Financial Prompt One

Financial literacy is a crucial skill to develop to become a conscious and informed consumer. Over the course of our lives many of us will acquire student loan debt, credit card debt, and debt from buying a home. Having the correct information and understanding about what protections we have as consumers can inform our decisions. For instance, there are many options to repay student loans through federal plans or refinancing a private loan. But there are also several scammers who take advantage of those who may feeling desperate to pay back loans. These companies set up sophisticated websites that resemble a government agency and trick unsuspecting consumers into paying monthly payments (McGrath, 2016). Consumers must do their research before giving any financial information to a company claiming to help with student loans.

I believe some policymakers are beginning to understand what it might take to have a better functioning workforce. First and foremost, some workers must be paid more. The minimum wage of $7.25 has not been raised in more than a decade, and it is also not reflective of today’s cost of living (Filipovoc, 2021). Even in Seattle where the minimum wage is $15, people are still paying an average of $1590 for a one-bedroom rental. So, you are paying more than half of your paycheck on rent. Workers also need access to affordable and reliable universal childcare. Childcare costs rose during the pandemic by 55%, and in Washington state the average cost went from $11,744 to $18,237 (Savransky, 2021). It is also estimated that 14% of Washingtonians income goes toward childcare. Overall, if we want people to work, we have to pay them a living wage and reduce the barriers that may be preventing them to work.  

References:

Filipovic, O. by J. (2021, June 2). Opinion: The real reason employers can’t hire enough workers. CNN. https://www.cnn.com/2021/06/01/opinions/covid-workers-labor-shortage-pandemic-benefits-filipovic/index.html.

Leonhardt, M. (2020, September 29). 64% of Americans changed their spending habits during The PANDEMIC-HERE’S how. CNBC. https://www.cnbc.com/2020/09/29/americans-have-changed-their-spending-habits-during-the-pandemic-heres-how.html.

McGrath, M. (2020, December 15). 10 things you absolutely need to know about student loans. Forbes. https://www.forbes.com/sites/maggiemcgrath/2016/01/05/10-things-you-absolutely-need-to-know-about-student-loans/?sh=77920c6f10d0. Savransky, B. (2021, May 19). Child care costs in Washington have risen 55% during pandemic. seattlepi.com. https://www.seattlepi.com/coronavirus/article/child-care-costs-in-washington-up-55-percent-15963654.php.

Glossary Building Post # 3

Glossary Terms:

• Misclassification of Employees (contractor jobs)
• Poverty
• Student Aid Bill of Rights

Finances are an integral part of everyday life, and everyone is a consumer when it comes to finances. Finances are not always easy to understand and consumers should be aware of certain terms and policies to better be able to protect themselves from debt and fraud. Terms such as the Misclassification of Employees (contract work), Poverty, and the Student Aid Bill of Rights are all important matters that consumers should be aware of in finances. Consumers should also know that financial health is not limited to just how much money an individual has, it also expands into subjects like employment, student debt, and poverty.

Did you know that over $14 million Americans are unemployed? Job hunting is often a daunting and expensive task for both individuals pursuing a job and employers offering employment. Consumers are vulnerable during job hunting, as time passes they slowly dig away at their savings. This could threaten to throw a consumer into a drastic financial situation if they go without a job for too long. No one wants to be out of a job for long, but consumers should be wary of offers that are too good to be true. Consumers seeking employment should be closely before accepting contract work. Some companies are illegally dubbing employees as contact workers rather than full-time employees to save on costs. By listing employees as contract workers the companies are saving revenue while depriving employees of important benefits. This practice is known as misclassification, an illegal and slow to fix exploitation of employees. Consumers should always thoroughly investigate a potential employer and any offered job before taking on employment.

What happens when you cannot find a job, and the savings are gone? This situation is a common one for many consumers. Poverty, actual poverty, is unfortunately a real problem in today’s society. Poverty is generally thought of as an inability to provide for oneself basic necessities such as food, water, or shelter. Say a consumer cannot find a job, the savings are gone, the kids are hungry, and the electricity has been cut off because they cannot pay the bill. This is a harsh struggle that many people have to deal with on a day-to-day basis. Poverty is not something that can or should be ignored, and it is definitely not something that will go away on its own. Consumers need to be aware that they are not immune to poverty, and that they should be putting forth efforts to combat poverty.

Financial difficulties are not only affecting those in the workforce, these days it is common for college students to accumulate tens of thousands of dollars in debt in the pursuit of higher education. Student debt can become overwhelming, consumers need to keep track how much they owe, make payments early (if possible), and to know the grace period once out of school. Consumers with student debt should also be aware of the Student Aid Bill of Rights. The Student Aid Bill of Rights is a bill that provides consumers with protection as borrowers, and establishes the consumers right to a fair, affordable, quality loan to utilize for education. This bill is important to consumers because it affords consumers the flexibility to base payments upon income and to have the loan forgiven after a set number of years (generally around 25 years). The is a huge benefit to consumers as it means that the payment amounts can be adjusted to the consumers income, and it also allows for a responsive student feedback system to help shape the system more effectively and to hold lenders accountable for the services they are supposed to provide.

 

Finance

After reading: A Crackdown on Cheating Companies, Debts and Deceased Relatives, and The Top 10 Student Loan Tips for Recent Graduates. I was mainly disappointed in how companies are easily able to misclassify employees in order to save money.

I can kind of relate to this because during my second year of community college, I picked up a ‘full-time’ shift at a Frontier Communications Retail store in sales. I was working at least 30 hours a week but without really any benefits. The reason behind that was because we we’re ‘contractors’ contracted through another company for Frontier. Every month, I would get a $150 stipend for ‘medical expenses’ and sometimes I would get gas mileage refunds for outreach. Since I was getting decent pay in addition to going to college full time, I didn’t really think much of it. After reading this article, I now understand that there is a definite difference between a contractor which is a worker who, while is hired from a company, makes their own schedule and a full-time employee who works at least 30 hours a week but should also be entitled to benefits. I think that it’s important for consumers to understand this difference because for a college student, good pay+commission and a stipend isn’t too shabby but for a parent who’s working hard to make ends meet and with no health insurance benefits or coverage, it can really make a world of a difference.

As a consumer, I’m really glad that the Department of Labor is stepping in to investigate companies that misclassify employees but also knowing that if a close relative, were to die tomorrow (KNOCK ON WOOD), the family members wouldn’t be responsible for their debt, with of course, some exceptions. I’m glad that today you are able to write a letter to a debt collector to stop them from contacting you when before (when we had landlines) they would constantly call over and over and over again. As for student loans, we are lucky to have informational resources like this article on tips for student loans.
I think that enforcing employee classification to limit and even put an end to employee misclassification will take major work by policy makers but also consumers. I think that consumers should be well-informed on their workers’ rights so that big corporate companies are not able to get away with it. As for consumers alone, being informed is major work in my opinion. Informed about student loans if they have any and debts for the deceased so that they are effectively able to make educated decisions.

Sources:

A Crackdown on Cheating Companies

https://parade.com/49312/parade/100411-a-crackdown-on-cheating-companies/

Debts and Deceased Relatives

https://www.consumer.ftc.gov/articles/0081-debts-and-deceased-relatives

The Top 10 Student Loan Tips for Recent Graduates

https://ticas.org/content/posd/top-10-student-loan-tips-recent-graduates

Finance Matters Prompt 1

I am a typical young adult, and like many other young adults these days I have college debts, bills to pay, and a job. I have always considered myself as okay with finances, but I have never considered myself a knowledgeable source. After reading the articles I have realized that I actually know very little about finances and I feel that there are some matters that are important to share with consumers. For example, consumers should know that for student debts it is better to pay off your bigger loans before your smaller loans and that it is better to pay on your loans while you are in school if possible. Student debt can be crippling, especially if you are not keeping track of your loans. It is important for consumers to keep track how much they owe, make payments early (if possible), and to know the grace period once out of school. Consumers should know if they are facing a difficult situation where they cannot make payments or cannot find a job that they can often contact lenders and place a deferment or forbearance to pause payments for a short while. This can help give the consumer time to sort out this situation, though they should know that interest will still be added to the loan amount during that time.

Also consumers should know that if they are seeking employment then they should be look closely before accepting contract work. Companies are dubbing employees as contact workers when they technically qualify as full-time employees. By labeling their employees as temporary or contract workers the companies are saving revenue while depriving employees of workers compensation, medical leave, unemployment insurance, and other benefits. Misclassification of employment is an illegal practice that is unfortunately common and is slow to fix. This will take effort from both consumers and policy makers alike. Consumers should look into the job before they accept it, and report the company if they believe the job to be misclassified. Policy makers should crack down harder on companies who participate in this illegal practice so that employees are not cheated out of their legal rights. With combined efforts of both consumers and policy makers in these matters, there can be change.

 

Understanding Fiduciaries

The fiduciary rule, something I personally have never heard of until today, seems like a no brainer. Apparently, financial advisors are allowed to give advice that is not in the best interest of their clients. Their advice will, in turn, benefit the advisors instead. All of this is 100% legal unless you are, what is called, a fiduciary. This is a term for a group of professionals that are legitimately required to put the clients’ interests and benefits before their own. This “fiduciary rule” seems like it should be an obligation for everyone in the financial advising world however, it sadly is not.

Both the articles, one written by Kathryn Lee and the other by Patrick Tucker, came down to the same conclusion. The fiduciary rule is, in fact, a good one. Tucker and Lee are in favor of fiduciaries and think that financial advisors, who do not work under this rule, are scammers and con-artists. I, myself, happen to agree with them. The article written by Lee was much easier for me to understand. She got right to the point and explained exactly what a fiduciary is and how the rule works. Lee also explained that it is legal for financial advisors to give one-sided advice to clients, which I was not aware of. Reading her article, I was able to pinpoint exactly which side she stood on as well as gain information I was uninformed of. The tone in Tucker’s article was too far over my head. I have very little knowledge in the legal world as well as the financial world, so it was difficult to comprehend much of the vocabulary he chose to use. It was also a challenge to identify which side Tucker took because of the lack of familiarity I had with his writing. I think that it is very important to understand that many clients go to financial advisors and fiduciaries because they are unaware of laws and legal terms. Which is why, regarding the readings, Lee’s article is more consumer friendly. If I was seeking financial help, I would now know to look for a fiduciary or be weary of all financial advice I was receiving.

Finance Prompt 2

Both “Last Week Tonight with John Oliver: The Retirement Industry is a Minefield – But Here’s the Answer” and “4 Arguments Against the Fiduciary Rule Debunked” both argue that the Fiduciary Rule would only be beneficial to consumers. The Fiduciary Rule is a professional obligation that requires financial advisers to put their client’s best interests ahead of their own. Before this rule was instated, many financial advisers were having their clients do things that are beneficial for the advisory and many of these clients had high interest rates, which according to “Last Week Tonight with John Oliver: The Retirement Industry is a Minefield – But Here’s the Answer” can add up as “paying a 2 percent fee, [could mean] losing two-thirds of savings over a fifty-year time period” (Lee, 2016).

Looking at both of these articles from a consumer point of view, the John Oliver one was easier to understand. As I am a 20-year-old Nutrition major, I know next to nothing about business, therefore, I know next to nothing about financial advisers and how they operate. I do recognize this as being a problem, however, I have always thought that I would start saving for retirement after graduating college, and that retirement worries can wait till then, for now I just need to figure out how I am going to afford housing, food, and gas at the same time. I think this may be true for many consumers this age, the exception being those who are studying business. If the consumer is well-informed or currently saving for retirement, then “4 Arguments Against the Fiduciary Rule Debunked” might be more helpful. For instance, in this article’s first point, it states that the government cannot reclaim a consumer’s assets “unless you’re a criminal” (“4 Arguments Against the Fiduciary Rule Debunked”). This was news to me as I thought that the government could reclaim anything and everything depending on the level of debt that person may be in. Another thing that I, and most likely many consumers, was unaware of is that “some advisers receive commissions for their financial counsel” (“4 Arguments Against the Fiduciary Rule Debunked”). While I knew that financial advisers needed to be paid by their clients, I was not aware that they could also take commission from the prosperous investments made by their clients. To summarize, I believe that “Last Week Tonight with John Oliver: The Retirement Industry is a Minefield – But Here’s the Answer” provides better baseline information for those who are uninformed about the business world whereas “4 Arguments Against the Fiduciary Rule Debunked” provides better information for those who are more informed about the business and retirement world.

Bibliography

Lee, K. (2016, June 14). LAST WEEK TONIGHT WITH JOHN OLIVER: THE RETIREMENT INDUSTRY IS A MINEFIELD — BUT HERE’S THE ANSWER. Retrieved October 25, 2017, from https://uspirg.org/blogs/blog/usp/last-week-tonight-john-oliver-retirement-industry-minefield-here%E2%80%99s-answer

4 Arguments Against the Fiduciary Rule Debunked. (n.d.). Retrieved October 25, 2017, from http://www.truemeasureadvisors.com/2016/04/20/20164145-argument-against-the-fiduciary-rule-debunked/