are the future early retirees, and why are they successful? They started saving earlier -- age 25, on average, versus age 30 for their later-retiring peers. They contribute more to their company plans -- 10% of income on average, versus 6% for other respondents. They are much more likely to save for retirement outside of workplace plans -- 69% versus 60% of those planning to retire after 65.

They're also luckier: While about three-quarters of those surveyed enjoyed access to a company 401(k) plan, the future early retirees were more likely to have company-funded pensions as well (25% versus 14% for those retiring after 65).

More Likely To Dream Big

But a big part of their success relates to priorities and attitudes. Retirement is a huge value for them; nearly one-third called it their top financial goal, versus less than a quarter of their peers. They were also the group most likely to have a vision for their golden years.

"All groups look forward to spending time with family and friends, but future early retirees are much more likely to dream of traveling and pursuing hobbies," says Collinson. "The idea of retirement has captured their imaginations." The early birds were the least likely to work part-time in retirement -- 46% versus 59% of those who plan to retire later -- but more likely to do it for enjoyment.

More Likely to Plan

In terms of personality, the future early retirees have a propensity to plan: 71% have a specific retirement strategy, versus 56% of the post-65 group. Researchers have tested people for this trait, and found it actually predicts financial well-being, as measured by credit scores.

"There are four things that are part of being a planner: You set goals; you think about the means to achieve them; you use tools to keep track of progress and see the big picture; and you like to plan -- it feels good to plan rather than being spontaneous about a particular domain," says John Lynch Jr., a professor at University of Colorado and director of the Center for Research on Consumer Financial Decision Making.

"You can have two people who are similar in every way -- income, education, ethnicity -- but if one is a high planner and the other a low planner, the high planner will have a much better credit score," says Lynch.

More Likely to Balance Immediate and Future Spending

Planners also score high in conscientiousness, frugality and self-control. One reason is that their planning allows them to see potential expenses down the road and allocate money for them -- so they have a better handle on their spending today. Thus they'll whip out a coupon in the grocery store, knowing that small savings will add up over time for their future goals.

Steve Spiller, a marketing professor at UCLA, has studied the concept. Planners "can see ahead and realize they are bumping into [spending] constraints, whereas people who are not planning go about their merry way until they're just about to run out, and think, 'Oh, if I spend this dollar now, I can't spend this tomorrow,'" Spiller explains.

Even if someone isn't a planner by personality, it's crucial to try to set a retirement goal. Anna Maria Lusardi, an economist at George Washington University who studies financial literacy, has found people who make an attempt to estimate their savings goals for retirement ultimately save more than those who don't. (Take 30 minutes to try to ballpark your number for free at this site.)

More Self-Reliant and Nimble

The future early retirees also appear to be more self-reliant -- nearly two-thirds say their primary source of income in retirement will be their own retirement savings -- versus 54% of those who plan to retire after 65. They also seek out information on retirement. They're much more likely to spend time on financial information websites, and to talk with friends and family about their plans.

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In addition, they also responded to shifting economic times. Asked how their savings habits had changed since the recession, 45% said they were saving the same and 26% said they were saving more. "What the data implies is they have chartered a course and are sticking with it, and adapting to difficult conditions," Collinson says.

The study authors decided to spotlight future early retirees as an inspiration amid economic gloom and doom. "Hopefully people can look to them as role models in their own planning and saving, and may become future early retirees themselves -- or at least retire sooner and on better terms than they expect," says Collinson.

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]]>401kearly retirementEarlyRetirementGeorge Washington UniversityJohn A. Lynch, Jr.pensionpersonal financePersonalFinancesaving for retirementSavingForRetirementWarren BuffettLaura RowleyFri, 28 Oct 2011 07:30:00 ESTWhat Not to Do When Filling a Prescriptionhttp://www.dailyfinance.com/2011/10/27/what-not-to-do-when-filling-a-prescription/http://www.dailyfinance.com/2011/10/27/what-not-to-do-when-filling-a-prescription/http://www.dailyfinance.com/2011/10/27/what-not-to-do-when-filling-a-prescription/#commentsFiled under: ,

Cold and flu season is upon us. Americans spend $400 million on prescription drugs to relieve the symptoms, according to one study, and some of them spend too much. DailyFinance's Laura Rowley looks at what not to do when filling a prescription.



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]]>cold and fluColdAndFlucopaysdrug pricesDrugPricesfeatured videoFeaturedVideogeneric drugsGenericDrugshealth careHealthCaremoney and happinessMoneyAndHappinesspharmacyprescription drugsPrescriptionDrugsLaura RowleyThu, 27 Oct 2011 06:00:00 EST