An Open Letter to Chicago

Dear Chicago,

You really screwed over your millennials.
And it’s a shame because we love you, but that love is starting to waver.
Remember what you did about 60 years ago?
When city unions bribed politicians with votes in exchange for (outrageous) pension benefits that you couldn’t afford?
You knew it wasn’t right, but you did it anyway.
You promised police officers, firefighters, and teachers ridiculous amounts of retirement money that you couldn’t. afford. to give.
Now those people are retired, and you’re $20 billion short on delivering your promises.
Twenty. Billion. Dollars.
Chicago, your annual budget is $9 billion!
What were you thinking??
Worse, you expect my generation to pay for your carelessness.
You basically racked up a $20 billion credit card bill, and then asked us to pay for it.
Oh sure, go ahead, deny it.
But you know as well as I know that millennials will end up paying the price.
And Chicago, that really pisses us off.
We don’t like paying for taxes that go nowhere and serve no greater purpose except to make up for your bad behavior.
You foolishly spent not only retirees’ money, but also their kids’ money.
My money.
And you spent it before we were even born.
Seriously??
Here we are facing exorbitant college tuition costs, while everyone around us complains about how much millennials complain, and YOU my beloved city… YOU just royally screwed us.
Just as we’re starting our careers, families, post-academic lives.
Well guess what, Chicago?
We are your future, and we matter.
Whether we stay or leave matters.
Don’t raise our taxes.
Don’t file for bankruptcy.
Figure this out like an adult.
And leave politics out of it.

Disclaimer: The letter above is an attempt to make an enormously complex issue simpler. For those just tuning in, last month, the Illinois Supreme Court ruled against Mayor Emanuel’s plan to cut benefits and force city employees to contribute  more into their retirement – calling it unconstitutional. Now, Emanuel and his team must find another way to make up for a $20 billion shortfall in retiree benefits – a burden that will most likely fall on taxpayers. The question is: how much? 

Tune back in next week for a closer look at the issues and what it all means for us.

–P.S. Cheap Wine and Coffee now has a Facebook, Twitter and Pinterest page. For anyone wanting more conversation than the blog allows, I post on Facebook and Twitter daily and hope you’ll join me! 🙂

Advertisements

Anthem Presents Big Problems, Few Solutions

Unless you’ve been living under a rock, you’ve probably at least heard the name “Anthem” being tossed around in news headlines or on social media. If you haven’t, start reading about it here, here and here.

Simply put, the Anthem attack is both frightening and fascinating.

It begs the questions:

  1. Could the attack have been prevented? Many computer science experts and privacy specialists are saying no.
  2. Will it happen again? In his coverage of the situation, investigative journalist and privacy expert Bob Sullivan warns everyone, “The Anthem health data leak isn’t the Big One – that’s still coming, believe me.” He adds, “While Washington D.C. bickers over a new privacy law that enacts technological-era change at a glacial pace, hackers are running circles around our nation’s companies. Nobody I know who works in cybersecurity thinks things are going to get better.”
  3. What can victims do to protect themselves? Unfortunately, not a whole lot. Part of this has to do with the fact that there’s no telling when people’s identities will be forfeited – it could happen today, tomorrow or months or even years from now. According to Anthem, victims should take advantage of its free credit monitoring and identity protection services and immediately report suspicious activity if they see it. Spokespersons from companies such as Experian and Hotspot Shield suggest taking this a step further by also signing up for fraud alerts or even a credit freeze (until credit is needed again). None of this, as you can guess, is convenient or fun.
  4. How can this be prevented in the future? That’s the million dollar question, and the answer is anything but easy. To again quote Bob Sullivan – one of my favorite journalists – “fresh thinking is the only way through this problem.” He writes that as millions of Americans face compromised identities, “the right way to deal with [this] is simple: We need to devalue the stolen information. One modest proposal you will hear is to simply make all Social Security numbers public, thereby ending once and for all their use as a unique and ‘secret’ identifier.”

The suggestion to make social security numbers public is indeed bold and fresh. How that would work remains to be seen, but Bob and other experts hit the nail on the head: Without fresh, original thinking here – the kind that completely turns the tables on cyber criminals – America is going to be in for a very long, tough and frustrating battle against hackers, and who knows how damaging that could be.

A 3% Down Payment Sure Does Sound Attractive…

DISCLAIMER: This post is for people (like me), who know absolutely nothing about buying and financing a home.

A 3% down payment sure does sound attractive…. however, think carefully before you leap. Last month, two government-backed mortgage giants, Fannie and Freddie, announced a new loan program targeting first-time home buyers.  Under the program, a buyer could put down as little as 3% for a home. (So in theory, if you wanted to buy a $300,000 home, under this program, you’d only have to put down $9,000 – a down payment that is massively smaller than paying the traditional 20% down payment at $60,000. And yes, the latter takes years to save up for).

Several respectable media outlets covered the news, including the Washington Post, USA Today, AOL and TIME. When I first saw the headlines, I’d be lying if I said I wasn’t immediately hooked. If the new program is as good as it sounds, why the hell wouldn’t I buy?? Luckily, my parents raised me to be… suspicious.

However, without knowing anything about mortgages, finding the “catch” in the stories referenced above wasn’t easy. Which is a shame, because journalism owes it to the public to be more thorough and objective.  The stories all noted that under the new program, first time buyers would have to pass strict criteria, including good credit scores (620-650+) and completion of a home-buying education program. Easy enough.

But after digging more deeply, I came across this Consumer Affairs article that finally, more clearly identified the “catch.” Reporter Mark Huffman points out:

Because of the small down payments, these loans will also require private mortgage insurance (PMI) or other risk sharing. On a 3% loan, consumers should expect to pay a little over 1% of the loan as premium. In our example of a home costing $130,000 with $3,900 down, PMI would add about $110 to the monthly house payment.

Finally, a better picture of what a small down payment actually means for buyers! Thank you, Mr. Huffman. To make this a more realistic scenario (since $130k homes are rare in Chicago), that means for anyone interested in buying a $300,000 home, PMI could cost $3000 a year or $250 monthly on top of regular mortgage payments. (Note: This is money that is just paid and lost; it goes nowhere). Not to mention that a small down payment significantly drives up the monthly cost of your mortgage.

After digging even further, I found another helpful article that details another reason why first-time home buyers should avoid PMI. In addition to the cost, it talks about the negative tax consequences PMI has for couples who earn more than $110,000 annually together or $55,000 annually separately. Check it out here.

While I don’t want to automatically write off programs that accept small down payments, the moral of the story is to research, research, research! Otherwise, maybe we’d all end up like this individual:

… I was very ignorant when I purchased my 1st house at 25 years old! A combination of empty/mis-leading promises from my mortgage broker and just being so excited to be a homeowner got me into SERIOUS financial trouble!

I have been in my home for almost 5 years and have been paying $500 per month in PMI. I was told it would automatically end after 2 years. My monthly mortgage payments are about $1700 per month with PMI for a little two bedroom townhouse in Hudson, WI.

You can read the rest of this person’s story here, but you get the idea. Although a 3% down payment sounds wonderful on paper, it would take a lot of research and math to figure out if it’s actually worth doing over renting and/or saving for a more traditional down payment.

Thoughts?

 

Financial New Year’s Resolutions

Champagne glasses against holiday lights

I know, I know… not another NYE article! This time of year, it seems like every marketing department that ever existed has found a way to turn their products and services into New Year’s resolutions. Some of the especially dry ones include resolutions for medication management, vehicle maintenance, and lawn care. (And for those feeling overwhelmed, don’t worry, there are apps to help you keep your New Year’s resolutions too!)

But on a more serious note, I believe there are three areas everyone can and should be continually working on:

  • Your Relationships (with family, friends, co-workers, etc.)
  • Health (through nutrition and exercise)
  • Your Finances (by paying yourself first)

Even if you’re already pretty good at these areas, there are probably still ways to improve.  To make New Year’s resolutions that stick (and to achieve them), consider the following criteria:

  1. They should be specific (I will pay off $100 of debt monthly versus I will get out of debt)
  2. They should be realistic (I will eat 1-3 servings of fruits/vegetables daily versus I will quit eating meat, dairy, and processed foods)

Overall, I think the best New Year’s resolutions are ones that build upon the things you’ve already been working on, instead of going from zero to hero. Let’s say, worst case scenario, you have ample credit card debt and student loans and nothing in retirement or emergency savings. Instead of tackling all of these in one year – which would overwhelm anyone – try tackling just one of them. “In 2015, I will begin contributing 11% of my paychecks to my 401k” or “In 2015, I will put aside $300 monthly into emergency savings.” Then in 2016, build upon the progress you made by further increasing your retirement contribution, saving for another goal, or aggressively tackling student loans.

I personally have five financial goals for 2015, although I don’t expect anyone to create that many! Two of mine are below:

  • I will increase my 401k contribution to 12% in March
  • I will increase my 401k contribution to 18% for my 30th birthday (quite the gift, I know)

Whatever yours may be, feel free to share them and party with me next December when we’ve accomplished them!

 

This One is for the Ladies

230_min

A few weeks ago, I ran into an old acquaintance from college – someone I haven’t seen in years. He had recently moved into the area, and knowing I also lived in the area, asked which streets I live at.  When I told him, he immediately followed up with, “What does your boyfriend do?”

Already, I’m sure women reading this are nodding knowingly. It happens far too often, and is a conversation I’ve had multiple times with other women. If you’re a single woman, no one asks what you do. If you’re in a relationship, people ask what your husband or boyfriend does.

For some (somewhat) important background, Bryan and I live in the heart of Wicker Park at Hoyne and Division. For those not familiar with the intersection, it’s a beautiful area. In fact, the block we live off of may be one of the most beautiful blocks in Wicker Park – full of mansions and single-family homes. That said, Bryan and I rent – we could never afford to buy in this area – and although I’m certainly proud of our 2 bed/2 bath garden unit, I wouldn’t say our rent is steep.

Still, when I run into acquaintances and they hear where I live, they always ask what Bryan does. We’ve only lived together for 4 months, but this has already happened 5 or 6 times. The first few times, I didn’t put it together. By the 5th or 6th time, I realized they were trying to figure out how we could “afford” the area we live in. And it’s always, “Where do you live” followed immediately by, “What does your boyfriend do?”

For the record, I’m a pretty career-driven woman who loves my job and am proud of what I do! (And if you’ll allow me to brag for a second… I’m also damn good at it). I wouldn’t say I make a lot, but I would say I make more than I ever dreamed I’d make. The next time someone asks me what Bryan does, I’d love to say, “He’s actually not working right now – he quit his job to write a book – something he’s always wanted to do – and we’re actually living comfortably off my salary.” Just to see the guy’s mouth drop. (…This is pure fiction, of course).

But the truth is, I do make a decent salary, and although Bryan is a wonderful, supportive boyfriend, he doesn’t support me financially. Yes, he treats me to the occasional romantic dinner because we’re dating, but we still split our living expenses down the middle.

Regardless of salary or living situation, it’s time that men “got with the program” and started taking women’s careers seriously. We live in a very different world today – one in which both men and women bring home the dough. Although not every guy fails to ask a woman what she does, most do. (If you don’t believe me, just ask your wife/mother/daughter/sister/friend/colleague. I bet every single one of them has multiple stories like this).

As for us women, I think part of the problem is that we sometimes pretend we aren’t as successful as we are – something we must stop doing if we want to be taken more seriously. To circle back to the beginning of this blog, when my college acquaintance asked me about Bryan’s job, I just answered it and the conversation moved elsewhere. But I could’ve said something like, “We actually both started new jobs this year. He joined X, and I joined Y, and we both love it. It’s been a great year.”

To close… I wonder what women dating or married to other women would say about this issue. Do they get asked at all? Or do men take their careers more seriously? If taken more seriously, I say hell yes.

 

Stay Alert Out There, Folks

I’m not talking about while jogging in the dark or during inclement weather, although that’s important.

I’m talking about how corporations are acting pretty sneaky these days. If you haven’t heard, Starbucks is selling $200 silver gift cards. Aka, a gift card made out of silver, with just $50 loaded onto it for coffee. (You can read more about that here).

In addition, Comcast is causing controversy by forcing customers to upgrade their modems. When people click on a link promising more information, they’re hit with the following notice, “Great news! You have already placed an order to upgrade your current modem. Your order will be processed in approximately 24-72 hours and, if eligible, your easy to use self-install kit will be automatically shipped in approximately 2 to 4 weeks.” (More about that here and here).

It reminds me of my own experiences earlier this year with Discover (the credit card company). Now I love Discover, but I haven’t always loved them. I think the company does a lot of great things, such as their 5% Cashback Program. (But more on that later).

However sometime in January 2014, after paying off almost all of my credit card debt, I noticed that Discover was charging me bogus fees under the names of “Wallet Protection” and “Payment Protection.” Um, what? I definitely didn’t remember ever signing up for anything under these names. I also, unfortunately, had never checked my credit card statements, so I never realized that they’d been charging me these fees monthly. (Rookie mistake – always check your credit card statements).

The fees always varied – from as little as $3.99 to $7.99 a month. Still, small fees add up. When I called Discover and politely asked them to “un-enroll” me from the programs, they promptly offered to reimburse me for all of the times I was charged for these programs. Which was great news for me! (I have a feeling I wasn’t the first person to bring this up). Sure enough, about a month later, Discover reimbursed me more than $500 in bogus credit card fees. It kind of felt like Christmas again in February.

But the point is that these fees should never have been charged in the first place, and that it’s important to keep an eye on your transactions – all of them – so that you can catch these types of…. “discrepancies”… when they occur. As for the Starbucks gift card… I’m pretty sure all of us could find a better way to spend $200.

Now go check your credit card statements!! …and let me know if you catch anything.

ThinkstockPhotos-467054040

 

The Easiest Retirement Calculator Ever.

fullsizerender-37

I’m going to be completely transparent here: I did not do the best job saving for retirement in my 20’s. Or even a good job, for that matter. I did an okay job when I was 24/25, but then took like a 4-year hiatus. (My brother-in-law, an actuary, is probably reading this and dying).

Although some of my reasons are legitimate, others are excuses. Yes, I was broke, struggling, and battling credit card debt. But I could’ve done better. Lived below my means. Saved more.

I’m not going to be too hard on myself though. I’ve mentioned it before, but I think it’s crazy that society expects 20-something year-old’s to be so self-disciplined while figuring out their careers, life, love. I certainly don’t judge anyone for the financial decisions they made or didn’t make in their 20’s.

But, for anyone who needs to “make up” for lost time or who just wants to do a retirement “check-up”, the CNN Retirement Calculator is the best of the best. Forget about plugging in a whole bunch of information that just ends up confusing you more. All this calculator asks is your current age, your desired retirement age, the amount you’ve saved so far, your current income, and the percentage rate at which you’re saving. In just a few wonderful clicks, the calculator does the math for you and tells you whether you’re “falling short” or “on the right track.”

For me, as you’ve probably guessed, it was “falling short.” Worse, according to the calculator, I need to consistently save 18% of my salary beginning now until I retire. 18 percent! I was shocked when I found this out, but I’ve since recovered and accepted it.

Remember, since retirement contributions are pre-tax, saving for retirement really isn’t as hard on your paycheck as you might think.

CNN Retirement Calculator

So go ahead, give it a try! Play around with the “Savings Rate” slide at the bottom to see where you’re at, retirement-wise. Then, make adjustments. That’s the most important part: make the adjustments.

Yes, there are a lot of factors involved: The calculator assumes you’ll live to age 92 (you could live longer) and that you’ll live comfortably off 85% of your pre-retirement income. But if you’re like me and math gives you a headache, this is a great, simple way to track your progress.

And who doesn’t love more simplicity when it comes to finance?!