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  • Archive for December, 2008

    Money Minded Gifts: Financial Planners

    Thursday, December 18th, 2008

    Are you trying to give the budget conscious friend in your life something a little more exciting than cash? One option may be arranging a session for them with a financial planner. A financial planner can help your friend create a plan to save for retirement, start a budget, or offer solutions for their current financial issues. There are two kinds of financial planners: Fee Only and Commission Based. Fee only financial planners charge a flat fee or an hourly fee for financial advice. They do not receive commissions from mutual funds or other financial products that they recommend. Commission based planners receive a commission on the investments they sell, so they may be biased towards investments that will offer them a commission. A Fee Only financial planner is a good option if you’re purchasing a session for a friend, since you’re able to buy one session at a time and they’re less likely to be biased. But make sure you ask how they’re paid: One survey found that some planners that called themselves “fee-only” were receiving commissions on investments they sold.

    Because a session with a financial planner can be pricey, Candice Choi at the AP recommends “pooling resources with friend or family” and asking if the planner offers gift certificates. You may also want to find free financial planning clinics that you could recommend to a friend. Add your recommendation to a holiday card and maybe a financial planning book, and you have a financially savvy, money-minded gift for your friends and family. To find free financial planning clinics, check the Certified Financial Planner Board website. The CFP’s clinics only use certified financial planners and the clinics are completely free of charge.

    The Economic Recession and its Impact on the Educational-Loan Industry

    Tuesday, December 16th, 2008

    As a college senior, Laura Myers is well-versed in taking care of business. A student at the George Washington University in Washington, D.C., she has juggled the roles of student, athlete and intern with the characteristic deftness of the modern day overachiever. Unfortunately for Myers, this year’s mid-semester crunch brought more than exams and early morning swim practices; in October she received notice from the Office of Financial Aid that the lender for her Stafford loan was no longer offering government-insured loans.

    “It was a bad surprise that totally threw off all of my finances. I had to take out a loan to pay my rent for the month,” Myers said.

    Myers is not the only student who was forced, mid-semester, to re-apply for a federally guaranteed student loan from a different lender. According to Jane Bryant Quinn of the Washington Post, approximately 70 private and nonprofit lenders have ceased to offer government-insured loans. Unable to acquire the funds to lucratively sustain these programs in the wake of the economic crisis, these lenders have begun to pull out of the educational-loan industry.

    Typically, education loans are securitized following dispersion. The loans can then be invested by stockholders with the intent of accruing the interest, according to Finance professor Ehud Ronn of the University of Texas at Austin. Because of the current financial atmosphere, such investments have tapered off drastically. This causes the loans to dry up, so to speak. Fortunately, measures are being taken by the government to assuage current circumstances. In early November, the U.S. Department of Education announced that it will purchase $6.5 billion in “federally guaranteed student loans from the 2007-08 year to ensure loans remain available to students in the future.” This plan aims to buy upwards of $500 million in loans weekly until February 2009.

    If you intend to borrow money through the private, FFEL market, be warned that you will be faced with increased restrictions and less than liberal lending practices. According to Quinn, those most susceptible to this new level of conservative lending are students with low credit scores (less than 650 out of 800), new borrowers and those who have parents with “adverse credit histories.”

    If you are worried about your prospects for attaining a Stafford or PLUS loan through FFEL, contact your university’s aid office for assistance. They can offer you information on the lenders that are still in the market in addition to such alternatives as the Direct Loan Program, a program that allows parents and students to receive loans directly from the Department of Education instead of having to go through the banks.

    Job Opportunities Amidst the Recession: The Merits of Career Roads Less Travelled

    Thursday, December 11th, 2008

    In the wake of the current economic recession, employment prospects seem mediocre at best. Recent large-scale layoffs seem to be unfavorable indicators of employment for recent and future college graduates. While the current economic atmosphere can certainly be disheartening, there are jobs out there. If you’re in the market for a new position, you may want to consider alternative career routes that can offer lucrative and fulfilling roles.

    In recent years, the term social entrepreneurship has been used to describe ventures that “generate some of their own revenues and use business techniques to address social goals.” Essentially, such projects are non-profits that apply smart business practices in order to achieve the highest level of social impact.

    Drew Chafetz, a University of Colorado graduate, is an example of a young social entrepreneur. Chafetz created his own nonprofit organization called love.futbol at the age of 25. Love.futbol aims to bring soccer fields to impoverished communities where recreational space is scarce. To date, this organization has built three fields in Guatemala.

    Projects such as the one established by Chafetz are not trifling affairs. According to the Washington Post, over 30 business schools have established social entrepreneurship programs. Pamela Hartigan, author of “The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World,” believes a certain business sense allows those like Chafetz to achieve more with respect to their social endeavors. “Young people today…believe that change is going to be brought about by business and market discipline,” says Hartigan.

    Even those who are typically viewed as stakeholders in the profit-driven business world are singing the merits of social entrepreneurship. Bill Gates, co-founder of Microsoft, is a proponent of nonprofits that practice business strategies. According to Gates, “creative capitalism” can result in increased social impact. If you’re entering the workforce and have an interest in social issues, you may want to consider researching social entrepreneurship. Amidst the current atmosphere of shrinking job opportunities, the social enterprise realm continues to flourish.

    WISER

    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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