Money 1st: Big Ideas, Sound Advice, Tips, Tools and More
Three New Rules to Feed Good About
1. Student Loans Are Cheaper
The change: Starting July 1, all students eligible for federal loans can borrow directly from the government via their schools’ financial aid offices. (Previously some schools offered federal loans only through private lenders that got subsidies.)
How you benefit: The interest rate on federal loans that parents can take out (PLUS loans) is capped at 7.9% vs. 8.5% for private subsidized loans. Plus, bypassing a bank means simpler paperwork and, starting in 2014, more flexible repayment terms, says Mark Kantrowitz, publisher of FinAid.org.
2. Short Sales Are Shorter
The change: New rules require lenders to provide pre-approved terms for short sales (in which homes sell for less than the owners owe) for sellers who weren’t approved for a loan modification.
How you benefit: You’ll know the minimum amount the bank will take for these houses, so your bid is more likely to be accepted. That should speed up the sales process, says RealtyTrac spokesman Rick Sharga.
3. Credit Cards Are Less Fee-Crazy
The changes: As of Aug. 22 new Fed rules eliminate several egregious credit card fees, including inactivity fees. Issuers also can’t charge a penalty for inactivity on gift cards for a year. For details, see federalreserve.gov.
How you benefit: You can let a credit card gather dust in your wallet — and leave those gift certificates in there until you’re ready to use them.
—DONNA ROSATO AND BETH BRAVERMAN
Credit Watch: SHOULD YOU CUSTOMIZE YOUR CARD BENEFITS?
THE NEWS Now that you can customize anything from your ringtone to the color of your wall paint, credit card issuers are hoping you’ll do the same with the contents of your wallet.
THE DETAILS Discover recently launched CardBuilder, an online tool that lets users pick certain terms and rewards preferences. Citibank allows some customers to choose the rate and length of balance-transfer deals (such as 0% for six months or 3.99% for 15 months). And a new American Express card lets you rack up extra rewards for the purchase categories of your choice (double points at restaurants, for example).
BOTTOM LINE While it sounds like you’ll be able to snag every feature you want to create a perfect card, a build-it-yourself plan is mostly a marketing gimmick to get you to choose one from a lender’s existing stock, says Adam Levin of Credit.com. Instead, visit an independent card-shopping website such as nerdwallet.com. Just enter your criteria, and the site will scour the options from various issuers to find the best match for you.
—ISMAT SARA MANGLA
By the Numbers: WHEN RETIREMENT SAVINGS FALL SHORT
Most workers understand that they don’t have enough saved for post-work life. But they aren’t very realistic about coming up with a Plan B.
The Frugal Connoisseur: SPEND LESS… ON A CLOSE SHAVE
► MERKUR 38C BARBER POLE RAZOR; $47 AT CLASSICSHAViNG.COM
THE STRATEGY Buy a safety razor — yes, the kind Grandpa used. While the razor costs about five times more than the typical multiblade cartridge kind, its blades will run about $30 a year, vs. $50 and up for cartridge refills. Plus, a safety razor lasts a lifetime and looks a heck of a lot better on your bathroom shelf than a plastic one. Will you get a good shave? Absolutely — and you’ll be less likely to develop ingrown hairs, says grooming expert Nick Burns, co-author of The Bearded Gentleman.
WHAT TO LOOK FOR A razor that weighs 2 1/2 ounces or more, such as the classic Merkur (left) or the Edwin Jagger 89L ($35). Heavier models are less likely to nick because you won’t be tempted to press into your skin to get a close shave. Go for a handle that’s at least three inches long — it’ll be easier to grip.
SHAVE SMARTER Not all safety blades are the same. Feather blades, for example, are sharper than Derbys. So try a few options to find the best fit, says Mark Herro, who writes the shaving blog mantic59 .blogspot.com.
The Money Shrink: THREE THINGS TO TELL A NEW GRADUATE
One reason behavioral economics has become such a hot field is that it has scads of practical applications. It can help you fire someone, choose a great restaurant, or get other people to do the dishes. But at your child’s graduation from college or grad school, more important life lessons are in order. Three of them are based on the same insight: One of the hardest and most important things to do in life is to behave rationally — or, put another way, to know your limits.
YOUR CAREER: Heed your enemies. In your business dealings, the people with whom you butt heads are often those who have the most insight into you. If someone thoroughly annoys you, chances are he has a good sense of your faults (maybe that’s why you’re annoyed!) or holds a point of view you don’t often hear. Listen closely. Understanding the value of what your adversaries have to say will help you improve, giving you a big leg up.
YOUR INVESTMENTS: Buy and hold. People always like to think that they can beat the stock market. They’re almost always deluded.
No matter where you think the market may be headed, stick to a buy-and-hold strategy. You’ll make more money in the long run, in part because you’ll minimize your taxes and trading fees.
YOUR LOVE LIFE: Understand the odds. When you have an argument with your future spouse, about half the time you’re in the wrong. Grasping that hard-to-accept fact is one of the best ways to save yourself from a costly divorce. ■
Tyler Cowen is a professor of economics at George Mason University.