IRAs, 401ks, and other headache-inducing TLAs

I had the clever timing to start my new job just as my employer was switching 401k providers, from Scudder to JP Morgan. The various confusions meant that it's taken more than three months since I started for my 401k to be completely set up and functioning properly. So, last week I finally got around to going through my rollover forms from JP Morgan and contacting my old 401k provider, ING, about transferring funds from my old employer's plan to my new one.

ING, of course, doesn't like the idea of losing my money. The rep I spoke with first pitched the idea of leaving my existing 401k in place. Bzzt. I'd already ruled that idea out; if I need to borrow against my 401k, or even make a hardship withdrawl, that's a lot easier if the money is in my current employer's plan. The investment mix is pretty comparable at both ING and JP Morgan, so there's no edge there for ING.

Undaunted, the rep next pitched the idea of moving some of the money into an IRA at ING. It's "more flexible" than a 401k, he said. Hrm. This idea I had not considered. I've always kept all my retirement money in one 401k (I did a rollover the last time I changed jobs, five years ago) for simplicity. At some point I plan to look into a Roth IRA, but I hadn't seen any reason to check out a traditional one.

How is it more flexible? I asked. Er um, said the rep. He then offered to
"waive the fees, if that's daunting you." Fees? Grr. I don't like buying things by phone anyway, so I told them to just send my rollover forms and be done with it.

I then went skittering off to my usual information source, The Internets. However, there is not much to be found in the way of concrete details on ING's Rollover IRAs page. It looks like the main selling point is that you have a broader mix of investment options.

I'm pretty conservative with my retirement-stash investments (I'm a margarita-mix girl), and I value simplicity over penny-maximizing schemes that'll generate a .005% higher return. Anyone mucked around with rollover IRAs? Any reason I shouldn't stick with my plan to do a straight 401k-to-401k rollover and continue ignoring it all?

Back in business

Whoops, that was not intended to be a cliffhanger and long hiatus. Once again, the culprit was travel. SF & DC were lovely.

The credit reports I pulled were surprisingly accurate. It's a bit daunting to realise just how many credit lines I've had in my not-so-very-long consumer lifetime. Each report showed more than two dozen accounts -- credit cards, retail cards (usually opened for discounts, used once, and subsequently ignored), student loans, and other assorted bits. While I only actively use two credit-card accounts and my student loan lines, I apparently still have another fistful of still-living retail accounts.

Of all the dozens of accounts listed, though, all were recognizably mine. Yay no identity theft! The only inaccuracy I could find was the address listing on my Experian report, which was for an address I lived at five years ago. Weirdly, the report had both my subsequent and current addresses listed as "past" ones. Still, I doubt I'll bother correcting that. TransUnion had my correct current address. Both reports also listed as my employer the company I left about six years ago. *Shrug.*

It was interesting to see just how many inquires there were by marketers for my file -- each report contained about five pages of them. Discover apparently pings frequently. (Inquiries initiated by you, when you apply for new credit lines, are listed and treated separately. Too many of those inquires can be a red flag, since it can indicate a hunt for lots of new credit. Inquiries by marketers don't affect you credit score and profile at all.)

The report also showed, in the marketing-inquiries section, pulls by credit card companies for account-review purposes. Providian apparently grabs my report monthly. Amex picks it up only once a year or so. I wonder if that means Providian is more likely to pull the nasty trick I've heard about of yanking up your APR for missing *any* credit-card payment, not just one to them ...

Pulling my credit reports

As part of my house-buying daydreaming, I decided to do the annual credit-report pull -- now free, yay!

I did this last September, soon after it because available in New York, for David. That was tricky, since he has no credit cards in his name and has a very limited credit history in the U.S. None of the three credit-report vendors would give us online access to his reports. Each required a paper request. We filed those, and after a month or so got the reports for him from each place. (Tiny, two-page reports. Mine are like phone books.)

I'd thought I did the same for myself around that time, but I couldn't find the printouts I would have made in my files, so I decided to give it another go on Friday. The website is AnnualCreditReport.com.

First impression: This is elaborate. The site routes you in turn through each of the three reporting agencies. First up for me was TransUnion. In addition to expected stuff like my name, address and social security number, TransUnion wanted details on some of my accounts for identity verification. But credit reports are packed with dead accounts. It first rejected the number for my student loan notes and asked me instead to provide an alternative set of information verification data. Fine; I clicked the button to provide details on my revolving accounts. It came up with a list of a half-dozen accounts: three dead store accounts I probably still have open but no longer use, one long-closed card, and two current ones. I gave details on one current card. That checked out ok, but it asked for the account number for another. That too checked out -- but it wanted a third after that. I didn't have available the numbers for any of the store accounts or for the dead card. So I had to try a third verification method: Confirming old addresses. Fortunately, that one finally worked, and it gave me access.

TransUnion also wanted me to create a user name and password for returning to view the report within the next 30 days. More passwords to try to keep track of, whee. (I use CryptInfo on my Palm. It is invaluable.)

Experian was easier: It wanted me to answer a set of four verification questions, about the county I reside in, the street I used to live on, and two questions about my non-existent mortgage ('none of the above' was an option, and the correct one for me.) For return access, it wants me to keep track of the report number, rather than a password.

At Equifax, I bombed out -- it said records show I got my report from them on 9/2/05. Guess I did pull some in September after all. I'll have to hold off till the fall to pull that one.

So after all that to get the reports, how accurate were they? I'll get to that in my next update ...

Stocking my house-buying info bookshelf

Two of my close friends are in process of buying a house right now, the crazy kids. (An actual *house.* In New York City. Who knew such things existed?) This has gotten me thinking wistfully again about real estate. We're not in a position to buy anything now, and I doubt we will be for at least another year, but since I'm always information obsessive, what's to stop me getting started with some research?

Listening to these two go through the details of the buying process, it hit me how little I understood it all. Inspections? Title checks? Swarms of lawyers? Eeek! So, I asked for book suggestions. Home Buying for Dummies was enthusiastically recommended as a good overview. I'm also interested in the larger economic questions about the housing market -- how do you judge when it's the 'right' time for you to roll the dice on a purchase? The Washington Post's personal-finance columnist, Michelle Singletary, is pretty impressed by June Fletcher's House Poor: Pumped-Up Prices, Rising Rates, and Mortgages on Steroids, and makes a persuasive case for it. So I tossed that into my Amazon shopping basket as well.

I'm about 10 pages into House Poor right now. I'll report back when I've finished the books. Anyone else have recommendations?

'Don't Be Evil' investment strategies

It had to happen, I suppose. For years a handful of organizations have focused on advocating socially conscious investing, encouraging individuals and organizations to weed out of their investment portfolios those companies that perpetrate environmental, cultural and political ills. So what's a red-meat right-winger do to? Fight fire with fire (or money with money), of course, and launch a mutual fund pledged "to defend free enterprise from the Left’s use of capitalism against capitalism." Hence we have the Free Enterprise Action Fund, which Daniel Gross entertainingly smacks around in Slate today. It seems that fighting the Left's crimes against capitalism doesn't yet deliver better returns than the S&P 500.

Sort of in line with my last post: I've never been a fan of the line that a corporation's primary responsibility is to make money for its shareholders. There are things more important than absolute dollar returns, but it's become a business cliché for CEOs to spout off that their legal and fiduciary duty is to do whatever will make the most money for stockholders. Worse, this gets spun as some sort of democratic affirmation, because for public companies, anyone can be a shareholder and lots of everyday people are, thanks to mutual-fund-packed 401ks and pension plans. And, of course, we don't want to see bad things happen to corporate America and tank Grandma's pension, do we? Why, those nasty representatives in Congress considering an excess profits tax would just be snatching money from the millions of Americans with Exxon stock in their retirement plans!

Me to Congress: Please snatch money from my retirement plan. I have no idea what stocks are in the mutual-fund mix in my 401k, but personally, I'm perfectly ok with taking a hit there in return for tighter controls on the petroleum companies that are currently reporting annual profits surpassing the GDPs of most developing nations.

Someday soon I need to quit being lazy and explore options like Working Assets' range of financial products.

Why I'm not trying to maximize my money

Back from the road again -- travel and blogging just don't mix well for me. I see my post about keeping separate accounts with my spouse generated comments while I was gone. One point in particular caught my attention:

My wife and I used to operate the exact same system as you and I have to say the best financial decision I ever made was to change this round. ... Our savings rate has tripled since we started doing this and yet we haven't felt deprived. We have just stopped wasting money.

That makes sense to me. It also touches on one of the fundamental issues that got me started on thinking and blogging about personal finance: What do you prioritize over "more money"?

For me, it's a pretty long list. Heading it is "a lifestyle that means I can think about money as infrequently as possible." David and I would spend less if we had joint accounts and cleared purchases with each other. I'm absolutely certain of that. We would also spend more time wrangling with each other about finances. I'm willing to trade away a few hundred dollars a month in additional savings to spare us that stress. I'm also aware that the choice is a luxury I'm very fortunate to have.

Money, in the absolute sense, doesn't interest me. This is why I don't have any desire at all to be an "active" investor -- stocks, interest rates, esoteric investment vehicles and other moneymaking schemes don't seem like any fun to me. Paychecks from our day job are enough for me and David to live on and meet our (admittedly too minimal) savings goals; if I'm going to invest my free time in something, it had better entertain me, and monitoring investments would not.

I will be the token "I hate money" personal finance blogger :)

A very annoying form of rebate

David got a new cell phone and plan last month from Cingular which came with a $20 rebate. We did all the usual annoying rebate stuff, including waiting close to two months for the refund, which arrived Friday. But here's a twist: Instead of the check I expected, what arrived is a prepaid Visa card, preloaded with the $20 rebate.

I think that's pretty obnoxious, because it'll be hard to use all $20. The letter it came with suggests that if you want to use the card for a purchase of more than $20, you request that the merchant run the purchase twice, once for $20 and then once for the rest of the balance, paid with cash or another credit card/check. I've occasionally split bills in weird ways at restaurants, but I've never tried such a thing in retail shops, and I can't imagine it would get a terribly favorable response.

The poetically just thing to do, ofc, would be to use the prepaid card to pay $20 of David's next Cingular bill and force them to handle the split payment. We have the monthly bill set to automatically charge to our Amex. I wonder if it's worth wranging with Cingular customer service to skip the autobill next month and pay with the prepaid card.

Probably not.

Sigh.

What do you really need in your 'emergency' fund?

The question came up this week in a chat area I frequent: When do you declare your emergency fund full? Financial pundits like to throw around suggestions about 'have three/six/eight/a bazillion months of cash on hand,' but what are people really setting aside as a cushion?

Here's an article on the topic I like: The $0 emergency fund. The author's argument is that these days, with easy credit and all sorts of savings and investment options available to regular consumers, what you really need isn't cash but flexibility.

Jonathan Clements of The Wall Street Journal drew a lot of heat a few years ago when he confessed to keeping only a month's worth of expenses in his emergency fund. He wanted his money working for him in the markets, not disappearing inch by inch as taxes and inflation took their toll.

But Clements' view is shared by many financially sophisticated folks who would rather take more risk -- in stocks, in real estate, in their own businesses -- to get better returns. And that approach can be perfectly legitimate, as long as you can quickly get your hands on enough money when you need it.

This makes a lot of sense to me. A 'real' emergency -- a job loss, a medical crisis, draconian rent hikes, etc -- is something that throws your usual life into chaos. You can't effectively plan for such things. What you can do is give yourself as much flexibility as possible. Having lots of savings is a great cushion for all sorts of unexpected life events, but you don't really need all that much sitting in a basic checking account or stuffed under the mattress in $20 bills.

There are a number of savings/investment options that give you near-immediate accessibility to your money, like money-market accounts or straight stock-trading accounts. A level up, there are vehicles like short-term CDs. I just checked my bank's rates, and the rate difference between a 1-year CD and a 5-year CD is less than 0.10%. With so little incremental difference, there's no reason not to opt for the shorter duration and have your money more liquid.

The real decision point comes when you're considering tying up your funds in something difficult to quickly liquidate -- like real estate or a business venture. There, I think the 'flexibility' comes into play. The investment may eat up an uncomfortable share of your 'cash' savings, but: do you have other ways of tapping cash if you need to, like lots of available credit, a home-equity line, a 401k loan, and so on? So long as you *can* get three/six/eight/a bazillion months of available money if you need -- and everyone will have to come up with their own comfort-level number to fill in that blank -- it doesn't seem essential that the money actually be cash.

So what's my own emergency-fund strategy? I'm trying to save up about $5,000 to put in a money-market account, where I can grab it instantly if needed. I have a significant chunk of available credit -- enough to pay most of my living expenses for about six months, I think. And I have about an equal amount available for borrowing against on my 401k.

My next 'major' cash-immobilizing purchase will likely be a primary residence. If we eventually get there, I expect the down payment to devour any 'emergency fund' savings we've accrued, but I won't fret too much about it as long as we have credit levers we can pull if needed.

Our best marriage decision: not pooling accounts

The best thing David and I ever did for our marriage is maintain separate financial accounts.

Decisions like keeping your own name when you marry (I did that too) are very common, but I have no idea what percentage of couples don't merge their checking accounts. For us, it was an easy decision. We each make very similar salaries. We're also both alike in our habits: we fritter away a lot of money on perks like books, travel and dining out, but we're also reliable about not spending money we'll need for rent and bills and such.

We're also both prone to spending on things the other would consider stupid. David recently dropped something in the high-two, possibly three, figures for his 25th "Dark Side of the Moon" copy. (He insists this one is somehow different and special. The distinction escapes me.) I recently spent three figures on a handbag, for the first time. (David doesn't understand why I didn't spend $20 and buy one off the street. The distinction escapes him.) If such purchases were coming out of our money stash, we'd be at eachother's throats about them. But because his personal spending comes out of his account, it doesn't faze me, and vice versa.

We could accomplish something similar by pooling all our money and giving ourselves allowances, as the Make Love Not Debt pair recently discussed. For us, though, there's no pressing reason to go that route. We don't have any big savings targets we're trying to hit right now. (We probably should, like saving for an apartment downpayment, but we're not there yet.) We don't have any joint debt. We're pretty good at shifting our resources around as is sensible. When I was trying to pay off my credit-card debt, David carried my student-loan payments for years. On a day-to-day basis, whoever feels like they can spare the cash for groceries, dinner out, etc., is the one to pick up the check. For major expenses, like a vacation or a sudden cat trip to the vet, we generally charge it to the Amex (our closest thing to a shared account -- I'm the primary cardholder, but David is an authorized user and has his own card) and split it up at bill-paying time. For us, it's a surprisingly stress-free system.

None of our financial information is secret from each other, and when it comes to big savings pools, I think we both consider them 'ours' -- I may be the only one funding my 401k, but I fully expect it to be used on us both, and I regard it as a shared asset. But I like the independence of each of us having our own accounts, and being able to indulge our own spending idiosyncrasies. Having kids is the one thing I can think of that would derail this independent-finances approach. There, the expenses are so big and so shared it would be hard not to have a joint pool to draw from. But for us, I think not going the typical joint-checking route has spared us a lot of marital discord.

At least it's less painful than having my debit card hacked

Some researcher, somewhere, must have calculated the odds of having your credit-card information intercepted and used fraudulently. In the typical consumer lifespan, how many times is one statistically likely to hit the problem, on average?

I'm now on go-round #3.

Both times before, it's been my Netbank Visa/check card that got nailed. The first (I can't remember exactly when -- perhaps three years ago?) was the ugliest: someone got hold of both my card number and PIN, and made a dummy card that was used to withdraw about $1,200 from an ATM in Queens, the entirety of what was in my account. No one has my PIN, and I had my card on me the whole time this was going on. What probably happened was that my card got hit in an ATM skimming scam. I'm not completely oblivious and would likely have spotted a suspicious device, but a hot new trend in fraud is internally rigged ATMs -- and I do pretty regularly use the kind of non-bank ATMs in convenience stores and whatnot that are most susceptible to this. (Well, I did. I *try* to stick with bank ATMs now ... but I fall off the wagon a lot ...)

Clearing that up entailed filing a police report, along with all the fraud paperwork at my bank, and waiting several weeks for my money to be credited back. To NetBank's credit, they didn't hassle me too much about "they used your PIN, you must have given it out!" or anything.

About a year ago, my NetBank account got cleaned out again, though this time it was a case of more "classic" credit card fraud. One morning a blizzard of charges appeared for expensive, out-of-town purchases at stores like Staples and Foot Locker. Call NetBank, file fraud paperwork, replace card, wait several weeks for a refund, lather, rinse ...

Neither incident ended up costing me money that wasn't refunded (although I did probably spend $10 or so tracking down and faxing police forms to my bank and getting things notarized, the first time). The most painful part each time was waiting the week or so it took for my new bank card to arrive, during which stretch I had no access to cash. Ug.

So this Tuesday, I stagger home at 9:30pm from a long day spent mostly at a hospital ... and find 10 messages on the answering machine. Nine were from merchants or Amex calling to say "Hi! We want to verify this large, suspicious charge on your card!"

ARUGH.

I managed to ring back and connect to Amex's charge-verification unit about five minutes before it closed for the day. To Amex's credit, it seems like this is going to go about as smoothly as it can. They caught this early (a $500 online order from Nordstrom's was the first to set off their red-flags radar), proactively notified me, and it sounds like I don't have to file a pile of paperwork on this. They're taking care of contesting all the charges that came through on Tuesday from outside NYC, and of taking off the one suspicious charge I spotted that had already gone through. (Last Thursday, my Philly scamster apparently took the card for a trial run with a Domino's pizza order.) They also overnighted me a new card for free -- yay! It arrived Thursday.

(I initially thought that a particularly nice customer-service touch, that Amex was overnighting my card. If only my bank had done that ..., I thought. But then, on Thursday, I unexpectedly ended up putting several hundred dollars on my card -- and, lacking my Amex, I charged it to my backup Providian Visa. At which point it occurred to me that Amex has a strong self interest in getting me a new card as fast as physically possible. All those precious merchant transaction fees! Lost to a rival! Quelle horror!)

This time, the most painful part is going to be tracking down and changing all the things I have autobilling to my card. Grr.

So, three fraud-hacks in ... counts on fingers ... say about 10 years so far of active credit-using consumer life. Am I above average yet?

401ks, 529s .... when bad investment choices defeat the whole point

I'm in the process of setting up my 401k with my new job, which is going slowly since my new employer is also in the midst of moving its 401k services to a new vendor. I'm not sure yet what the new-new vendor's investment options will be like, but when I set up my fleeting enrollment in the new employer's old vendor's system, I was surprised to find few attractive options. The choices were limited to less than a dozen funds, many with high fees. Ug.

I'll post in more detail about 401k stuff when I finally get registered and settled with the new-new vendor, but the problem of limited choices reminded me of one of the most troubling aspects of the (thankfully, now apparently dead) privatize-Social-Security scheme: if mutual funds were used as a key savings vehicle for the plan, it would force a huge amount of money into a savings system that isn't particularly efficient or advantageous for investors.

This is the same problem that seems to be a very nasty catch in the well-intentioned 529 college savings plans, designed to let parents set aside tax-deferred dollars to educate their sprogs. The plans are set up state-by-state and vary widely. However, they've increasingly come under fire for carrying indefensibly high fees and being touted with insufficient disclosure. In some states, the ones with the poorest 529 plan investment selections and highest fees, the plans probably aren't worth using despite the tax advantages.

So, since this is an area I have no personal stake in whatsoever (the cats need no higher education to fulfill their duties, being cute and catching bugs around the apartment) and therefore know little about: Any parents out there want to recommend useful college-savings mechanisms? Upromise has made it through the dot-com meltdown and seems to get reasonable reviews ... anyone have a vote on whether it's useful or a gimmick?

More on when bad debt goes, well, bad

A few good points came up in response to my debt-expiration-dates post, and I've done some more research to expand on it a bit.

-The FTC allows negative information to linger in your credit report for up to seven years. After seven years, you can request its removal. From an FTC FAQ on how the seven years is calculated: "Generally, the period runs from the date that the event took place." So, seven years after a debt was due, creditors generally lose the ability to put a black mark about it in your credit report. They may or may not also lose the right to sue you, depending on the nature of the debt and your state's statute of limitations. The credit-reporting statutes and the lawsuit statutes are completely separate.

-There's a big neon-flashing caveat to the limitations -- it dates to the period of "last activity" on your debt account. Making a payment, or agreeing in writing to do so, can reset the clock by moving your account back to active status. Tread carefully before paying or agreeing to pay anything on old debt. (Of course, you may still have a moral obligation to pay off an old debt. These policies only cover your legal obligations.)

-Some types of debt have no statute of limitations and never expire. Among them are student loans, past-due child support in most (possibly all) states, and most taxes.

-The Fair Debt Collection Practices Act is actually pretty strict in regulating how collection agencies can approach consumers. For example, they're barred from calling outside "reasonable" hours, defined as 8am to 9pm. You can also force them to quit communication. If you notify a collector in writing that you want them to stop contacting you, they have to, except to notify you of specific remedies they're invoking. Forcing communication to stop does not mean they have to end efforts to collect the debt, but it does mean they can't keep up a barrage of calls and can only contact you further if they're filing a lawsuit or taking other remedy measures.

Our descent into the stock-market inferno

David recently called me with terrifying news: "I'm going to exercise my stock options!" My response -- you have stock options!?!

Turns out his company, A Giant Madison Avenue Ad Conglomerate, chucked a handful of options at staffers about five years ago. They've recently vested. Although Giant Conglomerate's shares are trading dead flat to where they were five years ago, David's options carry a strike price of about half the current value -- so, if he exercises the options and cashes out, he'll see a profit. (A fairly tiny profit. Like, a rounding-error-on-Google-shares size profit.

Since neither of us has ever mucked around with the tax implications of anything related to stocks, I promptly wigged out. "Exercising stock options" is irrevocably linked in my mind to complicated tax situations and debacles with the AMT. "Whatever you do, do not exercise and hold the options!" I fretted at David.

I don't pretend to have looked in any detail at the minutia of how it works, but my understanding is that when you exercise options, you're taxed on the 'profit' of the difference between your strike price and the market price -- even if you end up holding onto the shares and not realizing any actual-cash profit. If, as happened to so many during the dot-com smashup, the shares you own then tank, you still owe on what they were 'worth' on your exercise date. So why would anyone exercise shares and not immediately sell them? If your options are expiring but you want to gamble on the shares going higher, you can buy and hold. It can also result in a lower total tax burden if you hold the shares for more than a year, shifting the gains into the capital-gains category (which can come with a lower tax rate than you pay on your regular income).

But I have no interest in gambling on Giant Conglomerate's shares climbing, and given the tiny sums at stake here, trying to game the tax rates would save us about enough to buy an extra box of cat food. So my vote was firmly cast in the "exercise and dump" category.

My next fret was about the logistics of that -- would we need a brokerage account? An accountant? I just write about stocks, I've never tried to do anything so silly as selling them ...

Fortunately, David's company is apparently prepared for having a workforce with no clue about these things, and has an arrangement struck with the financial institution handling the stock-option deal. Employees can arrange for their options to be exercised and sold simultaneously, with the tax withheld. We'll just get a check for the net amount, and presumably some paperwork for the IRS next year around tax time.

I haven't seen any of the paperwork on this -- David and his company are handling it. It still feels rather nebulous; I'm viewing the whole thing as a rather novel experiment. Now if only my company would start talking about spin-offs and IPOs, it'd really feel like 2000 all over again. Maybe I too will eventually get some of these newfangled stock option things.

Seeking those low balance transfer offers

When I've taken advantage of offers like Providian's 'low lifetime APR on transferred balances,' they've all been offers that sought me out rather than the other way around -- those 'you've prequalified!' flyers that arrive by the pound in my mailbox. The rates on those offers seem to be better than those dangled for fresh prospects hitting various card-lenders' websites. But if you're not getting sacks of decent offers in the mail, is there any way to seek out good rates? I'm throwing this out to the floor -- I don't know the answer.

Bankrate maintains a chart of low-rate cards, but none are particularly fantastic rates. Google Ads, of course, is all too happy to kick up hits for 0% APR offers, but I rather worry about the idea of picking a lender based on "L0W R@T3!!!!!!!" ads.

Two caveats to watch if you're going to transfer a balance to save on the APR. 1) Most lenders charge a transfer fee. The standard seems to be 3% of the balance, with a $5 minimum and $75 max. That can still be a good deal if you're transferring a large sum you'll be paying off over time, but it's good to know in advance if you'll get hit with the fee. 2) Think carefully about time-limited offers. Right now, when I log into my Providian account, it's dangling a 2% APR till next October on transferred balances. But come November 1, the rate shoots up to Prime + nearly 10% -- making it currently a 17% APR. Ow. It's tempting to say 'oh, I know I'll have the balance paid before the rate goes variable,' but I found that my timetable for that sort of thing slipped a lot. I vastly prefer paying slightly higher APRs for a life-of-the-balance offer.

Actually, two more caveats: 3) If you transfer a chunk of money to a card with a low-rate offer, don't use the card for anything else. Your monthly payments go first to paying off the low-rate principal -- while that $100 you charged for the new purchases racks up a sky-high new APR rate. Another lesson I learned the expensive way. I was paying nearly as much in finance charges each month for a $200 purchase as I was for a transferred balance about twenty times that. And 4) try not to make the mistake I did of missing a payment and watching your rate skyrocket. Sigh.

Debt expiration dates

Many years ago, I made the brief mistake of subscribing to the Science Fiction Book Club to score some free books. This quickly got annoying, as they would send me their monthly selection every few weeks unless I remembered to send in an "aiee, no, don't send!" slip. I would then have to return the shipped book. Not infrequently, they would fail to log my return. I cancelled my subscription as quickly as I could.

My final return never got logged, and about a year after I ended my subscription I got my first collection letter. In classic collection agency-letter form, this was followed by a barrage of increasingly nastier missives, vaguely suggesting dire consequences if I didn't make right my debt. Said debt was around $18. I figured they would eventually go away, and they did, but it was a few years before the letters dried up entirely.

Cleaning out some old mail a few weeks ago turned up one of those letters, which got me wondering: What's the statute of limitations on debt? Surely, at some point, creditors lose the right to come after you with sharp, pointy lawsuits and credit-record nastygrams.

And lo and behold, they do, thanks to the Fair Debt Collection Practices Act. The law mandates how collection agencies can contact alleged debtors, and also forbids chasing debt that's beyond the statute of limitations. Those vary by state, but Bankrate has a nifty chart that offers a good starting point.

The surprising key to credit-card satisfaction

Sorry for the unexpected hiatus. I am the world's worst business traveler -- it always takes me days to recover afterward, and I get incredibly unproductive until the post-travel/jet-lag-blah passes. I have no idea how salespeople and whatnot stand doing it constantly.

Anyway, I return with a rant. When choosing credit cards, I typically look at the fine print about rates, terms, grace periods, etc. Something it never occurred to me to investigate: how annoying is the lender?

My Amex In NYC card has been my main pay-off-each-month card for about 18 months. For several years, I've also had a Providian Visa, which I got to take advantage of the 4% lifetime ARP on transferred balances. I transferred over my credit card debt, paid off a chunk each month, stuck the card in a drawer, and ignored it.

Everything went smoothly until last September, when I was distracted (it was another damn business trip, naturally) and forgot to make a payment. Whoops. I remembered about a week after the due date and promptly sent it off, but by then, the damage was done. Providian whacked me with a $40 late fee. I called, complained, and got it removed, but the really nasty part was that the late payment triggered an APR jump. My 4% rate shot to 20% -- with no formal notice. I found out about the penalty when I saw the sky-high charges on my next statement. I called again to complain, this time about the lack of notice that I'd triggered a rate increase. I also politely threatened to yank my balance off the card if they didn't put my rate back down. They refused, and I went shopping for another transfer offer. Crankily. My balance was low enough that the higher APR wasn't actually costing me that much; I was more annoyed by the shoddy customer service and the principle of the thing.

So, for once, I took an interest in the credit-card offers jamming my mailbox. Chase sent one offering a 0% balance transfer through 2007. I took it, and transferred my Providian balance. (I decided not to cancel the Providian card, though, to keep the free FICO score access.)

The problems with Chase started with my very first statement. I had scoured the fine print of their card offer for catches, but managed to miss the big one: they offer a 0% APR, but charge a transfer fee on balances moved over. I maxed it out and got hit with a $75 charge. Grrrrrrrr. Also, the dangled 'no APR till 2007' promise didn't pan out -- they instead only set my 0% APR period for about three months. Another little fine-print catch: they can change the terms of their offer at any time. Grrr again.

When we got our tax refund, I paid off my credit-card debt and left my Chase and Providian cards with $0 balances. I haven't yet cancelled the Chase card, but I'm highly tempted. My old cards spoiled me. I was unprepared for Chase's constant hard-selling tactics.

The first call was the one that caught me most unaware. A Chase agent rang to 'confirm some information about your account.' It was a few weeks after I'd opened the account, so I figured I'd go along with it. 'Is this your address?' Yes. 'Is this your correct phone number?' Yes. 'OK, Ms. Cowley, I'm enrolling you in the credit-protection plan ...' Wait -- what? I had never agreed at any point in the call to any new 'services' -- I thought I was just confirming information for their records. I emphatically said no, no new services, do not enroll me in anything, and hung up. The agent had a thick Indian accent, and seemed not to follow when I said I hadn't agreed to anything like that. I got the impression he was following a script, and had either missed a step or been instructed that if you get a few minutes into the call, just keep barreling along.

Since then, at least once a week I get a phone call from Chase agents (always from offshore call centers) trying to talk to me about my account. Now, if I'm unluckly enough to answer the phone, I immediately say I don't want any new services and hang up.

Chase also blankets me with mailed offers, of the particularly insidious 'cash this courtesy check to start your new services' variety. One recent one included a $10 check, which would sign me up for a $120/year plan offering 'discounts' at Disney World. I can think of few things more insanely priced and useless.

Luckily, I'm not at all tempted by $10 checks, but such marketing tactics seem deeply deceptive and unethical (though probably legal). Had I known Chase pulled this crap, I would never have gotten their card in the first place. I never expected credit-card companies to be warm and fuzzy corporate Samaritans, but this is skeezier than anything I've experienced with other companies.

So, for any considering Chase cards, be warned!

Rebuff the upselling, score perks anyway

I'm in Vegas this week for a software conference, and my company kindly shelled out for me to stay in style at the conference hotel, the
Venetian. (Motto: "More gilt per inch than Trump's most lurid imagined fantasyland!") When I checked in, the clerk promptly asked if I'd like to upgrade to a larger room. Larger!? Ha ha, no. The basic room is already bigger than my first NYC apartment. Next question: Would I like to upgrade to a room with a view of the Strip? Again, no.

Turns out the only rooms available at the moment all had Strip views -- so I got for free the "upgrade" I'd just declined to pay for. Rental car companies pull this scam all the time. I always book economy cars. (I'm short; I don't need legroom.) Inevitably, the first thing I'm asked when I arrive is "would you like to upgrade to a full-size?" Trick is, many car companies don't even bother actually stocking economy cars any more. More than half the time, when I turn down the full-size upgrade, I get a full-size car anyway for the economy price.

Insurance is another area where rental-car companies famously try to slip in lucrative, unnecessary add-ons. If you have your own auto insurance, you're generally covered for anything that happens with a rental car. If you don't have personal insurance, you still likely have some coverage on your credit card -- many offer policies that cover loss and damage, as my Amex does.

But here's something particularly insidious I hadn't known about before. Two weeks ago, I rented a car from Hertz for a quick day trip to Long Island. While filling out the forms, I noticed a small sign on the counter (very small) mentioning something legalistic about Hertz's optional CDW (collision damage waiver) covering damage beyond the insurance level mandated in NY. Googling turns up the info that New York requires rental car companies to cover collision damage on all rentals -- making Hertz's add-on CDW coverage in NYC even more ridiculous than usual.

Because we really needed another Byzantine credit scoring system

I'd been out of the loop. "No post on the new VantageScore yet?" my sister asked. Er, VantageWTF? Thank god for Google News.

Apparently the Credit Data Triumvirate -- Experian, TransUnion and Equifax -- banded together to unveil VantageScore yesterday, a new credit-scoring model to compete with FICO. VantageScores will range from 501-990 (higher is better), versus the 300-850 scale FICO uses.

What else is different? No one can tell. The Triumvirate is being even less forthcoming than FICO creator Fair Isaac about how their scores are calculated. The promotional propaganda says VantageScore was created "to address the market need for a common sense approach to credit scoring." Like hell. VantageScore was created to address the Triumvirate's crankiness about all the money Fair Isaac collects for holding the keys to the FICO kingdom.

A Fair Isaac spokesman told the LA Times that the Triumvirate "have all had their own credit scores that they have tried to sell against us, and they've been wildly unsuccessful. This is them trying to take another crack at our fortress." Investors suspect it will be a successful crack. Fair Isaac's stock dropped 7 percent yesterday.

So what does this mean for consumers? In the short term, not much. FICO is entrenched in the credit-granting process. The Triumvirate plans to market VantageScore to mortgage firms, credit-card companies and other lenders, and they'll need to individually persuade FICO users to switch. That certainly won't happen swiftly. If VantageScore does catch on, it's likely to exist in parallel with FICO for a long while, with lenders scrutinizing any cases that kick up wildly different results from the two models. VantageScore's backers claim their algorithms (the details of which I have not seen any public comment about) will better predict the credit habits of "thin-file consumers," those with a scant paper trail (like young adults). It's possible they've built a better mousetrap, but the idea of one black-box credit scoring model replacing another black-box model does not fill my consumerist heart with joy.

Consumers won't be able to get their hands on their VantageScores for at least another few weeks, says the Washington Post.

I'm curious if consumers will be required to pay for access to their scores, as they are with FICO. I just rang the Equifax media contact listed for VantageScore queries to ask; I'll report back when my call gets returned.

More financial paperwork: your social security statement

I'm part of the generation that considers Social Security something mysterious and mythic -- I gather it's supporting a large chunk of the population in their old age and infirmity, but it's nothing I'm banking on in my own retirement planning. Still, it's interesting to have some idea of how it works and where you stand on earning benefits. That's where your annual Social Security statement comes in.

The full story of Social Security's intricacies would require a thesis to explain, but the quick gist is that to earn retirement or disability benefits, you need to accrue "credits" for working. For 2006, you earn one credit for each $970 of wages or self-employment income. You can earn a maximum of four credits per year, so it takes at least 10 years of work to accrue enough credits for retirement payments. Those years don't need to be contiguous, though -- you can earn a few credits, have no income for few years, and pick up again with no problem.

Your annual statement shows how many credits the SSA has on record for you, which is useful to check against your own work records. It also estimates your expected benefits for retirement or disability, and the survivors' benefits that would be available to your family if you die. A sample statement, with explanations, is available at the SSA website.

The SSA automatically sends out statements annually three months before your birthday. If you feel the need to see one sooner, you can also request it online, although the statement will still come to you via snail mail. David's turned up recently, and we realised we haven't seen one for me in a long time. Because we bounce around a lot, I rang the SSA to ask about changing my address in their files. It turns out they pull address information from annual tax filings to the IRS -- so, if you're filing taxes, the SSA should find you and get your statement mailed out properly.

Also, like many government agencies, the Social Security Administration is in charge of all sorts of bizarre, semi-random tasks. Such as compiling lists of the most popular baby names each year. (2004 winners: Jacob and Emily. The records go back to 1880, when the top names were John and Mary. Stacy has been plunging like a stone since its popularity peak in 1973.)

A very elaborate way to scam credit card companies

A number of personal-finance bloggers like to play arbitrage with
zero-percent balance transfer offers from credit-card companies. The basic idea: Credit card lenders are strafing people with offers for limited-time 0% APRs on balance transfers. You accept, take out the biggest balance transfer you can get (generally something in the $5,000-$20,000) range, and tell the lender to transfer the balance from another card where you're not actually carrying a balance. That creates a massive credit on the second card. You call that second lender, tell them to cut you a check for the refund, and take that money and park it in a high-interest savings or money-market account like ING Direct's (current promotional rate: 4.75% APY). You set up automatic payments to zap over monthly minimums to the card with the massive balance. When the 0% APR expires, you pay it off. Meanwhile, you've gained several hundred dollars risk free from the interest you've earned.

I think it's a silly game to play. There are practical considerations. StopBuyingCrap.com tracked what doing this did to his FICO score over the course of a year -- since you're running up huge liabilities, FICO freaks out. (His score bounced around between a 612 and a 751). If you're late with a payment, your 0% APR disappears. If you use the card with the balance for anything else, you start owing finance charges: When you have a low-rate balance transfer on a card, and then use it for a new purchase, that new purchase becomes the very last thing that your repayment dollars are applied to.

Still, in the right circumstances, you can pull this trick off and make money with it. I still think it's pretty silly. PRBlog.com likes to muck around with this. In "The Value of A Great Balance Transfer Deal," he breaks down the math behind one of them: an $11,000 balance transfer from Citibank at 1.9% APR will net him $600 after tax over three years. This game strikes me as a hell of a lot of work for $200 a year. The only reason I can see for doing that is that you're a finance geek and enjoy the work. Which is a perfectly fine hobby, but there must be more lucrative investment schemes out there, if you're willing to devote that kind of time and attention to detail ...

For those who do want to fuss with extracting the very best possible rates on money socked away in savings, though, my friend Stephen pointed out an excellent resource: a Bank Deals blog. The site tracks and compares rates on money-market, CD and savings accounts ... for fun. Yow. Still, yay for financial geeks!

Minimum Visa/Mastercard charge requirements not allowed

NYC is home of the small grocery shopping trip. I don't have a car and am limited to the groceries I can carry on my own. That, combined with my own scheduling scatteredness, means I do near-daily grocery runs for whatever items I need for that night's dinner. Which means I make a number of grocery trips where I'm buying just one or two things and spending something like $6. No problem if I have cash; big pain if I haven't hit the ATM recently, since nearly every small deli/bodega I shop at has those "sorry, $10 minimum on credit card charges" signs.

Turns out minimums are a violation of Visa and MasterCard's merchant agreements. If you want to charge your 75-cent candy bar, you're technically entitled to. MSNBC covers this in a recent "Ask the Consumer Man" column. Some Googling turned up further confirmation, including an NY Better Business Bureau page on the issue.

In actual practise, I don't know that I'll challenge the policy at places I shop regularly. Kicking up a stink may or may not work, and is unlikely to endear me to the shop owners. But the pharmacy I hate, but occasionally stop in at anyway because it's close, which claims a $25 minimum on credit-card purchases? There, I may make a scene next time I'm caught short-cashed.

Because the best price point is free

Another in my very infrequent frugality series: Microsoft is giving away completely free USB thumb drives. (Offer good in the U.S. only. Sorry, international readers!) Loaded with Microsoft propaganda, of course. Since they can be pretty useful devices, I figured I'd pass it along. My sister was quite astounded this weekend when I introduced her to her first flash drive, which we used to transfer MP3s between computers. (I was impressed -- her circa-1999 iMac had no problem with the drive and required no drivers.) Thumb drives seem to be the tech tchotchke of choice these days; I tend to get piles of them in press kits. Still, it's nice to have an alternative to small-capacity-and-breakable floppy disks!

(The answers to Microsoft's questions are '2' and true to all the rest.)

Colour-shifting ink, watermarks, and a really obscured motto

New $10 bills are rolling out today, featuring more colour and the catchy slogan "We T[splot]N People."



Now if only they would start making the bills out of plastic instead of paper, David could stop griping out how our colourless paper money doesn't feel like real currency. Whereas when we go to Australia, I feel like I'm playing with Fisher Price My First Money(tm).

Frozen assets

Over the weekend, my sister and I were talking about financial matters. She said she'd come up with a way to control credit-card impulse spending: she froze her card.

I assumed she meant she'd had the issuer halt new purchases. No. She literally froze the card.



"When I want to buy something, I have to spend a few hours thawing the card," she said happily. "And then I usually decide it isn't worth it."

I think we should pass a bill requiring Congress to give this a try, as a deficit-reduction measure. And then pass another bill authorizing the construction of a really, really big freezer. I'm thinking we could repurpose West Virgina for the cause.

The only love money (lots and lots of it) can buy

Free Money Finance has been regularly blogging about the cost of having a pet, which he at one time calculated could run as high as $48,000 over a pet's lifetime. Unless you're housing a pet elephant, that number is absurd, but the idea of a cat or dog coming with a five-figure price tag isn't.

Our cats are young, healthy, and so far relatively inexpensive. We go through about $10 a week buying litter and dry kibbles. (Frugal cat that she is, River actively dislikes wet food. Kea loves it, but also loves even better whatever we have for dinner. The sneaky little thief gets so much in the way of table scraps, frequently stolen right off the plate of whoever let their guard down for a second, that I feel no obligation to buy much wet food for him.) It's about another $100-$150 each for annual vet checkups ... which puts our annual, routine pet expenses in the $800-$1,000 range.

But multiply that out across an average cat lifespan (say 15 years), and your per-cat cost can easily hit about $9,000 -- and that's before you run into the big expense, serious vet bills for aging pets. My dad fielded a $2,000 bill for surgery for my childhood kitty, Max, when he developed a hyperthyroid problem. I know of almost no pet owners that escape such giant medical bills as their pets grow into senior-citizen pets.

(Even small pets aren't immune to the giant-vet-bills risk. My sister and I once spent Christmas Eve at an emergency vet clinic with her hamster. The critter had somehow managed to put one of his teeth through his cheek. I think it cost around $100 in vet bills to fix up the $6 pet.)

We'll probably end up spending about $15,000 on our two kitties over the course of their lifetimes. Of course, I think they're worth the money. And hey -- cats or dogs are still a lot cheaper than kids!

Blogrolling and feeds

I'm finally starting a blogroll of other personal finance blogs I enjoy reading. Links are going up in a sidebar. It's a small collection for now; I'll expand it as I come across others that catch my interest. PFblogs.org is an aggregator I've used to browse through a bunch of them.

One specific-to-personal-finance-blogs problem I'm hitting, though, is sheer add-cluttered ugliness. The granddaddy of personal finance blogs seems to be PFBlog.com. I checked it out a few times, but my eyeballs kept shutting down in horror over the ad bars in the middle of posts. I suppose that's a good way to maximize AdSense revenue. It's also a good way to scare off readers. There is pretty much no content I consider so valuable I'm willing to slog through that kind of clutter for it. (I suppose I could get around the problem with a syndicated feed, but enh. Too Much Hassle. I'm a dinosaur that prefers to read content on its original host site.)

Other websites and blogs can certainly be ad-laden, but this seems unusually prevalent with PF blogs. Which, I suppose, makes sense; finance-oriented bloggers are pretty likely to want to profit off their blogs, and to do it in a way that delivers maximum financial results. But I'm a journalist at heart. I want my blog read, and I'll happily give up some incremental revenue if it'll make life easier on my readers. (This is why I am a comparatively impoverished reporter rather than a rich media baron. I could make a lot more money if I were more entrepreneurial. Being entrepreneurial would make me want to reach for hemlock each morning when I woke up, however. Fundamental personality/job mismatch.) Right now, I'm leaning against AdSensing this blog; if I ever do add advertisements, though, they will be banished to the corners of the layout, far far away from the content. And I would only do it if there were some significant advantage in doing so. $10 a month in AdSense revenue is a stupid reason to mess up my readers' experience.

I've also been put off by the huckerish tone of several personal finance blogs, and of personal-finance writing in general. It annoys the hell out of me that most of the field's "experts" are Personalities with Branded Lines of books, seminars, audio tapes, financial organizing systems, frozen dinners, etc. Several people recommended the book Smart Women Finish Rich to me. The title put me off immediately. I gritted my teeth and picked it up anyway. I've only made it through a few pages so far. They contain some solid, useful advice. The useful bits are broken up by constant references to the author's seminars, which makes me want to fling the book into our (unfortunately non-working) fireplace. I want personal-finance writing that makes me feel like the author's primary interest is in conveying solidly researched information, rather than in hooking me into his personality cult and selling me more "personal finance product."

Which is a longwinded way of saying that I will attempt to only link blogs that are solidly informative, and that don't strike me as primarily a vehicle for the blogger's grander dreams of Making $$$ Through Blogging.

(Also, I currently have XML and Livejournal feeds set up for Birds & Bills. If anyone wants any other feeds, feel free to request 'em and I'll get them set up.)

Sometimes, it's the little things

I am kicking myself for not thinking of this sooner: Get a separate wallet pouch for storing affinity cards.

I had pretty much stopped taking advantage of store membership cards, purchase stamp/punch cards, store credit cards with discount offers, and whatnot because I can't keep track of them. I feel particularly silly for not thinking of this sooner because I already carry multiple wallets. I've always used two: one zip pouch for bills, coins and most-important plastic like my driver's license, primary credit card, and subway card; and a second zip pouch for the zillion other bits of plastic I have, like phone cards and little-used credit cards. Adding one more pouch for affinity cards seems a useful way to keep them accessible without further cluttering my primary wallet.

(Also, totally unrelated but too funny not to mention: "H&R Block gets its taxes wrong.")

Plastic matchmaking

Credit cards can be insidious. If you're on a bare-minimum budget or have wildly variable paychecks, I think they're a bad idea. I just recently killed off the last of my college credit-card debt, and I suspect I ultimately paid as much in interest charges as I did on purchases. For several years it was a very good idea for me not to have access to any plastic other than my Visa check card.

However. If your monthly budget is working relatively smoothly and you're not inclined toward massive impulse spending, credit cards can be not only convenient but fiscally prudent. Lenders are fighting like crazy for business, and now that no-fee cards are the norm, there are some fun offers available.

At my previous job, I was issued a green corporate Amex for which I paid the bills directly. Personal use of the card was encouraged, since the company got some sort of kickback benefit on funds slushed through the corporate cards. Between business and personal spending, I ran thousands of dollars each year through the Amex. Eventually I realised that I was having no problems paying the bills on time, and that I should check out rewards programs and whatnot that would give me a benefit off all that credit-card spending.

Amex wanted $75 or so to hook my corporate card to its Membership Rewards program. I wanted something free, so I started browsing offers. For any still clinging to a classic green Amex, or any other fee-bearing card, SmartMoney has a nifty article explaining why you're being screwed.

My dad swears by his cash-back Discover card, and cash-back cards have an obvious appeal. They also have an obvious drawback: cash is the most expensive rewards currency for lenders to deal in, and they naturally want to minimize payouts. All the restrictions, caps and fine print associated with such cards made my head hurt. Still, for those who want to go that route, there are some helpful guides available to the various offers, including Credit Card Goodies list of cash-back rewards offers. Amex Blue Cash seems to be leading the list of cards various bloggers are recommending right now. MyMoneyBlog has a pile of posts about various cash-back cards.

Mile cards are popular, but I already have a million frequent-flier miles I have trouble using. Again, too much hassle.

So I decided to take a look at my spending, figure out where big chunks of my money go, and look for rewards cards targeting those areas. My theory is that since goods and services don't have the same hard costs as cash, credit-card companies will be more generous with those rewards. And hey, if I'm going to take my $100 cash back and spend it on books, I might as well get $100 in books credit directly.

Because books and food/entertainment are my biggest discretionary spending categories (beyond travel, and I already ruled out miles cards), I focused on those areas. Amazon's Visa card terms didn't dazzle me (basically, a $25 Amazon certificate for every $2,500 in spending on the card), though in retrospect, they seem to be par for the course. The average across most companies seems to be rewards valued at around $100 for every 10,000 in accrued points (usually accrued at the rate of $1 in spending = 1 point).

So I ended up getting Amex's In NYC card, which has no annual or rewards-enrollment fee and offers points redeemable for theatre, dining and music gift certificates in the city. For me, it's been a great deal. I don't understand Amex's formula, but I seem to be accruing points much faster than $1=1, and so far I've cashed in points for free spa services (which is the only price point at which I can afford such things) and several $100 dining vouchers.

If I weren't a fancy-restaurants junkie, other cards would make more sense. But with so many options, there's a good card out there for pretty much any financial profile. Finding yours can be a great benefit.

(Young and Broke recently mentioned a card I hadn't heard about which sounds really intriguing: American Express One, which funnels 1% of purchases into an interest-bearing savings account. That could be a nifty way to jumpstart an emergency fund.)

Generation 'my monthly loan payments will be what!?!?'

I started this blog because I didn't see a lot of personal-finance writing out there aimed at twentysomethings, people who are more worried about paying off student loan and credit card debt than about diversifying their stock portfolios. One book I keep running into is Generation Debt: Why Now Is a Terrible Time to Be Young, by Village Voice columnist Anya Kamenetz. Salon has an interview with her up today.

I'll have to check out the book. It's an issue I have mixed feelings on. I have plenty of friends who have been caught in the kind of economic turmoil Kamenetz describes, of low-wage, no-benefits jobs and little chance to grab hold of any kind of corporate ladder. On the other hand, I also know plenty of people like me, who moved from college into fairly stable corporate jobs, get treated decently, and have never been laid off. (I also worked at a dot-com, a company with poor management and a dicey future. I saw the writing on the wall and left before the layoffs started.) And then there's the next level up, of my college companions who went into i-banking or high-end consulting and landed starting salaries that would make anyone's head spin.

It's easy to tut-tut about "mistakes" people make. The one thing I did in college that locked me in for a fairly stable future was intern like crazy. I knew I wanted to go into journalism; I knew journalism jobs turn on clips and experience; I knew those would matter more for my future career than grades or other academic credentials. That made it much easier for me to work in a field where jobs can be hard to come by. (Though not so hard as advertised, in my view, if you're willing to work in trade or other niche areas of the media world.) I still believe strongly that anyone with the foresight to do some planning and the willingness to consider a range of jobs can come out of college with bright career prospects, in nearly any field, no matter how competitive. I also think my future would have been a lot trickier if I hadn't been lucky enough to know off the bat what field I wanted to go into.

I'll agree, though, that there are some distinctive challenges facing our generation, starting with rising college costs and too-easily-available credit. Yes, personal responsibility means it's your own damn fault if you sign on the dotted line for money you can't immediately repay, but I would also like to see strong curbs on how heavily credit card lenders can push cards with sky-high limits on those with paltry paychecks.

College costs are the more insidious problem, because the numbers involved are so scarily high. It's utterly absurd for liberal-arts colleges to be charging annual tuitions higher than what their average graduates will be making in post-graduation starting salaries. Again, yes, there's a personal responsibility angle, and yes, people can choose to go to public and other lower-cost institutions, but even those are falling prey to tuition creep. I don't know what the answer is on that front. I'm just very grateful I don't have kids' college tuition's to worry about.

I honestly don't know if we have it worse than our parents. My sense is that we have less security but more flexibility. That's a great trade for those who make good choices and catch lucky breaks, and a bad one for those whose missteps or misfortunes take them to the edge of the cliff.

Your good name: Priceless. Insuring it: $25.

Apparently identity theft is the new fad fear. An assortment of companies are offering ID theft insurance policies, generally charging $25 to $50 a year for policies that cover the cost of long-distance phone calls, lost wages and legal fees associated with untangling a stolen identity case. This week, the AP and the Washington Post have chimed in on the trend.

I've never been a victim of formal identity theft, but I've twice had my bank account/debit card hacked, once in a particularly odd (but, apparently, increasingly common) way -- someone was able to create a copy of my ATM card, complete with its PIN number, and use it to withdraw money. Sometimes this is done with phony ATMs and modified front-ends, but it can also happen at totally normal-looking machines that are running stealth skimming software.

Recovering my missing cash was a pain, involving hours on the phone and time off work to trek over to various police stations to fill out reports, but I don't see that having insurance would have been terribly helpful. Claiming reimbursement for the (relatively small) financial costs of the incident would have been just one more bureaucratic chore to slog through, at a time when I had quite enough red tape to deal with. For a full-fledged ID fraud case, the horror stories you hear about people mistakenly arrested because crooks with arrest warrants are using their names, it might come in handy, but those cases still remain lightening-strike rare.

Medical billing error tally: $1900 and counting ...

I had heard that the medical system is rife with billing errors. But good god. So far, from The Big Hospital Adventure, we have:

-Received a bill for the ambulance that was an attempt at double billing -- we got one, and the insurance got one. When I called Aetna to ask if I should send the ambulance bill I had received their way, the agent said oh, hey, we already got it, but good thing you called, because it was processed wrong. Aetna initially processed it as 80% covered when our plan apparently calls for 100% coverage. Not that I would have known this, because none of the papers I've been able to get hold of address ambulance coverage. So, yay inadvertently catching the error?

-Received a bill sent to us with the note that the insurance company denied coverage. Why was coverage denied? Because the doctor's office billed the wrong insurance company.

-Almost left unchallenged $500 we weren't liable for after all. Apparently it's normal for doctors who visit you during a hospitalization to bill you (well, your insurance) directly, separately from the hospital's bills. One of the doctors who passed through was out of network. I was prepared to grump and suck it up and pay the higher out-of-network change (we've already hit our out-of-pocket limit for in-network expenses), until I mentioned it offhand to my new company's HR manager, during a chat about FSA options. She said that during hospitalizations, when you're not exactly in a position to doctor-shop, most insurance companies will cover out-of-network hospital-staff personnel as though they're in network. Hrm.

So I rang Aetna again today. Not only did that pan out, it turns out they had a precertification on file (two, actually) for this doctor's services. So, they had already approved in-network-rate coverage, but that information never made it to their claims department.

Aetna so far is not dazzling me with their competence at processing all this stuff, but at least it's been easy to clear up mistakes when I've called. I suppose I'm learning the frustrating way that once you get tangled up in the American medical system, be prepared to scrutinize and challenge every scrap of paper sent your way. And put your insurer's customer-service number on speed dial.

Saving with FSAs (even if you're healthy)

Until now, I've avoided paying any attention to medical Flexible Spending Accounts (FSAs), a standard benefit available to corporate guppies like me. I lack kids or chronic health issues, the two factors that seem most prone to generating high healthcare bills. I'd never before tracked my annual medical expenses, but I'd bet that in an average year they total less than $200. The use-it-or-lose-it nature of FSAs made them seem more of a hassle than a benefit for casual medical spenders like me.

Then came The Big Hospital Adventure of '06, which has spawned promises of ongoing monthly healthcare expenses and a pile of bills with scary numbers. (Total bill sent to our insurance company for a weeklong stay: $20,484. Twenty thousand dollars. And this was basically a monitoring trip, no surgery or anything intensive like that. Daily shared room and board appears to have cost $1,950 -- for that rate, we could have checked ourselves into the Mandarin Oriental and booked a private nurse. Plus hourly caviar deliveries.) Our insurance eats most of it, but as insurance companies do, Aetna is finding ways to kick a sizable chunk back our way. So, suddenly this FSA idea sounds really appealing.

Especially since I saw the power of taxable income adjustments at work this year with my tuition deduction, which resulted in $4,000 of taxable-income reduction cutting our tax bill by $1,000. If I can use the FSA to reduce our taxable income by a few thousand, that will make a noticeable dent in our taxes and effectively reduce the cost of the whomping bills we'll be getting.

The big danger of FSAs is that you lose any unspent money left in the account at the end of the year. (You have a few months' grace period to actually claim reimbursement, but the expenses all have to be incurred by the end of the calendar year.) They're a bad gamble unless you have a pretty clear idea of at least the minimum you'll be shelling out.

However, there's a less-publicized flip perk I hadn't known about: your employer is required to let you claim reimbursement at any time during the year for the maximum amount you've elected to contribute -- even before you've actually made those contributions. In addition to the tax advantages, you're essentially getting a free credit line.

SmartMoney has a helpful article on FSAs and a benefits calculator. In some ways, the Big Hospital Adventure was well-timed. It came at the start of the year, and just as I'm changing jobs and will have the option to start up an FSA. If we're going to be contributing to the care and feeding of the medical-industrial complex, I'd like to at least wring out whatever financial advantages we can.

Playing the FICO game

FICO scores, ranging from 300 and 850, are the keys to the credit kingdom. They're also annoyingly mysterious. Everyone has three -- one each from Experian, TransUnion, and Equifax -- and the exact algorithm used to compute the scores is a Fair Isaac Corp. secret. FICO scores are also pricey. Unlike credit reports, which you can pull annually for free, FICO scores remain a premium product. Fair Isaac will sell you access to all three for $40. (As I mentioned earlier, Providian gives card holders free access to one score.)

Fortunately, while the precise calculation is clandestine, you can still get a pretty decent amount of information on how scores are derived and how to tug yours upward. Fair Isaac explains the basics of what goes into your score: payment history (35%), amounts owed (30%), length of credit history (15%), number of newly opened accounts or inquiries (10%) -- only those you initiate count, and types of credit used (10%) -- mortgage, retail, installment loans, credit cards, etc.

While the algorithm is universal, FICO scores from each of the three credit agencies differ because each agency considers only the data in its own report. Checking your credit reports for errors is the first step toward making sure your scores are as high as they can be.

What's a good score? Every lender will have its own benchmarks, but 680 is a number I see mentioned frequently as a cutting point. Get into the 700s and you're fairly golden. Fall below 600 and you'll have trouble getting decent credit offerings at good rates.

Obviously, a big part of having a good score is making sure payments are made on time. That's the single most important factor in keeping your score aloft. Lenders start reporting delinquencies after 30 days -- paying a credit-card bill 15 days late won't show on your credit report, but paying it 45 days late will. Lenders report delinquencies in three categories: 30 days, 60 days, and 90+ days. Avoiding falling into the latter group makes a big different. Delinquencies are never good, but one or two late payments won't consign you to FICO hell. A pattern of 90-day-late payments can be hard to shake off, though, especially if it's recent. The further in the past delinquencies are, the less they affect your score.

OK: your credit reports are all correct and you're paying your bills on time. What can you do to bump your score up? (And by the way, scores are shockingly responsive. I've seen mine vary by dozens of points within weeks of something in my credit profile changing.)

-Ask your lenders to raise your credit-card maximums -- and then don't use the extra credit. The notion that it's bad to have "too much" available credit is a myth. Your income isn't in your credit report; lenders worry far more about what percentage of available credit you use than they do about how much available credit you have. Financial experts recommend keeping your credit utilization below 30%. This makes a big difference on your FICO score. Having $5,000 used of $6,000 in available credit will look much worse than having $15,000 used in $50,000 of available credit. When Amex doubled my credit limit, my FICO score jumped 20 points in a month.

If possible, avoid opening new accounts simply to increase your available credit. That can help, but since inquiries are a factor in the FICO score, it can also hurt. (A spate of new-credit inquiries makes the FICO gods worry you're about to go on a credit bender.) Raising the limits on your existing accounts, though, is all to the good.

-Take out an installment loan and use it to pay off your credit-card debt. The FICO algorithm focuses more on revolving accounts (like credit-cards and home-equity lines of credit) than on installment accounts, because how people treat their more flexible accounts better predicts what kind of credit risk they'll be for future accounts. When my friend used an installment loan to wipe out her credit cards, her score went up 80 points the next month.

-Spread purchases across multiple cards. The FICO algorithm not only considers your overall utilitization percentage, it looks at utilitization on each individual account. Maxing out the line on a $2,000 card will hurt you; spreading $2,000 across two or three accounts and keeping the utilitization percentage low on each will help you.

-Only cancel credit cards if you have a zillion -- and don't cancel your oldest card, if you can avoid it. Length of credit history is a factor in FICO scoring. The average American has 13 credit lines, including 9 credit cards, according to Fair Isaac. A wallet full of plastic cards with no balances on 'em is quite typical and not a red flag.

-If you have no credit history, it's useful to get one! When we first started renting apartments, landlords were flagging David (newly immigrated from Australia) as a credit risk because he had no available score. Even worse, I then messed up his score by making him an authorized user on one of my cards -- an IKEA retail card -- that I once paid 30 days late. That barely affected my credit profile, but since that card was the only item in his, my late payment tanked his score. We eventually fixed this by adding him as a user on my Amex card, which has a high credit limit and no history at all of late payments. A year later, his score had climbed into the high 700s.

-And finally, needless to say, those "fast credit repair" services that splash ads all over the Web are scammy. There's legally nothing any third party can do to change your score, short of handling for you the hassle of seeking out incorrect items in your credit reports. All the steps that will actually affect your score, like those mentioned above, are steps you can take without paying anyone for "assistance."

Sharing lives, and credit

A friend recently posed a question about joint credit accounts: isn't it unfair that the account affects both partners' credit scores? A $10,000 credit card debt on a joint account shows up on both parties' credit records. A very cursory glance would make it appear that the couple was carrying twice the debt they actually were.

In practice, glances aren't that cursory. In situations where the couple's combined debts and income would be considered, like mortgage applications, potential lenders will recognize that they're seeing the joint account listed on each party's report. From the creditors' perspective, listing the debt on both reports makes sense, because it's a potential liability against each: either party can strand the other with the entirety of the debt.

However, if you're in a precarious financial situation, it can be worthwhile to safeguard at least one partner's credit. Once an account is listed jointly, getting it switched to an individual account can be tricky. Creditors can change the account status at the request of either or both parties, but they aren't required to. Legally, they can insist that the debt remain a joint one.

One way around the problem is to open only individual accounts, to which you add the other partner as an authorized user. Lenders are required to report the account's history on the credit reports of authorized users, but only the individual account owner is legally liable for the debts. The account owner can at any time cut off the authorized user.

For married partners, the shared-accounts issue is trickier in community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. These states treat all property, and all debt, acquired during a married as joint economic activity. If you're a Louisiana resident who discovers that your wife has a covert, maxed-out Visa card, you can be on the hook too -- if the debt was incurred while you were married. However, no one can be held liable for debts their partner incurred before the marriage. In all states that aren't joint property states, no one is liable for debts solely in their spouse's name.

CNN has a good article on handling credit-mismatch issues in a relationship. Sometimes the problem isn't irresponsibly managed debt, though. It's simply that there's a lot of it. Next post: tips for boosting your credit rating.

Taking questions from the floor ...

My personal-finance exposure is pretty much limited to the accounts and strategies I'm personally using. Which means there are bunches of areas it won't occur to me to write about. However, even when I don't know about stuff firsthand, I enjoy geeking out on research :) So, if there are ever topics you, Dear Readers, would like to see blogged, just drop me an email or a comment and I'll add it to the to-blog list.

Filing systems, online and off

Today's gripe: Why are all filing cabinets ugly? Even Design Within Reach couldn't come up with a non-ugly cabinet.

I'm looking for a filing cabinet because I'm finally attempting to organize my ancient one, which is utterly overstuffed. (And ugly.) This also reminded me to look up the latest data on how long I should be keeping various financial papers.

An increasing number of my financial intuitions offer paperwork online. My banking statements, credit card statements, quarterly 401k statements, pay stubs and W-2s for up to three years, and phone and cable bills are all available at the providers' websites. Possibly foolishly, this dissuades me from keeping printed copies. Why should I sock away a pile of pay stubs when I can go to ADP's website and print out years' worth, if I ever run into a need for them? I have great faith in the Internet's storage powers.

What I have learned to print and keep, though, are tax returns. TaxAct, and probably all the other providers, regard storing returns as a 'premium' service. You get access for a few months, then poof, no more online return unless you want to pay extra fees.

Free FICO score with Providian plastic

Providian (now in the process of becoming Washington Mutual) offers a credit card with an interesting perk: free access to TransUnion FICO scores. If you're not totally booked up with plastic, the card (no annual fee) can be worth having just for that feature. I got the Providian card a year or so ago for a balance-transfer offer; now that it's paid off, I'm keeping the card open just for the FICO. It's easy to access, available right on your sign-in page, and keeps an ongoing record of your score, so you can watch it rise and fall and see how various actions affect it. Mine jumped a small bit when I paid down a chunky balance, and then jumped a lot when Amex hiked my credit limit and my utilization percentage dropped down quite low.

TransUnion, Equifax, and Experian all tally their own FICO scores, so having only the TransUnion one is an incomplete view of your complete FICO status, but regular access to one of the three numbers still provides a useful data point.

Emergency funds for the broke

A classic piece of financial advice is 'build an emergency fund of six months' living expenses.'" Suze Orman argues that you need an eight-month fund. For many years, I looked at these sorts of recommendations and laughed. Six months of savings!? My paychecks were covering rent, food and enough fun to keep me sane. They were not big enough to do much of anything in the way of savings. Six months of savings is simply not happening on an entry-level journalism salary.

But the young and broke can still have emergencies, and it’s a good idea to have some backup systems in place for handling them (beyond the traditional twentysomething backup -- "um, hi mom ..."). One of the best pieces of financial advice I heard during the run-up to the dot-com meltdown, when everyone I encountered in "Silicon Alley" worried about how long their company had left before it collapsed, was: get a credit card with a high enough max to float you for several months. Make that your emergency fund. Lock it up where you can't easily touch it, but get it now, while you still have the job and the income to procure high credit. (Obviously, this is not a good plan if you don't trust yourself with credit -- I wouldn't advise giving a high-limit card to a college student, f'rinstance. I think it's a lot harder to be sane about credit before you have regular paychecks and get a better sense of what it's like to work within finite financial resources.)

And don't worry about 'too much credit' hurting your credit score. Applying for a flurry of new credit can affect your score, but simply having a copious amount of unused credit doesn't hurt you at all. It can actually be good for your score, since lenders do pay very close attention to what percentage of your available credit you're using. Having $4,000 used of $5,000 in available credit will set off red flags; having $4,000 used of $20,000 in available credit will impress. When Amex spontaneously added $10,000 to my credit limit, my FICO score jumped 20 points in a month.

Obviously, a credit card isn't an ideal emergency solution. But if you're broke, and especially if you already have credit-card debt, it's a much better idea than trying to squirrel away cash that could instead be going to pay down high-interest debt.

With one exception: like most people, I'm a big advocate of taking advantage of company 401k matches. Even if your company doesn't offer a match, putting some money aside in a 401k is a good idea, since you at least get the tax-savings benefit. If your employer does offer a match, though, take the free money, even if it means paying off debt a bit more slowly. Because 401ks also make great emergency funds. Most plans allow you to take a loan of up to half your balance for pretty much any reason, and if you get really desperate, hardship withdraws are an option. They carry nasty penalties and tax repercussions, but in a genuine emergency, 401ks are at least a tangible asset you can tap.

While I've been emergency-fundless till now (building one is my plan for 2006), it hasn't worried me overmuch because I always knew that if I lost my job or otherwise suffered catastrophe, my 401k would keep me from imminent rent-check-bouncing homelessness.

Not a moment too soon, either. In the past two months, David and I ran into the first genuine financial emergencies we've had -- a sudden trip home for a funeral (a pricey proposition when "home" is Australia), followed by an unexpected hospitalization. Amex is pulling us through till we can collect our tax refund. Yay IRS as emergency fund!

Tax bites

Miscellaneous tidbits ...

-I haven't filed a 1040EZ in years -- out joint income has usually been above the cap. This year, the cap is lifted to $100,000, which will put a lot more people into EZ eligibility. However, there are good reasons in some situations to go the more complex route. This Bankrate.com article does a nice job explaining the different 1040 options.

-The tuition deduction I mentioned yesterday is an adjustment to income. You can claim it even if you don't itemize your return (which I don't).

-I'm getting very fond of Bankrate.com. It has a nifty article laying out other income-adjustment deductions available to those who don't itemize. Traditional IRA contributions, student loan interest, money spent by educators on classroom supplies, and moving expenses are among the items you can use to adjust your income downward -- which, as I found out, can dramatically affect your tax bill. The Bankrate article is two years old, but the IRS's website has an index of explanatory documents on various income adjustments.

-My friend Fahmi points out that anyone with a brokerage or other financial services account should check out what deals are available through their provider for tax-prep services. Fidelity offers TurboTax discounts; I'm sure other firms have similar deals. For those who really, really don't want to pay for prep software, H&R Block's TaxCut will let you do both your state and federal return free if you take your refund on a prepaid Visa card. (If that link doesn't show the offer, go in through the IRS's FreeFile site. It's a semi-hidden/limited offer.)

-Note for freelancers: Companies are required to send 1099 forms to any contractor they've paid more than $600. The deadline for sending those out is Jan. 31, so watch your mailbox.

-I think this is my last year with TaxAct. The interface is pretty clunky and buggy -- with Firefox 1.5, using TaxAct's 'back' button to rewind to the previous screen consistently brought up a screen full of blank data fields. After a few minor heart attacks thinking I'd lost all my entered data, I caught on that it's actually a display bug: If you go back, then forward, you see the data. Weird. More annoyingly, when I tried to research questions about the tuition credit (like 'can I deduct tuition fees I'm paying with loans?'), the built-in question system generally had little to offer. Thankfully, a few minutes with Google and the IRS's website answered all my questions.

So, TurboTax/TaxCut users -- how do you like your interfaces?

Milk your tuition expenses

Throughout January, I collect tax documents that show up in our mailbox and toss them in The Tax Pile. We don't itemize, have investment income, or do anything particularly complicated -- we each have one W-2, I have a few 1099s from freelancing, and I have a 1098-E each year for student loan interest. That's it.

So it rarely occurs to me to look for tax deductions for which some financial institution has not sent me a form. But as I was buzzing through TaxAct, the screen on tuition expenses caught my eye. Well, hmm. New School never sent me any forms, but I have tuition expenses in spades thanks to the endless Finish My Degree project. So I started researching what I can deduct.

I don't appear to qualify for Hope or lifetime learning credits, but I do nail the tuition and fees deduction, which allows you to lower your federal taxable income by up to $4,000. You can still claim the deduction on expenses you're using student loans to pay. Score! Claiming this got me nearly $1,000 extra back on my refund. New York State also let me deduct tuition expenses -- up to $10,000, this time. That notched my state refund up a few hundred.

If you're eligible, make sure to claim 'em. Maybe the memory of the deductions will ease the pain a bit next time I hand New School another of its gigantic tuition checks.

Taxing times

My mom was a bookkeeper, and I think something got genetically passed down. I geek out at tax time.

For the past few years, I've done my taxes through TaxAct.com, because it's the cheapest of the Big Three tax software packages -- $16 to prepare and e-file federal & state returns. (It looks like you can knock that down to $13 if you avoid their extra-help features.) This year, TaxAct.com is offering free federal returns. If you're the lucky resident of a state without any state income taxes, you can do your whole tax prep and filing for free through TaxAct's system.

Why isn't all e-filing free? Because the government is running in circles to protect tax software companies. We're all shocked, I know.

Before I return to TaxAct each year, I like to read through the latest reviews to see if I should be considering any other options. For those who like the boxed software, PC World has a detailed rundown on what's new (and what's gone: rebates).

The Web programs tend to be much cheaper, and I'm too impatient to muck around with boxed applications. TaxCut seems to want $45 to file a standard (non-EZ) state and federal return online. TurboTax appears to be either $45 or $25 -- I honestly can’t tell whether the $25 fee includes both state and federal prep costs or not. All of the sites are horrendous about giving bottom-line prices. "Free e-file!" -- which they all tout -- is an utterly disingenuous claim if you have to pay for the service before it will allow you to e-file.

For those who feel like wading through a zillion options, the IRS has a lengthy list of online prep sites. It looks like I'll once again be going with TaxAct -- even if the one review I found of it from this year is pretty brutal.