What do you 'owe' your parents?

Here's a fascinating kettle of worms: How much do your parents' financial lives affect your own, once you're an adult?

One half of the Make Love Not Debt blog team raised this issue in a post on Asian culture and finances. I'm as 'white middle-class suburban American' as you can get, with the usual financial dynamics attached to that -- money flows from the parents to the kids, until the kids are out of the nest and sometimes longer. There's no expectation or likelihood it will ever flow the other way, at least in my particular case, barring some kind of financial miracle or catastrophe. If I won the lottery, then sure, I'd kick back a fair chunk into sharing the wealth. If my dad (a single parent for the past decade) suddenly fell into disaster, I'd jump in and try to help.

But in the routine course of things, our financial lives are almost completely independent. When I budget out future priorities, I only have to worry about me and David; we don't need to account for supporting our parents, either wholly or in part. It's only in recent years, as my social circle broadened beyond the suburban-middle-class peers I grew up with, that I've realised how unusual that it.

More than half my friends expect to have significant financial obligations to their parents. In some cases, culture is the driver; the Asian cultural expectations MLND describes are ones I've seen at play in some of my friends' families. In college, several friends grumbled that the only "acceptable" choices for them were to be economics majors or pre-med. Their parents were willing to work themselves to the bone to send their kids to top schools; in return, they expected the children to pursue lucrative careers (medicine, law, or investment banking -- maybe computer programming, though that was definitely on the fringe), so that both they and their children could reap the financial and social rewards of that professional success.

In other cases, the obligation comes from class issues. Most of my friends are in a similar socioeconomic band to me: We have careers that pay way more than the average U.S. salary. (Although in NYC, "way more than U.S. average" can still mean living paycheck-to-paycheck. Journalism is not the career for those who dream of rolling in moneypiles.) For me, that keeps me pretty level with my parents' socioeconomic band. But for some of my friends, professional-middle-class is a step up. One very close friend quips about how she grew up in a trailer and was raised by a trucker. Her dad works way, way harder than I ever have -- but his financial situation is also more precarious than mine has ever been, or than his daughter's now is. Her parents don't have that nice retirement pension my Dad does. Which means the kids are going to inherit some of the responsibility for their parents' financial security as they age. Because what are the other options? It's not like her parents made bad decisions or gambled or drank away their financial stability. They poured what money they had into raising their kids.

You hear a lot of talk about financial planning for babies, and for the costs of raising kids. There's less talk about the complex calculus of how much you "owe" to your parents, and what a giant difference those obligations can make in financial lifecycle planning.

(Did I just write "lifecycle"? I've spent too much time in the jargon trenches this week.)

Equipping your kitchen from scratch for $200

I rarely go in for frugality on this blog or in daily life, but I had to link to a nifty article in this week's New York Times: "A No-Frills Kitchen Still Cooks" (found via Matthew's always entertaining and prolific food blog Roots & Grubs). I could quibble with some of Bittman's recommendations (no baking pan? I use my 8x8" one often for casseroles; the list seems geared toward someone who cooks on the stovetop but not in the oven), as I'm sure every reader can, but I really like the basic premise of 'practical ways to frugally equip a new household.'

I remember the sticker shock I felt when I left college for my first apartment in the late '90s. Not just for things like furniture, which you expect to spend up on, but for all the basic things we take for granted -- Windex, olive oil (I don't recommend using them in combination), bathroom towels, scissors, storage boxes and so on. I felt like I was running to the supermarket every hour to fling money at them for household essentials. So for new grads and others setting up house for the first time, tips like Bittman's seem essential. It's good graduation-season reading.

And on that note, off I go to my college commencement! YAAY no more classes! Now to spend the next three lifetimes working off my loans.

Resetting myths about resetting debt statutes of limitations

I've been a very remiss blogger lately, and the culprit is, as usual, travel. San Francisco this week, Vegas last, and a crunching work deadline on a feature piece in the midst -- I'm behind on everything, oy. But! The end of the insanity is in sight! And I have lots of financial thoughts scampering around in my head.

Starting with an update on the "repairing your financial sins" series about rebuilding damaged credit. The common word of caution to people thinking of repaying or resuming communication about old debts is "proceed with caution," because doing so can reportedly "reset" and restart the clock on the statute of limitations. Regular reader Karawynn linked in comments to a Consumerist article saying that's a myth, and that the statute of limitations runs from the date payment initially became delinquent, no matter what happens later. Their sources: a nonbinding opinion from the FTC ("because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed -- sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer -- changes the allowable period for a [credit reporting agency] to report a chargeoff") and a direct comment from a TransUnion spokesman, who said (paraphrased) 'paying the account after a delinquency has been reported by a credit grantor will not have the impact of "resetting" the item.'

However -- these comments relate only to what can legally happen on your credit report, not a) what can actually happen (in practice, unscrupulous debt collectors have been caught running all kinds of skeevy stuff up the flagpole to see what flies) and b) what payments do to reset the debt legally. By reinitiating activity on an old debt, you may bump it back into the active column and restart the statue of limitations for the debt's legal expiration (the point at which the creditor no longer has any legal right to pursue you for payment).

The key point to bear in mind is that a credit report is different from a legal accounting of your debts. Some creditors never report debts to credit agencies; that doesn't mean you don't legally owe the debt. Some statutes-of-limitations expire before the seven-year window used for tracking credit-report items; that doesn't mean those old delinquent debts can't continue to haunt your credit rating, even after you no longer legally owe anything on them.

It also explains why paying a delinquent debt doesn't remove it from your credit report, and may not do anything useful for you at all, from a credit-rating standpoint. (It can certainly be useful if it clears a debt you're still within the statute of limitations on and legally liable for.) Remember, the purpose of a credit report is to help credit-granting agencies judge how easy it will be to get money back from you. If you let a debt go delinquent, that makes you a pain for the creditors to deal with -- and even if you later get everything together and clear those delinquencies, there's still a legitimate red flag, since you did incur the delinquency in the first place.

On the other hand, credit reports and credit ratings do take recent history into account. A two-year-old delinquency will hurt you far less than a two-month-old one. As the problem ages, it becomes less harmful. And if you have recent problems, the best thing you can do is reach some sort of arrangement with your creditors before the account is charged off. (When that happens varies, but it's almost never less than 90 days or more than 365 days after the debt became delinquent.) Charge-offs are the really black smirches you want to avoid, and they're often preventable -- creditors will be pretty flexible about payment arrangements so long as you're active about negotiating with them.

Underwater homes (not the fun, aquatic kind)

With adjustable-rate mortgages coming home to roost and the subsequent, entirely predictable and long-predicted collapse of the subprime lending market, the dark side of buying real estate is getting a public airing in the press. But there's not just the risk of taking on a mortgage bigger than you can afford -- there's the risk of being really locked in to the house you buy. In a culture that pushes homeownership as an almost essential step in building financial security, it's a risk that's not often highlighted.

The Washington Post has a piece today on "upside-down homes," where sellers end up owing the bank the difference between the mortgage they took on and the lower price they're able to sell for. The idea that housing prices can go down as well as up isn't a novel one, of course, but I admit that the reality of the consequences that can have didn't hit home for me until I read through a few of the article's examples:

Jeffrey Taylor and his wife bought their dream home in Purcellville for $538,000 last August. Now they have to sell it because they are getting divorced and neither one can afford the mortgage alone.

The most they could get for it was $430,000. After paying all the real estate commissions and taxes, they will still owe the bank $118,000.

When David & I (eventually) get serious about buying an apartment, our plan has always been to buy a place we can envision staying in essentially forever. We probably won't be leaving Brooklyn, and neither of us has any interest in getting a "starter apartment" and trying to flip upwards. But the article did prompt me to proceed with caution and be really damn sure we're both committed. The tales of people being forced by circumstances (usually divorce) to have no choice other than selling into a less-frenzied market than the one in which they bought -- and to actually end up owing money to sell a house -- are pretty scary.

Account creep

I think I have a relatively straightforward financial life: no investment accounts, no real estate, just the basics. But eeek. I sat down today to update my bookmarks for my financial sites .... and the total is impressive. A checking account, a 401k, two credit cards, my student loan account, my HSA, and, now, my sharesaver thing. Plus the site I use to manage my pretax monthly subway card purchase funds. That's not counting sites for the other credit card which I never use, my closed 401k (I rolled it over to my new one last year), my closed FSA, my PayPal account, or on which I pay recurring bills, like Verizon's.

This space seems to be screaming out for a mashup -- something that will let you access all your accounts from one interface. But, alas, security restrictions mean no financial services company is exactly rushing to open APIs and let developers plunge in. (Ok, I grudgingly concede that's sensible.) Still, it seems like there must be a more sensible way to keep tabs on the profusion of financial sites. How on earth did people manage years ago and not simply lose track of accounts?

Risk-free company stock options

I promise to post something relevant to people beyond me soon, but for today, I'm untangling an interesting stock plan my new (I've been here a year; I'm sure it will eventually stop feeling like my "new" job) company offers: Sharesave. This appears to be a UK thing, which makes sense because somewhere up the food chain my company is actually British. (It's such a typical modern-conglomeration thing ... my magazine is published by a Long Island-based tech publishing company that I think has been sold fortybazillion times, and is currently owned by an even bigger publishing company. In London.)

Anyway, the way this scheme works is: I nominate an after-tax amount to be pulled each month out of my paychecks. I pick a contract term, either three years or five. During that time, my nominated amount is pulled from my paychecks each month and put into a savings account. At the end of the contract term, I have the option to convert my savings to company shares, purchased at a discounted rate fixed at the start of the contract. For the contract term opening now, the fixed price is $12.55, a 20 percent discount to the company's trading share price on the official offer date. (I would mention what the actual share price is today, but I honestly can't figure it out. Whatever currency it's being quoted in doesn't seem to be pounds. What on earth does the London Stock Exchange use?)

The neat thing about this is that it's zero-risk. If my company shares are underwater (meaning that at the end of the contract in three years, they're trading below my $12.55 option price), I'm not obligated to roll my savings into stock. I get it back, plus interest. So, I get to take advantage of the upside if the share price rises, but I'm not gambling my savings if it doesn't.

Which pleases me greatly. My company seems to be a nice healthy company, but I've seen the Enron documentary a few too many times to be willing to sink my savings, or my 401k, or basically any actual cash money, into company stock.

I'm tossing about $100 a month into the Sharesave jackpot. It'll be the first formal savings thing I've set up outside my 401k -- overdue, I know. Check back in June 2010 to see if it's made me rich ...

How to mess up an Amex payment and destroy your finances

Lest my personal-finance blogging imply I have all of our financial matters nicely in hand, here's a fun cautionary tale about how I firebombed David's bank account.

Because David and I have separate checking accounts and budgets, we each pay in each month to pay off the charges we've run through our main credit card, my Amex. I use Amex's Pay Online option, which lets me directly debit money from linked bank accounts. Two weeks ago, I sat down to pay David's portion of this month's bill. I calculated what he owed, cleared the amount with him, typed in the amount, hit the "pay" button, and clicked on "confirm and pay."

As I whizzed past the confirm screen and said yes yes pay, I realised -- literally the second I was hitting the button -- that I'd put in an amount almost twice what I actually intended to put in. An amount substantially greater than what David actually had sitting in his bank account.

I caught the mistake the instant I hit the button -- but by then, it was too late. Amex's online payments are instantaneous. Once you've confirmed, you can't change or revoke the payment.

I got on the phone right away to Amex's customer service, which threw up its hands and said to call Citibank and arrange a stop-payment.

Citibank's customer service center is in India, and is impressive in its level of cluelessness. Dealing with them has rarely proved helpful, and this experience was no exception. The center put in a stop payment order. A week later, we learned -- painfully -- that Amex payments don't work like typical check or debit payments, and can't be halted with a stop payment.

This whole mess was compounded by David's lack of access to his account info. In a separate incident, he lost his debit Paypass keychain thingie right after my payment debacle and had to cancel his debit card and get it reissued. Doing that temporarily cut off his access to Citibank's online banking site -- meaning he couldn't check and see what happened with the Amex charge. It took more than a week for his replacement card to arrive.

When it did, Tuesday, David hit the ATM and found that his account appeared untouched: the Amex payment had apparently bounced or been stopped. Figuring we'd worked through the mess, I went in that night and put in another payment on Amex's website, for the amount I'd originally intended to pay.

Insert hollow, dark laughter. Yesterday morning, David found his account hugely overdraw. So, instead of dealing with the Indian call center, David went to a Citibank branch to ask: What happened?

The original Amex payment was never stopped. It can't be. Online payments of the sort I made are apparently handled as direct electronic transactions between financial institutions, routing through the Federal Reserve system. If a payment doesn't go through because of insufficient funds, it tries again. Three times.

So, we now have the original payment making its second or third attempt to go through, plus the second payment I made last night starting its attempts. We're even further into the hole than when we started. And presumably every time one of these payments fails, it will generate another bounced transaction fee, on both sides, from Amex and from Citbank. Amex already socked us with one $38 fee for the first bounce. I'm praying each subsequent bounce won't incur another.

The obvious way to solve this mess is to throw enough money into David's account to let all the Amex payments suck out the money they're trying to. But, er. We lack the cash. My clever plans to create an emergency fund haven't actually come to fruition yet, partially because taking just five credits this semester
(I'm almost finished, yay!) killed my ability to get loans and all my free cash is temporarily tied up paying for the credits my company will soon reimburse. So, for the moment, we're just kind of financially screwed.

I think we can dig mostly out of the hole with this Friday's paychecks. It'll be months before I crawl out of the guilt hole, though. I owe David lots of extra niceness in return for temporarily completely destroying his bank account :(

Have we scrapped the heath-care system yet? No? Damn.

Last Friday I made an appointment with a new doctor for my annual physical. I already knew this doctor, who came recommended, didn't take my insurance; I'd decided I'd rather pay out of pocket (well, out of my HSA) for a recommended physician than take a stab in the dark at my insurer's in-network directory. So it didn't surprise me when the doctor said she doesn't take my insurance (I already knew that from her website). What surprised me is when she said she could only fit me in because I'm not paying with any insurance.

"I just can't take any more in-network patients," she said in her email. (Doctor with email? I love her already!) I understand why. It's no secret that networks reimburse providers at a highly discounted rate, one that increases slightly more often than Halley's Comet appears, and make them slog through mountains of paperwork to get the meager checks.

Once again, the medical services David and I actually require are services our insurance won't pay for. The cover story in this week's New York magazine is about "generation uninsured.". That's a huge problem. At least half my friends don't have any kind of insurance and are basically crossing their fingers they won't have a financially devastating health emergency. But the other, less recognized side of the problem is that even those who do have insurance, who pay the ever-rising premiums for company plans or scrape up the psychotic sums demanded for solo insurance, are getting less and less for that not-inconsiderable monthly payment.

The only silver lining to all this is my firm belief that a system so catastrophically &!*@ed, one that even the business community is ready to scrap, can't last much longer.

Head go boom now -- FSA reimbursements

March 31 is the deadline for claiming money from your 2006 flexible spending account, and I'm still trying to dredge back the last $26.65 of mine that Wageworks is clinging to with a deathgrip.

When we last left the saga, Wageworks was declining to pay any of my "pay me back" submissions, instead using any receipts I sent for reimbursement to clear the backlog of charges I'd put on my FSA Visa debit card but had not sent verification receipts in to cover (because I didn't realise they wanted verification receipts.)

I've long since lost receipts for most of the things I'd initially charged on the FSA card. However, Wageworks lets you file "substitute receipts" -- you submit one for any valid expense you haven't previously funneled through the FSA, and it swaps that over and clears the verification backlog. Fine. We had more than enough medical expenses last year for me to pull up documentation on a substitute expense.

So I had David procure a receipt for one of his medical visits and sent that off to Wageworks last month, with the verification form and the little "substitute receipt" tickybox all checked off. The total outstanding amount of charges needing verification (there are two or three) is $24.97. The amount left in my FSA is $26.65. So, total of $51.62. I sent a receipt for $80, figuring they would clear the backlog, refund me the balance of my account, and call it all done.

But lo, a month has ticked by, with no money flooding into my coffers and no logged activity on my online "track my account activity" dashboard. So, this afternoon, I summoned the willpower to call again and inquire.

It seems that the Bureaucratic Powers That Be do not automatically link charge verification paperwork and "pay me back" claims -- except when it works in their favor to do so.

A charge I filed for "pay me back" can be rerouted to clear a verification backlog, but a receipt submitted for verification won't automatically refund me for the additional amount beyond the backlog.

Not only that, but it won't trickle over to other charges awaiting verification. I only checked the little tickeybox on the card verification form once, next to one of the charges. Since the receipt covered an amount greater than all the charges, I assumed it would carry through and clear them all.

Nope. Resubmit with all the boxes checked, suggested the rep.

Arugh. But we had also just established that clearing the verification backlog wouldn't get me my refund ...

After 15 very convoluted minutes, we appear to have determined that resending my $80 receipt, this time with a Pay Me Back form, will clear the backlog and trigger my refund. Apparently. I have only the rep's assurances to go on that the receipt won't be kicked back entirely, since they've already seen it once.

Eleven days left to sort it out. At this point, it's the principle of the matter motivating me. I don't want this bureaucratic custer@%^! to keep my money!

And I am really glad I have a different FSA (well, HSA) provider this year. Let's see if Amex is less complication to work with than Wageworks.

Stalking the wild NetBank ATM

I'm traveling this week -- Seattle for fun, Santa Clara for work -- which means blogging will probably be light. But I just had a wacky personal-finance moment. I'm at the Santa Clara Convention Center (for EclipseCon) and stopped at one of the convention center ATMs to snag cash. While it was processing, it flashed a commercial. For NetBank. *Blink.* I'm used to thinking of my bank as this semi-obscure thing. My first thought was that running my NetBank card somehow triggered a NetBank ad, but then I noticed the ATM was NetBank-branded. I've never seen a NetBank ATM in the wild! As mentioned before, I'm used to sucking it up and paying ATM fees (on the front-end only, not the back) whenever I withdraw cash.

Yes yes, I realise this is a financially unwise move, but I really like my bank, and for a long stretch it just didn't have any in-network ATMs in NYC. It was "pay the fees or switch banks." Plus, I'm lazy, and relatively willing to pay the fees for the convenience of going to the very nearest ATM (rather than hunting for one associated with my bank) when I need cash. I think the fees should be a hell of a lot less, but that's a whole other blogpost.

But this NetBank ATM prompted me to go take a look and see where others might be hiding. It seems my little bank got big when I wasn't paying attention -- their website claims they operate the second-largest ATM network in the U.S. They even appear to have a few near-ish my office in Manhattan now! Who knew?

It was a slightly surreal feeling getting money out of the ATM ... and not paying a surcharge. ($2, on this ATM. Bad NetBank! Stop price gouging!) Now I want to go play with the free ATM again and again. It's like my own little slot machine.

Journalistic probings of the debt and heath care messes

Pulitzer Prize jurors will meet next week to mull over the best of this year's journalistic offerings, and one series getting notice is the Boston Globe's in-depth Debtor's Hell investigation. I've been reading through the pieces during my downtime; there's a lot of material, and it's excellent. The Globe documents both the skyrocketing growth of the problem -- between 2000 and 2005, the number of debt-collection lawsuits filed in Mass. averaged out to one for every five households -- and the catastrophic flaws of an overwhelmed regulatory system that lacks the resources and manpower to keep abuses in check.

I love rigorous work like this that shows off journalism at its best. When regulators, politicians, and the courts fail to protect citizens from predatory practices and ensure just outcomes, we need media attention to focus a spotlight on the problem. Accountability begins with awareness.

In the spirit of spotlighting, I also wanted to point attention to a fantastic piece from last spring in the New York Review of Books: "The Health Care Crisis and What to Do About It". Ostensibly a critical look at several recent books on the U.S. health-care system, the article is really a rigorous examination of what's going wrong, why, and what issues reform measures will need to address.

And if anyone needs another example of why the heath care status quo is not acceptable, just take a look at today's Washington Post: "For Want of a Dentist". The unwritten rest of that headline is "... a ten-year-old boy died from a toothache."

The nitty numerical details of being a full-time writer

At the risk of looking like a big shill for John Scalzi's Whatever blog, I'm going to cite it in two consecutive entries. Lots of people fantasize about becoming a full-time writer. Some who try it then write whiney articles about how badly it pays. The harsh reality is that midlist authors don't generate enough ancillary economic activity to make being a midlist author a particularly lucrative career path.

But what are the actual numbers involved? Scalzi, a veteran freelance writer and semi-fledgling science-fiction writer, breaks them out in two blog entries: one tallying what he made from his fiction writing in 2006 and an earlier one approximating all of his writing/editing income in 2005. If you're an aspiring writer, or simply someone curious about the economics of the field, check them out.

On my end, the figures had a few surprises. Scalzi has been pretty successful marketing his work and building a following (a 500-copy run of a small press book published this week sold out before it shipped), and he gets pretty strong critical reviews; I would have expected his take from the fiction to be a bit higher, though I follow his explanations of why it wasn't. If you're making your money off royalties, rather than big advances, it's going to take a long time to actually land in your bank account.

On the flip side, I'm surprised he's doing so well off the freelance journalism and corporate work. Finding steady, lucrative clients who cough up paychecks when they're due is the real skill of freelance writing -- the actual journalism is the easy part. Obviously, Scalzi has got the business end of things well in hand.

The one caveat I'd throw in is that Scalzi has an unusual asset working in his favor: He is insanely prolific. In an average year, he writes multiple novels. If you're going to rely on fiction for a substantial portion of your income, being quick helps; your editor doesn't care how many years you slaved over a book. Your advance depends solely on the book's marketability, not the time that went into its creation.

Similarly, if you're relying on journalism and freelance work, churning articles quickly is going to have a direct, positive effect on your bottom line. Scalzi estimates that he writes 20,000 to 30,000 words in a typical week. I don't think I know of any other writers keeping that pace. In my staff job, I'd estimate that I publish 5,000 to 7,000 words in an average week; my most prolific peers probably do 10,000 to 15,000.

I understand why people are loathe to reveal specific details of their own financial situations, but I'm all in favor of this kind of information being more widely spread. The first step in making any choice is having the information you need for an informed decision.

Birds & Bills redesign!

If you usually read Birds & Bills on a feed, surf on over to the site today -- it features a massive overhaul. The best new element is a gorgeous new logo, designed by artist Renee Thompson. Lacking any design skills myself, I'd been hunting around for an artist to commission a design from. When I found her work on deviantART, I promptly fell in love. And, she specializes in birds! Such a perfect fit! I was really delighted she took the commission, and I'm blissed to be ditching my old off-the-shelf template for a lovely custom design. If you like Renee's work, you can find more in her Etsy store.

The new design also features long-overdue tags functionality. I've added a list of the tags I use to the blog sidebar. That should make it easier if you're hunting for posts on a specific topic, like retirement planning or credit cards.

What other features should I incorporate? Speak up, if there's some site-navigation element you find lacking. For instance, should I compile a "table of contents" with links to significant posts (like the one on 401k strategy, or the article about How FICO scores are calculated)? Does anyone need/want a search box?

While I'm in a bit of a relaunch phase, this seems a good time to mention Birds & Bills' editorial policies. Flipping through pfblogs.org (a great blog aggregator) a few weeks ago, I was surprised to find a handful of posts tagged [PayPerPost]. I've heard about this insidious little outlet before, but I hadn't previously run across it in the wild.

I don't consider blog ethics completely interchangable with my day-job, beat journalism ethical practices. (To earn my paychecks, I write about software over at CRN.) I'm a lot more opinionated here about issues and financial services vendors and than I would be about companies/topics on my beat. However, I do consider blog ethics akin to the responsibilities of a columnist: someone whose job is to provide opinionated, personal, but independent views. "Transparency above all" is my policy. If I try out a service I've been given free access to, or review a book from a publisher that has sent a free copy, I'll mention the freebie. If I don't add that kind of disclaimer, you can assume I'm paying the going rate for any goods or services I comment on.

When it comes to advertising, my views nicely coincide with what John Scalzi wrote in the Whatever a few weeks ago: I get approached every so often about running ads here, and I don't take up the offers because, "One, I don't wanna. Two, I don't wanna. Three, I don't wanna." I'm not opposed to ad-subsidized media. Advertising underwrites my paychecks and keeps the magazine I write for in business. But I don't have a pressing need to run it here, and I don't like the cluttered look it gives so many blogs. I've run the math; putting AdSense or whatever on Birds & Bills wouldn't generate enough income for me to consider it worth the visual clutter. So, now and for the forseeable future, no ads.

Finally, while I'm rambling on blogging topics, thanks for reading along over here. Birds & Bills recently had its one-year anniversary. I don't have a good stats tracker (the kludgy one I used broke in today's redesign), so I have no idea how many people are out there, but I'm happy a few people are following along as I thrash out financial matters.

A sample 'cease communications' letter to debt collectors

My posts about debt expiration and statutes of limitation weren't wholly theoretical. I've been dodging calls for the last few months from a collector trying to shake out money for a debt from 2000 that I don't consider valid. (It's a long story, as these things generally are.) Instead of running through hoops trying to track down all the paperwork to prove that the debt is well and truly not legitimate, I opted to wait out the clock till 2007, at which point it became an indisputably expired debt.

This collector is fairly low pressure; their main tactic seems to be leaving automated messages on my answering machine every few weeks. Still, the calls stress David out and I'd also like them to stop, so I figured it's time to formally issue a "cease communications" request, as allowed by the Fair Debt Collection Practices Act. Under that law, you can at any time tell a collector to stop contacting you, and they have to oblige. Once you've made the request, the only communications they're legally allowed to send is a notice of specific actions, like filing a lawsuit.

In case anyone else can use it, I'm posting the letter I'm sending. I'm citing the New York state law that sets the statute of limitations on debts; if you'd like to find a local law to cite, the Fair Debt Collection website has good pointers to state laws.


[Date]

[Your Address]

Dear [Collector]:

I am writing regarding your attempts to collect a debt of $XXX for XXXX (account #XXX). I do not acknowledge the validity of this debt, which, in any case, is beyond the six-year statute of limitations for collection in New York, as laid out in the New York State Consolidated Law & Rules (chapter 8, article 2).

In accordance with the Fair Debt Collection Practices Act, Sec. 805(c), I am requesting that you cease any further communication with me on this matter and discontinue phone calls. If I receive any further communication -- other than a written notice that further collection efforts are being terminated -- I will submit a complaint about your organization to the Federal Trade Commission and the New York Better Business Bureau.

Sincerely,


[Your Name]

The trail even Sacagawea couldn't blaze

Think the third time will be the charm for the dollar coin in the U.S.? Refusing to concede defeat after the chilly reception to the Susan B. Anthony and the only slightly more enthusiastic uptake of the Sacagawea dollar, the mint is debuting yet another dollar coin today: the Presidential coin. Among the lures the Mint is dangling are "larger, more dramatic artwork" and edge inscriptions of "E Pluribus Unum" and "In God We Trust."

The New York Times has a detailed look at the dollar coin's advantages and travails. Personally, I like 'em. New Yorkers probably deal with more Sacagaweas than most Americas, since the subway machines give them as change. When I've gone and visited Australia (where David hails from), I've always adapted pretty quickly to the coins-only system for $1s and $2s. Although, their $1 coins have kangaroos. I bet $1 coins would be way more popular here if we put kangaroos on them.

TurboTax Rip-Off On Amex Discount

The reason I decided to try TurboTax this year was the 25% discount on the federal return cost. In actual practise, this translated to about $5 off, but by the time that sunk in I was committed.

Having just filed, I feel even more ripped off by my inability to actual get my damn $5. The offer didn't come with a promotion code; to use it, you're supposed to access TurboTax through a special page on OfficialPayments.com. (This special page: https://www.officialpayments.com/promotions/turbotax/amex/index.html) When I started my return, I initiated it at that site. When I went back to finish it today, I want straight to TurboTax. Come checkout time, no discount. So I went back to the original site and saw the note that you need to "Remember to access and complete your return through the TurboTax links on the American Express Web site." Being a dutiful little discount hunter, I clicked the link, re-stepped through TurboTax to the checkout ... and again saw no discount. GRRR.

At this point, I decided further chasing was not worth the $5 and surrendered. But if anyone does manage to use an OfficialPayments discount: What's the trick? Do you also need to open an account there and log in through that? (Something NOT MENTIONED BY AMEX AT ANY POINT ...)

Shock of the day: I itemize

When I get swamped, "tomorrow" tends to get interpreted loosely. Anyway, back into the tax trenches!

Although I finished doing my taxes, I haven't filed them yet: I'm one of the people affected by late tax-law changes that the IRS needed extra time to handle. People claiming the deduction for college tuition expenses were affected by the changes, which the IRS estimated would apply to about 1 million of the 136 million tax returns the IRS expects to process this season. Although, clicking over to that press release, I see a note that "As of 2/3/07, the IRS is Processing Extender Claims" ... so it looks like I can go file as soon as I finish blogging.

Others might also get tripped up trying to file early, though. Various news outlets are reporting rising corrections rates in the 1099s sent to investors with dividends and other investment income. Thanks to tax-law tangles, the error rate on those forms has climbed as high as 14 percent -- meaning that people who file early could face the frustration of finding corrected forms in their mailboxes a few months after they've finished their returns. (You can amend, though it's optional if the error was in the IRS's favor. Even if it's not, unless the error is huge, I imagine few people bother to make the correction. The odds of getting audited remain small and dwindling.)

The last few years I've been stumbling over discoveries of things I can still deduct even though I don't itemize. Last year, it was my tuition deduction: Even though I don't qualify for any of the educational credits (which give you $1 off your taxes for each credit dollar you qualify for), I did max out the $4,000 allowable deduction. Using that cut about $1,000 off my tax bill (or, in my case, added $1,000 to my refund). Sweet.

This year, I discovered that I do itemize. I always assumed we wouldn't have any reason to until we had a mortgage. But there are a handful of other scenarios that can make itemizing the cost-effective thing, and it turns out that the amount we pay in state and local taxes exceeds the standard deduction. (Ah, NYC. Did I mention how depressing it was to go through the TurboTax Local portion and have it wrack up a whopping refund -- until I ticked the 'I live in NYC box'? It actually had a little animation of my refund dollars spinning away as it wheeled its refund-calculation line backwards. When I winged at David about this, he responded, "Your taxes buy subways. It's worth it.")

The practical upshot of this is that for the first time, I'm deducting charitable donations. The downside is that because I always went along assuming "I don't itemize and get no deduction," I never kept the paperwork on our donations. Oops. Guess this is the year I start!

The TurboTax vs TaxACT decision

Our last W-2 finally arrived yesterday, so I plunged right into doing the taxes. Much banging around online turned up no good reviews of the online tax software, grrr. I didn't even find many current reviews of the boxed versions, which surprised me. Isn't this a gimmie for every personal-finance beat writer at any publication of size? PC magazine had one of the only comprehensive bake-offs I could find.

I usually go with TaxACT, but I swore to look elsewhere after running into some minor hassles last year. One look at the prices of "elsewhere" nearly sent me running back. My Amex offered me a 25% discount on the federal-return cost with TurboTax ... but the savings that translates to is actually pretty small, especially since the more-expensive state return isn't discounted. Even with the discount, the total cost for TurboTax online for me will be about $48 -- versus $16 for TaxACT. Ow.

Still .... TaxACT was annoying me, and I'd never tried anything else. The reviewers all swear by TurboTax. Solely for the experience of taking the Cadillac out for a test drive, I decided to shell out and try it. (And hey, blog fodder.)

The interface was indeed a little smoother -- but I'm not sure the end result was any different. I didn't turn up any exciting new deductions I wouldn't have otherwise known about. Plus, TurboTax still had one of the more annoying features that irked me with TaxACT: if you need to go back and revisit something out of order, it's easy to get lost. While working on my state return, I clicked back to the federal return to check out a previously entered amount. That lost my place in the state return workflow, and I couldn't get back -- I had to click through all the fields I'd already entered, costing me an extra 20 minutes of work. Grr.

So, next year, I'll probably save the money and return to TaxACT.

For those allergic to paying full price for tax software, various deals abound. TurboTax has a 15% off deal to anyone paying with a Visa, Amex, MasterCard or Discover. Your financial services providers may have their own deals. My friend Fahmi reports that Fidelity offers TurboTax free to its customers, and PC World is making TaxACT free to subscribers. State Farm also offers TurboTax free for customers.

Meanwhile, if you have an adjusted gross income of $52,000 or less, you qualify for FreeFile -- a program 70 percent of taxpayers are supposedly eligible for. FreeFile deals have all kinds of odd qualification standards, but the IRS helpfully offers a wizard to guide you to an eligible program.

More from the tax trenches tomorrow ....

More taxing tidbits

Following up on yesterday's tax theme, I figured I would dust off a link to one of last year's most vital tax-tip posts: Don't forget about "adjustment to income" deductions available even to those who don't itemize. There are a handful of items you can get credits or deductions for even if you claim a standard deduction, such as tuition and student loan interest payments, moving expenses if you relocated for work, children, and adoption costs. One interesting credit is available for those who make $25,000 or less and contributed to a retirement plan like a 401(k) or IRA.

Bankrate has a helpful rundown on such tax breaks. I suspect a number of B&B readers are students or are paying off student loans; don't forget to use that to your advantage on your taxes.

Tax round-ups and refunds

We're still waiting on W2s from my new company and David's company, so no tax filing yet for me. Still, since I imagine other people might be doing theirs already, I'll start dusting off the tax posts ...

I haven't figured out whether I'm sticking with TaxACT this year or switching to something that will annoy me less, but Consumer Search has a "review of reviews" with guides to the various programs. One thing that piques me: Reviewers continue to focus on the sold-in-stores CD versions of the various programs. I always use the Web versions. Do they offer the same features? The same pricing? Reviews don't say. GRR. Anyone know of a rundown that evaluates the online versions?

This year most people will be getting an extra $30 or more back on their taxes, thanks to the telephone tax refund. The government apparently got smacked down in some court rulings over long-distance taxes and told to pay them back, to the tune of $10 billion in refunds. (I was going to look up the rulings and give more details, but a quick troll of Google News turned up nothing -- and if the beat reporters are going to be lazy about this, I am too, unless anyone is really interested.) If you had long-distance services on a cell, VoIP or land line between Feb. 28, 2003, and Aug 1., 2006, you're eligible to collect. The IRS page has the formula; I imagine all the tax-prep programs are worded up about the rebate.

You can opt for either the IRS standard rebate or you can calculate what you actually paid for the tax, and take the higher amount. I took a brief stab at calculating and gave up after finding that a) my phone bill doesn't really break out this charge; it just lists "federal taxes" on the long-distance, and b) the entire monthly "federal taxes" bill on my long distance looks to be about 65 cents -- so I'm probably better off taking the flat refund.

Be warned, if you try to claim thousands of dollars on this refund, the IRS is probably going to get cranky. They've apparently already fielded a few cases where people have claimed they paid phone taxes that would correspond to phone bills larger than their actual income.

The dangers of online account statements

In the interests of saving postage, most of my financial-services providers (and everyone else's, I imagine) have taken to sending me statements by e-mail. In the interests of avoiding boring things, I have taken to almost never looking at the statements. If I want to check balances and make sure things are running smoothly, I log in to the provider's site to check my account history, but I rarely review the detailed transaction statements I'm emailed.

I recently submitted a claim on my 2006 FSA, to try to zero out $26.65 or so I have lingering on it. Usually, I use my FSA Visa card to pay for things, but the last health-care purchase I made was for $35, and it bounced. I paid for the prescriptions in cash and filed a pay-me-back claim, figuring that would dislodge my last $26.65 and all would be good.

Except WageWorks, my FSA provider, bounced my claim in bizarre fashion. The statement it sent seemed to indicate it processed the claim for the full $35 the prescription cost, then "clawed back" earlier transactions to bring my balance right back to where it started, at $26.65.

It looked weird, but my guess was that WageWorks' system got confused trying to pay $35 in credits on an account with only $26.65 left in it, and hadn't been sufficiently clever to pay out a fractional claim. So I rang customer service, expecting a quick resolution.

Instead, I got a whole new trail of paperwork to chase down.

When you use your FSA credit card, you're supposed to keep receipts for your purchases, in case you get audited -- you're supposed to be able to prove that the $20 you spent at the drug store was for drugs, not magazines. It's a sensible restriction, and I tried to be good and squirrel away receipts. I think I have at least one or two of them in the filing cabinet. But somewhere along the line, I stopped socking away the receipts. My transactions seemed to be going through with no problems, and keeping little paper bits is a pain.

It turns out, though, that WageWorks really does want you to mail or fax them receipts for some of your card purchases. Three of mine over the past year were apparently flagged for verification. I never had any idea about this, though, because the company never sends any kind of alerts or puts any flags on your account for you to see when you log in. Instead, it puts a claim verification form in your monthly account statement, which are only available online. (I do at least open and flip through account statements that arrive the old-fashioned way, by snail mail.)

The account statements I never looked at, because I never had any idea they contained anything more than the transaction history I could check every time I logged in to the site. Grrr. When I got the monthly "your account statement is ready, click here to see it" email, I'd been deleting it.

I suppose I should have actually looked at the statements, but it also seems lame for WageWorks to not flag this verification thing in any more visible way. I just did a quick poll of friends with FSA credit cards; none of them recall ever getting verification requests.

So now I get to see if I can excavate receipts to appease WageWorks so it will release the $26.65 it's holding hostage. Remind me again how online statements and automatic payment systems are supposed to make our lives easier?

Using tax-cut apples to solve health-care crisis oranges

In honor of last night's State of the Union, it's time for another heath-care-and-taxes rant.

I'd seen articles suggesting that a health-care proposal would figure into the speech, and looking at a transcript, I see that Bush acknowledged we have a problem: "Many Americans cannot afford a health insurance policy." (Bush also said that the government has an obligation to care for "the elderly, the disabled, and poor children," and that private insurance is the best way to cover everyone else. I disagree and think we should have universal, government-based health care, but it seems like we're still a few years away from the current system collapsing into such a rubble that universal-care proposals become tenable.)

I am left genuinely confused about how the proposal is supposed to address the problem. Once again, this seems like an outright tax break camouflaged as a health-care-reform measure.

Bush's proposal is to create a new, additional standard deduction (available even if you don't itemize your return) for people who purchase health insurance. If you buy it, you'll be able to deduct $7,500 (for individuals) or $15,000 (if you have family insurance) from your taxable income. The idea seems to be that this reduced tax burden will free up money that currently uninsured people will use to purchase insurance.

The flaw in that logic? If you can't afford the premiums for a health-care plan, it's unlikely that a tax incentive will change your mind. CNN's detailed analysis includes White House estimates that this tax break would motivate 3 million to 5 million currently uninsured people to get coverage. With an estimated 46 million Americans uninsured, that's a barely noticeable dent.

This proposal would make insurance more affordable for self-employed people who don't currently get any tax write-offs for buying health care, as people with employer-sponsored plans already do. (All of my health-care premium payments are already tax-free.) That's a great thing, and I'd be happy to see tax breaks targeted at that specific issue. But this plan would also hand money back to scads of people who already have insurance and don't need this incentive. (Like me. Since the proposed $7,500 deduction is far more than amount I currently deduct to cover my premiums, this plan would effectively shelter an additional $6,000 or so of my income.) If Bush wants to increase standard deductions, fine, but, doing so under cover of "addressing the health care problems" is duplicitous.

Because this tax plan does nothing to address the real source of skyrocketing health-care expenses: a massively inefficient system. Getting more people insured does little good if insurance plans continue cutting back on what they cover and hiking premiums, while the system's worst problems, including its inscrutable and inflated cost structure, continue unchecked. For a very good (and very long) examination of what's going wrong and why, check out "The Health Care Crisis and What to Do About It."

Bush's State of the Union proposal is, of course, simply a proposal. Any actual legislation along the lines he suggestions would take months to pass and years to enact, and is unlikely to get through the current Congress, anyway. (Right now, it seems unlikely Bush could get a resolution praising fluffy kittens through Congress without vicious opposition.) But the administration's drastic misdiagnosis of the problem bodes ill for the chances of any significant reform proposals to address the urgent-and-growing problems with our health-care system.

Opting out of credit offers

Today, a quickie while I catch up on a workpile: Dislike having your mailbox cluttered with credit-card offers? Opt out.

That site, OptOutPrescreen.com, is the official opt-out registry used by the credit-reporting agencies. Adding your name to the registry means the agencies will no longer put your name on the prospecting lists they sell to people hawking credit cards, auto loans, and other such products. You can use an online form to opt out for five years; opting out permanently requires you to sign and snail-mail a firm.

While I was quick to sign up for the Do Not Call registry in an attempt to shoo away telemarketers, I'm not adding my name to this one. Why? Because those snail-mailed "you're preapproved!" credit offers are often the most competitive deals lenders offer. I've always found better rates and terms in those mailers than I have by looking online at the lenders' websites. Right now, I'm not in the market for any new credit cards, so I toss those offers out. But you never know what the future will bring ... if there's any chance you might be looking for a balance transfer deal, a new card with a low APR, or any other such offers, it can be worth keeping your name on the mailing lists. When I needed to transfer a balance off my Providian card last year, I took up a mailed Chase offer and opened a new card. (Of course, Chase then immediately annoyed the hell out of me. Caveat emptor.)

By the way, there's no impact one way or the other on your credit report from opting out of prescreened offers. While one of the factors in FICO scoring is "number of credit-report inquiries," it only counts inquiries you initiate, generally by applying for new credit lines. Inquires from marketers trolling for targets are listed on your report, but have no effect whatsoever on your FICO score or other evaluations of your creditworthiness.

Thanks to Mark for the opt-out tipoff!

Security whinging: You want to know my hobby?

Kind of a follow on to Thursday's post: I've recently noticed a number of my financial-services providers implementing a new security scheme, under which I have to provide answers for a flurry of personal-info questions. These go beyond the standard "mother's maiden name." Citibank wanted to know my hobby, my favorite movie, my favorite artist, the name of the first street I lived on ... the idea is that when I sign on to access my accounts, the company will "occasionally" ask me to answer a security question first.

Apparently, the idea is that these questions will thwart phising schemes. Some fraudster may get your log-in password, but will they be able to answer a question about your favorite food?

If only one company did this, I would raise an eyebrow but otherwise not really notice. However, a bunch of the ones I interact with did it all at once. NetBank and Citibank have; I think there's at least one other. So it seems to be on its way toward becoming an industry standard.

I have mixed views on it. On the one hand, if it really does prevent attacks, that's great. On the other hand, this is yet more bits of login info I need to keep stored into my sieve-like brain. Remembering my mother's maiden name is one thing; it's a fixed, unchanging fact. But -- my favorite movie? Er, I dunno, could be any one of five or six? Favorite artist? Same deal. My hobby? I have several. In the few weeks since these schemes went live in Citibank and Netbank, I've had a small moment of panic every time a question pops up. I have to wrack my brain to remember which hobby, which "favorite singer," which "favorite animal" I listed.

So far, I've managed to guess or remember the right answers, and haven't flunked a challenge. We'll see how long that lasts ...

The risks of digital 401(k) looting

Here's a very worrying new wrinkle in the identify theft/financial fraud: Are 401(k) accounts underprotected?

Most financial accounts held by banks are impressively impregnable. Yes, they can be hacked into -- as I keep discovering over and over -- but consumers are shielded from the crime's effects. If your credit, debit or ATM card is used fraudulently, your liability is capped by federal law at $50. (If you still physically have the card, and the thief obtained only the numbers, your liability is nothing. The bank/credit provider can't pass on any of the costs.) Meanwhile, if your whole bank goes wobbly, the FDIC (Federal Deposit Insurance Corporation) protects CDs and checking, savings and money-market accounts at up to $100,000 per depositor. With all the various regulations in place, if something nasty happens to your traditional bank account, you're in for a lot of hassle but don't have much risk of serious financial losses.

But 401(k) accounts are investment accounts. They're not subject to the liability caps attached to credit and debit cards. MSNBC had a recent article about a 401(k) theft: A hacker got access to the victim's $179,000 J.P. Morgan account and drained it.

This isn't the first time such a case has hit the headlines. Business Week wrote last year about a looted E*Trade account. This is the bit that really jumped out at me, from the Nov. 2005 article: "In the latest, most pernicious twist yet on Internet securities fraud, online brokerage accounts are being looted by hackers who exploit the weaknesses of investors' computers rather than the firms' systems. ... Six months ago, Securities & Exchange Commission investigators say, such schemes weren't even on their radar screen; now, the agency is knee-deep in them."

The frustrating part is that what happens next seems to vary by firm. The companies don't have a legal obligation to cover the stolen funds. Obviously, "Hack Attack Financially Ruins Customer" is a headline every PR person has nightmares about; the financial-services companies are going to do everything in their power to resolve the situation in a customer-pleasing way. But if they're on the hook for hundreds of thousands -- or millions -- of dollars? At what point do the hard financial costs outweigh the customer-service benefits of sheltering the theft victim?

J.P. Morgan is my 401(k) provider. After I first saw that MSNBC piece, I made a mental note to ask our HR person about fraud protections on our accounts. As often happens with my mental notes, this one disappeared into the clutter. But yesterday, my company sent out an email from J.P. Morgan, prompted by "an online article [highlighting] one particular case." (The actual article isn't linked or specifically cited. Very oblique.) The email talked about J.P. Morgan's efforts, in conjunction with law-enforcement agencies and investigators, to recover the money (apparently, they were successful), and about its "extensive precautions and controls" to protect accounts.

However, the email was noticeably lacking any assurances about what guarantees J.P. Morgan provides. It also shifted a big chunk of responsibility for protecting account information onto its customers' shoulders: "We recommend all clients, including individual participants, avoid making financial transactions on public computers or via wireless networks [emphasis mine] and that they keep their personal computers up to date with firewall and anti-virus software."

I'm down education campaigns to help people avoid phishing scams and protect their electronic information, but telling people not to do anything sensitive over wireless networks seems impractical and extreme. I also question how much responsibility consumers should bear, when the information-stealing scams are becoming ever more sophisticated.

This seems like a technical arms race between digital thieves and financial institutions, with increasingly higher stakes. Electronic credit-card and ATM card theft can net thieves hundreds or thousands of dollars per victim. Hacking investment or retirement accounts could yield hundreds of thousands of dollars -- or even millions. Unless there's a security breakthrough, digital theft could snowball into an economic disaster.

Online credit increases -- instant gratification

All this credit-report research this week got me in the mood to go check my own reports. I'm pulling them through annualcreditreport.com, the official, free, government sanctioned way to get your reports. You get one free report each year from each of the three credit-reporting agencies. You can pull all three at once or space them out, as you like. Forcing the creation of this site, and requiring the credit-reporting agencies to release one free annual report, was an excellent move on Congress's part. It's one of the most consumer-friendly pieces of legislation in years. Go politicians!

Seriously, if you're in the demographic I imagine most Birds & Bills readers are (your twenties, with all the student-debt and entry-level-salary joys that come with the age), if you do nothing else to organize your financials for the entire decade, do these two things:

-Start a 401(k), and put in whatever your employer will match. It doesn't matter if you have piles of other debt. A 401(k) match is free money, and because it comes out of your paycheck pre-tax, the bite is smaller than you'd expect. You will be intensely glad later if you do this.

-Pull your credit reports every so often and get a feel for what's on them. Ideally, pull them once a year, but doing it annually is less important than simply doing it.

I'll do a longer post later on my findings from my credit-report-pulling adventures, but one immediate one was that my FICO score is getting dinged for having overly high balances on my revolving accounts. My first reaction: er, what? I have one credit card, my Amex, that I try to concentrate my credit-card spending on. It has piles of spare credit. So why is my score getting dinged?

Then I went and checked my Amex, and realised that my utilization had crept higher than I thought. Various large items are sitting on the Amex temporarily (it's spring semester payment time, whee), and my balance had crept up to almost half my available credit. Arugh. While I still have what seems to me a pretty large amount available before hitting my credit limit, the pattern was obviously Displeasing To The FICO Gods.

Well, I thought, I can solve this problem in one of two ways ...

The balance isn't going to be fully paid down for a bit longer. Various machinations have to process behind the scenes. So, the other way to decrease my utilization percentage ...

Amex lets you request increases online. I did a back-of-the-envelope calculation of what I think is the highest balance I could ever need to carry on the card, if I'm carrying, say, big travel expenses or some such. Then I calculated the credit limit I'd need for that amount to be 1/3 my available credit limit. (Utilization below 1/3 is apparently the percentage that appeases The FICO Gods.)

That amount was about a $7,000 jump over my existing credit limit. Ow.

What the hell, I thought. Might as well go for broke ...

It went through. Instantly.

Yow.

I now have a credit limit that strikes me as borderline insane, but at least utilization percentage problems should be a thing of the past.

The real costs of minimum wage

Here in personal finance blogland, we tend to be consumed with optimizing investment strategies, big goals -- "save a million dollars"; "retire early"; or even simply "buy a house" -- and batches of financial exotica. Want to know about CD APYs? There's a whole blog devoted to it.

This is a good thing. Fiscal responsibility is good; fiscal education and control are very, very good. Money should be demystified so that people have the tools and information they need to decide how best to spend their paychecks.

But first, they need to have paychecks with enough money in them to actually spend.

Congress is in the midst of a much-publicized push to increase the minimum wage to $7.25 an hour. A number of publications are looking at how this will affect people earning the minimum. One of the best I've seen is the Washington Post's "Life at $7.25 an Hour," which deftly examines the local economy in Atchison, Kansas, through the eyes of the town's residents. At $7.25 an hour, you're not thinking about 401ks, CDs, real estate investment or money-market savings accounts. You're thinking about how to feed three people for two weeks on $70.

In New York, the minimum wage isn't anything close to a living wage. New York magazine's annual money issue (typical story tagline: "Sometimes being a billionaire can just be so complicated.") included a great piece this year on a security guard making $10 an hour. He does all the things you're "supposed" to do -- works hard, is reliable, supports his kids -- but none of that changes the cold fact that to live in New York with a biweekly paycheck of $676, you're going to make a lot of miserable compromises.

A few years ago I read Barbara Ehrenreich's Nickel and Dimed, and wrote up some thoughts in my booklog. The biggest thing that struck me is that what low-wage workers sacrifice aren't "luxuries," but basics, like health and privacy.

I don't have answers for any of this. Income disparity, and setting an income floor, is among the most daunting public policy issues out there.

But I try to always remember how incredibly lucky I am to have a salary that affords me the choices I have. I don't think I could manage with any kind of grace the life an overwhelming number of low-earning Americans have too few opportunities to escape.

Repairing past sins, part II: Rebuilding your credit score & report

My last post was about your legal responsibility for old debts, particularly those that are beyond the statue of limitations -- meaning you no longer have any legal obligation to pay. (Er, is it still "tomorrow"? Pretend I posted this Thursday ...)

This one is about how to minimize and repair the damage to your credit report and your FICO score. (Remember, your credit report is different than your credit score -- and you actually have three FICO scores, one each from Equifax, TransUnion and Experian. The FICO post explains the basics.)

First, to reiterate a point made at the end of my last post: Be very, very careful about paying anyone anything on an old debt. If you're four months late on your Visa bill, by all means, call the provider and start negotiating a payment plan you can afford that will get you current. (Remember, providers want to help you find a way to pay your debts. If they have to charge them off, they get much less than they will by working with you.) If you're four years late, ignoring the debt and refusing to pay anything might be the soundest strategy for protecting your credit report.

That's because credit reports track charge-offs (when the original creditor consigns your debt to "bad debt" and takes it off its books; this almost always happens within one year of you not paying) and accounts referred to collections (when that bad debt is sent over to an agency to hunt it down). But FICO scores and credit reports care very little about what happens after that. Depending on what's actually showing up on your individual credit report, the effect of reviving an old debt to settle it will probably range from "very mildly positive" to "crushingly bad."

MSN Money has an article that does a good job of explaining all the various pitfalls of trying to settle an old debt. The gist is that it's a murky minefield.

Basically: avoiding having items sent to collections and charge-offs is very, very good. Do that if you possibly can. (If there's interest, I can do a post on negotiating with creditors over current debts you're behind on paying.) But once an item has gone that way, the value to *you* of clearing the debt goes down dramatically, and continues dwindling as it ages.

So if you've got old black marks, what do you do?

The first step to rebuilding a good credit rating is having credit. As anyone without any loans or credit cards learns the first time they apply for credit, you don't get brownie points for not incurring debt. The only way to build a good credit rating is to actually have a credit line, with activity on it. Opening a Visa and never charging a penny on it won't do much for you.

The easiest, safest, fastest way to build a credit record is to be an authorized user on the credit card of someone else who uses the card in credit-score-improving fashion -- someone who charges purchases on it, keeps the usage below about a third of the card's total credit line, and always pays at least the minimum balance due each month, on time. (It's even better if it's a longstanding account. FICO scores weigh the length of time an account has been open as a positive factor.) There are two types of "joint" credit card accounts: actual joint accounts, where each party shares liability for the account, and "authorized user" accounts, where an individual adds someone else as an authorized user on their own account.

Authorized user accounts are pretty interesting from a credit-reporting standpoint. They get reported to credit agencies like a joint account -- ie, the activity on them will affect the credit report, and score, for the authorized user. But, unlike a joint account, the authorized user has no legal responsibility for the account, or any debt incurred on it. All responsibility remains with the individual account owner. So, if you're an authorized user on some else's account, and you run up a bill on it, they're the ones with the legal responsibility for it.

However, there's no requirement that the account holder actually give the authorized user a card to use. If you need to repair a besmirched credit report, and you have someone you're close enough to request the favor from (a parent, spouse, relative, etc.), you can ask to be added as an authorized user on one of their accounts. If they (or you) don't trust you(rself) with the credit line, cut up the card. So long as there's positive activity on the account from the main user, you'll benefit. (Credit reports don't track whose card is used for purchases; if the card you're issued as an "authorized user" is never used, it doesn't matter a bit.)

Another option is a secured credit card. The first resort for people with lousy credit, secured cards require you to pay a deposit, typically 50 to 100 percent of the card's credit line. The credit card company holds this deposit in a savings account. If you default on paying, the company can withdraw what you owe from your deposit. Because the credit provider has that security, secured cards are easy to get, even if your credit rating is in tatters. And, because it's a credit card, activity on the card affects your credit report. If you pay at least the minimum due on time each month, your credit score will start recovering. Bankrate has a list of secured cards; if you have a checking account, your bank probably offers them as well.

Those are two of the aboveboard ways to start fixing bad credit. You'll be surprised how fast your score can change; as I mentioned in an earlier post about FICO scores, I've seen mine jump 60 points in a month when I did things it recorded as positive. (In my cast, that was increasing my Amex credit limit so my utilization percentage tumbled, and paying off a balance on another card.)

The other tactic you can use is slightly sneakier: Challenge negative items on your report, even if they're accurate. The Fair Credit Reporting Act gives you the right to dispute anything in your report you think is incorrect. Once you send in a dispute, the credit reporting agency (TransUnion, Equifax or Experian) has 30 days to investigate the dispute. If at the end of 30 days they can't confirm the information, they're required to remove it from your report. This tactic can be like going to court to fight a speeding ticket; if the cop who wrote the ticket doesn't show up to affirm it, you win by default. If the creditor, collections agency, etc. doesn't provide the credit reporting agency with validation of the debt and nonpayment within the 30-day window, the item is legally supposed to disappear.

In practise, getting the agencies to honor their obligations can be a horror show. The Boston Globe had a great piece recently about one consumer's nightmare of trying to untangle an identity fraud case. Still, challenging negative items costs you nothing, and can work in your favor. You can even dispute items online now -- here are the links for Experian, TransUnion, and Equifax.

Whew, that was long. This set of posts (continued from Wednesday) was prompted by a question from a friend about repairing a bad report. I'm happy to go investigate stuff in response to questions; anyone interested can reach me in comments or by email (stacy at covehurst dot net). Discretion guaranteed, of course.

Repairing your past financial sins

Today's question from the floor: You pull up your credit report, and it includes debts that are beyond the statute of limitations. What do you do next? (I wrote about the bad-debt issue a bit last year, but I'm researching it in greater detail for these posts.)

First: keep copies of any paperwork, such as credit reports, that documents the DLA (date of last activity). That paperwork is your key to proving that the statute has run out. Retail vendors tend to have fairly aggressive bad debt write-off timeframes -- they'll ditch it within a year, to allow them to take advantage of tax breaks for it. Once a debt is sold off to a collector, it can be resold ad infinitum. Unscrupulous debt collectors have been known to fraudulently reset DLAs so they can continue pursuing legally uncollectible debts. Documentation of a beyond-the-statute DLA is your best friend in fighting further collection action.

If the collector contacts you about an expired debt: Simply tell them to stop. The Fair Debt Collection Practices Act (linked for any masochists that want to pour over legalese) requires debt collectors to cease communication once you send them a written letter telling them to stop. If you're contacted by phone, you can make the request verbally; if they ignore it, ask for an address to which you can send your stop-communication request. If they won't give you a written address, or ignore your requests and continue communicating, tell them you'll file an FTC complaint -- then do it. The form is right over here on the FTC's website. The FTC has a helpful FAQ about debt collection that covers these points.

If you do actually owe a debt, telling the collector to go away doesn't kill the debt. However, it does require them to only communicate again if they're taking a specific action. Basically, it tells them to sue or shut up. And if you're sued over an expired debt (one that you can prove has expired, thanks to the DLA records you kept), you don't legally owe it, and the suit will be dismissed.

OK, so that takes care of the legal end of the expired debt. What about your ravaged credit report?

There, you're stuck for the infamous seven years. Both accounts not paid as agreed and accounts sent to collections remain on file for seven years from the DLA. Once the debt is expired, it's legally dead, but there's nothing you can do to stop it from lurking on your credit report.

What if you want to make the black smirch go away? Be prepared to step into a hornet's nest. Even Suze Orman, who has a nice FAQ on charged-off accounts, throws up her hands here and says 'call a lawyer.' If large amounts are involved, definitely: get legal help.

But if you're struggling with bills, or have in the recent past, you're probably not rushing out to rack up legal fees. What are the other options?

Proceed with extreme caution before paying a penny. Any payment at all -- even a $5 good-faith payment -- is an activity and restarts your DLA. Not only does that allow the black mark to stick around longer, it also means a dead debt becomes a legally viable one again.

There are still steps you can take to repair your credit report, both by establishing good, new credit practises and by vigorously contesting negative information in your report. I'll blog on that tomorrow, but in the meantime, he's a post from last year on how to improve your FICO score.

Congress loudly frets about student loans, quietly does little about them

The Democratic Party's pledge to ram significant legislation through in its first 100 legislative hours (which appears to translate to about two months, in civilian hours) has an interesting angle for with student loans. "Easing the financial burden of college tuition" is on the party's First 10 Bills of 2007 list. So what kind of easing do they have in mind -- assuming, of course, that they can get a bill through, and avoid a veto from the White House?

One of my first blog posts here was about the urgency of consolidating outstanding loans before a pile of changes hit in July 2006. July is when the federal government adjusts the rates on Stafford loans (the program that covers federal student loans, both subsidized and unsubsidized). This year, for loans in repayment, the rate hiked almost 2 percent, to 7.143 percent. The bigger change is that the government did away with its variable rate, replacing it instead with a permanent, fixed rate of 6.8 percent for all loans dispersed after July 1, 2006. (I consolidated my outstanding loans before the hike hit and locked in a rate somewhere around 4.9 percent ... but needed to take a new loan for my fall semester, at the new rate. Yuck.)

Get ready to temper your expectations for what kind of relief the Democrats are offering, though. Conscious of the difficulty of passing expensive new legislation while the U.S. is still spending like a college frosh with brand-new plastic, the Democrats are cutting the cost of their plan by narrowing its scope. According to several news reports, the College Student Relief Act of 2007 that will be introduced next Wednesday (Jan. 17) will only affect new, subsidized Stafford loans . On those loans, a rate cut from 6.8 percent to 3.4 percent will be phased in over the next five years.

Reporters are still trying to suss out exactly what will be in this bill, but the general tenor of the reporting is that it'll be narrow. So, if you're already out of school and paying (or ducking) your loans, prepare to keep slogging.

Student loan repayments seem to trip up lots of people, and it's no surprise. Confront your average new grad -- with the typical new-grad paltry paycheck and new-grad naivety about personal finance -- with a bill for a scary large debt, and it's unsurprising that many go the ostrich route and ignore the bill. (I can't claim to be an exception. David dragged me out of denial before my grace period expired, so I never had problems with student-loan defaults, but I spent my first few months out of college throwing out my credit-card bills unopened. David paying my loans for me for the first few years they were due is the only thing that kept my credit and payment track record safe. Yay for better organized, more practical spouses!)

But student loans are about the hardest debt to hide from -- they don't go away in bankruptcy, and even if you never get an actual bill (a common problem plaguing transient new grads), you're responsible for knowing about and servicing the debt. This can be tricky; with banks merging and selling off assets all the time, a standard student-loan debt can change hands a half-dozen times in its lifespan. Fortunately, there are a few resources out there to help you track down your debt, such as the National Student Loan Data System. Mapping Your Future has a resource list.

Web 2.0ing my way into 2007

After a bit of a December slumber, Birds & Bills is back to tackle 2007.

I'm not one for New Year's resolutions, but more regular activity here is a goal for the year. On that front, coming soon: A major redesign. The graphics are in the works; soon, the default gray look will be banished.

One of my other goals for the year is to Web 2.0ify my life. I winced while typing that. I spend half my professional life writing articles that call "Web 2.0" a piece of nonsense jargon that's propelling the next tech bubble. And yet ... I have to admit there's something to the wave of Web apps that tackle particular problems or productivity hang-ups very elegantly. These days, when I run into an information-management obstacle, my first instinct is to throw software at it.

So, to kickoff the New Year, I'm starting with a rundown of what I'm using, what I'm kicking the tires of, and what I need.

Currently in Use:

-Eight years after I began using it, PocketMoney remains the cornerstone of my financial life. (Yes, I realise that as a desktop -- or, actually PDA -- app, this is very unWeb 2.0. Hush. It works.) The essence of Web 2.0 apps is portability, and nothing is more portable than my Palm -- it travels with me everywhere. All I need for my budgeting is an electronic replacement for a check registry, to track what's actually coming out of my checking account. PocketMoney takes care of that.

- All my bills get paid online, some through the provider's website (I go to Providian.com to pay that bill because I don't trust their processing times if I don't pay directly in a documentable fashion) or by e-pay through my bank, NetBank. The only check I write regularly is my rent check, and I haven't snail-mailed a bill payment in half a decade.

-I run through something like 60,000 air miles in a typical year ... but rarely with one (or even two or five) airlines. I'm still using USA Today's MileTracker. It's free, it's simple, it works. It's a desktop app, so it's not portable, but for me, that's not a problem -- I rarely have a burning need to see my miles. Anyone know of a good, free online tracker?


Tire Kicking:

-My mom tried for nearly a decade to get me to use a paper-and-pen DayRunner. I made a few fitful starts, but didn't stick with it. The interface just didn't work the way my brain does. When I bought my first Palm, in 1998, I wondered if it would languish like my collection of neglected DayRunners. Would I actually use my fancy new electronic gizmo to schedule things?

The answer turned out to be "oh hell yes." The Palm simply works for me; the interface meshes well with what I want from a data organizer.

Which is a long-winded way of saying "user experience matters" -- and of saying that SimoHealth has been kicked out of my information management universe. In August, I wrote about giving it a try for handling tracking of our pile of media expense records for the year. I spent a day plugging in all of our expenses and appointments, one by one. I wrote the review. And then, despite my best intentions, I never opened SimoHealth again. The though of plowing through the painful data-entry for ugly, kludgy results was too dispiriting. The problem, of untrackable medical expenses, is less painful than the solution.

Meanwhile, it seems SimoHealth has gotten rid of its most attractive feature: Its $0 price tag. My version likely still works for free, but anyone downloading it now gets a 30-day free trial and then a $39 bill. Unless there have been *dramatic* revisions to the software, I wouldn't recommend paying that.

Meanwhile, Quicken Medical Expense Manager continues stagnating and won't run on Vista.

This area is screaming for an online management app. Ideally, insurance companies would include this kind of feature in their customer portals, but so far the customer portals I've used (Aetna's and Empire Blue Cross's) are frustratingly rudimentary.

-Being a compulsive bookgeek, I am drawn like a moth to light toward book organizers. Like that moth, I keep finding out the light is a candle. Ouch. Years ago, I started cataloging our library with ReaderWare. Pros: It's extremely flexible and I could configure it to record almost precisely the info I wanted to track. Cons: It's ugly, and it's not a Web app. Flaunting your books on The Internets is half the fun.

So I migrated to LibraryThing, where our library is stalled at about one-third processed. Pros: A very elegant Web app. Con: It's optimized for social networkers, not collectors. Tracking multiple copies of variant editions is a kludge. But in any case, cataloguing the rest of our library is a project on my "to do eventually" list. (It might wait until our next move, one to two years in the future, when we'll hopefully have more room for sorting and organizing the books.)

I also want to revive my booklog, which is about two years out of date. After a fair bit of hunting, I found the perfect software for what I want: oddbook. It has exactly the features I want, and I even managed to get it installed on my server. YAY! Not yay: Two days after I got it installed, it began refusing to let me log in. It will also require some hacking to deal with the multiyear-tracking issue. Ug. Fixing that, or finding a new blog app for my booklog, is a priority for the year.

-So is reviving my installation of Gallery, a photo program that worked brilliantly for us until it broke in a server move over the summer. The thought of wrangling PHP and sever admin to get it working again gives me vapors. Still, I need to suck it up, cope, and fix the damn Gallery.

For those who don't feel the need to have a customized photo gallery hosted on their own servers, Google's Picasa Web Albums and Yahoo's Flickr seem to be doing their jobs well.

-This is a me-specific problem, but since I freelance, I need software to track submissions. After a lot of hunting, I'm currently using Writers Planner. It has some weird aspects (like the creator's rambly explanatory text), and the ads are annoying, but it's free and it's flexible enough that I've kludged it into doing the things I need. It also has a few really elegant touches, like a nice interface for viewing notes on submissions (like the text of rejection letters).


What I Need:

-Data backup: Having suffered one catastrophic hard-drive meltdown this year, I know crashes are a matter of when, not if. So, having been through data-loss hell, what have I done in the wake to safeguard my PC? Er, um. *insert sound of crickets chirping*

I've heard recommendations for Carbonite, and the copy of Lifehacker I have sitting on my desk has a chapter on automated backup. I need to investigate those, soonish.

-When you get started Organizing Things With Web Widgets, it's hard to stop. I could track my wine collection with Cellar Tracker, and/or hunt down something similar for keeping track of any art we buy. (That sounds pretentious, but when your close friend opens an art gallery, you tend to find yourself with some paintings.) I could rip all our music to our PC, invest in a really good backup system, and say goodbye to the CD racks, as my friend mamster did. (Although that's unlikely -- I think David is pretty wedded to his physical CDs and cover art and notes and whatnot.)

Ye gods and fishies, that got long. So, to any readers still with me: What are your indispensable Web widgets or 2007 information-management needs?

And on the 13th day of Christmas, returning those golden rings and partridges ....

Tis the season for rampant consumerism -- and with it, the joys of battling the Retail Industrial Complex. You may have noticed a spate of stories in the newspapers lately about "return fraud," the "growing" problem of retailers suffering losses through returns of stolen or used merchandise. While I don't have the expertise to opine about the magnitude of the problem, it's clear that increasingly sophisticated software options for tracking retail logistics means merchants with modernized systems are keeping better track of who is bringing items back, and how often.

The retail industry trade/lobbying group, the National Retail Federation, kicked off the season with a press release saying retailers will take a $3.5 billion hit during the holidays from return fraud (or, as the release calls it "this immoral, and often illegal, practice." But tell us how you really feel, NRF! Don't hold back!) . Like all loss estimates bandied about by organizations with a vested interest, that one should be taken with a grain of salt. The release also pulls out the eye-popping figure that 8.8 percent of holiday gifts are expected to be returned -- but then, it notes that typical return rates are 7.3 percent. A 1.5 percent jump post-holidays is lower than I'd anticipated, actually.

The NRF is also offering up a list of tips for "stress-free returns," with suggestions like "ask for a gift receipt" and "investigate return policies before you buy." Or you can save the retail hassle and go the regifting (or ebay -- I'll bet *their* sales have a big post-holiday spike) route.

The return-fraud flap may simply be the industry's way of grabbing cover for tightened return restrictions, but I do have sympathy for those dealing with impressively organized shoplifting rings. Speaking of eBay, CSO magazine (published by my former employer) had a fascinating article last year about how eBay is becoming the best stolen-goods fence ever created. For a more penetrating look at the return-fraud issue, go there.