Nearly half of Americans can't afford a $400 emergency ... FICO has a new scoring model ... And more

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Welcome to MUTUAL INTEREST, the first place to check for all of the news and information you need to manage your money and build financial security. It also helps you understand what's going on in the economy, and how that affects you. This page is constantly updated, so bookmark it and come back often for the latest posts.

Nearly half of Americans can't afford a $400 emergency

If they had a $400 emergency, nearly 47% of Americans could not come up with the cash, according to a new survey by the Federal Reserve Board. And according to a 2014 Bankrate survey, only 38% of Americans could find the cash for a $1,000 emergency room visit or a $500 car repair. That means that a slim majority of Americans are on thin ice financially, notes The Atlantic

SECOND THOUGHTS: How are you doing financially? Do you know your net worth? Here are 7 ways to measure your financial success.
May 19, 2016

FICO announces a new credit scoring model

Credit-scoring giant FICO's new alternative scoring model gives people credit scores based on their payment history with phones, utilities and other bills. So if you've always been diligent about paying your bills on time, you're in luck. Called the FICO Score XD, it's designed to help lenders with a consumer base that has a strong record of paying noncredit accounts but little or no credit history, notes MarketWatch.

SECOND THOUGHTS: It's not only FICO that's experimenting with alternative credit scores. But if you don't want to rely on a lender using your alternative credit score, check out our 7 smart moves to boost your credit score and improve your life.
May 11, 2016

How much is a college degree worth?

When it comes to employment and wages, having a college degree makes a huge difference. And CNN Money recently displayed that fact in an easy-to-understand graphic. Fewer college grads are unemployed — 2.5% versus 5.6% of high school grads. College grads make more money — $1,227 a week versus $678 for high school grads. And they are more likely to have jobs — 82.6% versus 67.8% of high school grads.

SECOND THOUGHTS: No doubt about it — tuition is pricey. If you're planning on sending your kids to college, you need to start saving now. Find out if a 529 plan is right for your family .
April 15, 2016

Shady financial advisers are getting hit by Obama administration

The Obama administration has unveiled a new rule that requires retirement advisers to always act in the best interests of their clients. It's currently legal for advisers to get paid more money — a kickback — for getting their client to invest in a particular fund. Not anymore. "Brokers are salespeople. They sell whatever they and their firm make the most money on," Bill Harris, CEO of personal capital and former CEO of Paypal, tells CNN Money.

SECOND THOUGHTS: Fees for retirement advice can add up and eat away at your savings. Check out these 10 secrets to successfully save for retirement .
April 14, 2016

More Americans leaning on personal loans

The number of consumers taking out personal loans was up 18% in the third quarter of 2015 compared with the third quarter of 2013, according to the credit-reporting company TransUnion. It's estimated there are now around $82.52 billion in unsecured and $165.46 billion in secured loans. The rise in personal loans comes as fewer Americans have any kind of savings, notes Main Street. "Getting an unsecured loan may seem like a big win and an ability to borrow money with no strings attached," Priyanka Prakash, a finance specialist at Fit Small Business, told Main Street. "However, there are some real risks."

SECOND THOUGHTS: Unsecured loans that aren't backed by collateral typically come with higher interest rates. And that can make it tough to afford monthly payments. "The cardinal rule in personal finance is to live within your means," Katie Ross, education and development manager at American Consumer Credit Counseling, told Main Street.
March 16, 2016

How much do you really pay in taxes?

CNN Money put together a chart of estimated effective tax rates for 2015. It's often heard that the rich pay a lower tax rate than the middle class and that the poor pay nothing, but the chart indicates otherwise. Those who earn over $1 million a year have an effective tax rate of 27.9%. Those who earn less than $10,000 have a rate of 3.7%. And the rate for those in the middle, earning $50,000 to $75,000, is 11%.

SECOND THOUGHTS: This is a good way to gauge your effective tax rate, but keep in mind that everyone's situation is different when it comes to taxes — as you can see from some criteria used by CNN Money for the chart: "income" includes work and investment income and employer-provided benefits. And "federal taxes" refers to income and payroll taxes after tax breaks.
March 1, 2016

BofA is offering mortgages for just 3% down

It's a new program from Bank of America that's targeting low- and moderate-income borrowers who need home loans. Borrowers can get home loans for up to $417,000. To qualify, you'll need to make more than the median income for the area and have a credit score of at least 660, reports CNN Money. You'll also need a debt-to-income ratio of no more than 43%. The best part? No mortgage insurance. Most loans with less than 20% down require mortgage insurance, but BofA skips it.

SECOND THOUGHTS: It's a good opportunity for borrowers without much of a down payment. But keep in mind that it still pays to shop interest rates. You can shop for the most competitive mortgage rates in your area here.
February 25, 2016

Being a woman can hurt your credit

Despite the fact that women have less debt than men, they still have lower credit scores, notes The Washington Post. It could come down to the fact that men make more money on average than women. Women have an average credit score of 621 and men, 630, according to an analysis of 2.5 million users by the website Credit Sesame. And women have an average debt of $21,171 while men owe $25,225. But a bigger paycheck leaves men with more cash after the bills are paid and a lower debt-to-income ratio. Men also have higher credit limits in general.

SECOND THOUGHTS: The pay gap is a big issue, and it could be around for a while. The Institute for Women's Policy Research notes that women might not see equal pay until 2059.
February 24, 2016

New service offers unlimited flights, but it will cost you

OneGo is an all-you-can-fly subscription service that launched on Feb. 1. It offers unlimited service on 500 commercial routes around the nation for a flat fee, reports Quartz. How much? It'll put a $2,950 dent in your wallet each month. Of course, there are cheaper regional routes that start at $1,500 a month. But members also have to pay a $495 sign-up fee. Pricey. The airlines include Alaska, American, Delta, United, JetBlue and Virgin America.

SECOND THOUGHTS: You really have to be a heavy-duty traveler to benefit from this service. Perhaps some companies with employees who fly frequently will take advantage. But more than anything, this represents a shift in the subscription-based air travel market, which has grown since Surf Air launched in 2013, notes Quartz. Maybe someday air travel, like Netflix or Spotify, will simply be another subscription we pay. But for now, the cost is out of reach for most of us.
February 18, 2016

The priciest days to fly in 2016

Want to save on airfare? Avoid flying on St. Patrick's Day. According to an ABC News report by Rick Seaney, CEO of FareCompare, fares will see a major bump in prices on that day as the spring season begins. But that's not the only day on his list. For domestic flights, May 17, June 10, July 31, Aug. 22, Nov. 23 and Nov. 27 are all expected to be high-priced flight days this year. For trans-Atlantic trips, avoid March 17, May 17 and Aug. 22.

SECOND THOUGHTS: The conventional wisdom is to book early to save cash on flights. But Seaney advises against booking too early. "For domestic flights, purchase tickets between 90 and 30 days before departure. For international travel, you can start five months ahead but try to have your purchase wrapped up 45 days before departure," he writes.
February 12, 2016

Most Americans see a poor financial future for their kids

A whopping 56% of Americans believe that their kids will be worse off financially than they are, according to a survey by CNN Money and E-Trade. And 57% of Americans say the country is doing poorly. Yet the nation's jobless rate, at 5%, is down, and the past two years have seen the most job growth since 1999, CNN Money notes.

SECOND THOUGHTS: Perhaps the poll is the echo of the middle class. They simply aren't getting as much of the pie. In fact, after adjusting for inflation, the typical middle-class family doesn't take home much more than in 1995, CNN Money says.
February 8, 2016

Your odds of becoming a millionaire based on age, education and race

Middle-aged, college-educated Asian Americans have a better chance of becoming millionaires than those who are white, Hispanic or black, according to an analysis by economists put out by Bloomberg. And while everyone sees their chances increase with higher education, regardless of age, whites and Asians see better odds. "It’s a false narrative to say race doesn't matter in the United States," William Emmons, a senior economic adviser at the St. Louis Fed, tells Bloomberg.

SECOND THOUGHTS: Wealth is only one measure of accomplishment. "We all come out in the birth lottery with different endowments," Emmons tells Bloomberg. "Starting from that point, what can you do to move yourself in a direction you'll be happy with? That’s what we're really trying to get at."
February 4, 2016

Companies making employee wellness programs mandatory

Employers spent a record $693 per employee on wellness programs in 2015, up from $430 the previous year, according to data from Fidelity. These programs, often pitched as voluntary, are becoming anything but at some companies. For example, to get more employees to participate, plastics maker Flambeau threatened to cut off the health insurance of nonparticipants, notes Bloomberg. Under new guidelines from the Equal Employment Opportunity Commission, the maximum penalty employers can impose on nonparticipating workers is 30% of the total cost of employee-only coverage.

SECOND THOUGHTS: "You're seeing a real tension to basically incent people to live healthier lives so that they can use insurance less, and lose less days at work, and be more productive," Paul Secunda, a professor of law at Marquette University, told Bloomberg. "On the other hand, there's the medical privacy concerns of individuals."
February 1, 2016

Most Americans don't use their vacation days

Only 41% of American workers took a vacation last year, according to a recent survey by travel site Skift. Much of that is because many workers (especially low-wage workers) don't get paid vacations from their employers. Americans also fear what the boss will think. Around 20% of Americans felt they'd be letting their employers down by taking a vacation day, according to a survey by British Airways.

SECOND THOUGHTS: Another reason for the high number of Americans that aren't taking vacations is an under-reporting of vacation time because of memory lapses. "They don't feel like they got any time off," Jason Clampet, cofounder of Skift tells MarketWatch.

January 29, 2016

The priciest places to raise kids

The Economic Policy Institute says it costs anywhere from $50,000 to $100,000 per year for a two-child family to get by in the U.S., depending on where they live. And some cities are a lot more expensive than others. The EPI ranked 618 cities by the cost of living in each. The most expensive? Washington, D.C., where it costs a family of four $106,493 just to eke by. Nassau-Suffolk, N.Y., is the second most expensive at $103,606. And Westchester County, N.Y., is right behind at $99,592.

SECOND THOUGHTS: Child care is the most expensive line item for many families. In 500 out of the 618 areas EPI surveyed, child care was parents' biggest annual expense, MarketWatch reports. Child care averages $12,500 per year and climbs above $31,158 in Washington, D.C.
January 27, 2016

More students are graduating with loan debt

Around 70% of those who earn a bachelor's degree leave with student loan debt, according to new info from the White House. The outstanding student loan debt in the U.S. is $1.2 trillion — the highest level of debt behind mortgages. And the average student in the class of 2015 graduated with a debt of $35,051. What's more, 25% of student loan borrowers are in delinquency or default.

SECOND THOUGHTS: Student debt can really hurt your ability to build a nest egg. Use this student loan consolidation and debt payoff calculator to see how you can pay off your loans more quickly.
January 26, 2016

Planning a trip? Book your flight right now

Airfares are the lowest they've been in years. According to airline research site Hopper, airfares booked in January average about $210 per round-trip ticket, a 14% year-over-year drop. "That’s the lowest we've seen in the last three years," Patrick Surry, chief data scientist at Hopper, tells MarketWatch. Frontier is even offering tickets to Miami, Denver and Pittsburgh from a number of different cities for $19 (that's not a typo).

SECOND THOUGHTS: If you have to travel, even if it's months away, go ahead and buy a ticket. Can't buy a ticket right now? Keep in mind that the lowest ticket prices are usually posted on Tuesdays or Wednesdays. And ticket prices are generally higher in the spring and summer months.
January 25, 2016

Getting rid of the gender pay gap

Women earn about 79 cents for every dollar that men earn, according to the U.S. Census Bureau. The New York Times has some ideas on how to get rid of it. For starters, the paper says, publish people's salaries. When employers do that, the pay gap shrinks. Second, women should be encouraged to negotiate for wages. Men are paid more in part because they're more likely to ask for it.

SECOND THOUGHTS: The Times also says that women shouldn't rely on previous salaries to determine their new one and that work should be made easier for mothers. Flexible workplaces even come into the conversation. And if it comes down to it, the law should require men and women to be paid the same for similar jobs.
January 22, 2016

Driverless electric cars and ride-sharing are the future

According to the blog Stratechery by Ben Thompson, vehicle trends all point to the future of cars as "electrically powered self-driving cars, summoned from our smartphones, tak[ing] us where we need to go." Electric vehicles are going farther, software is starting to matter more than mechanical engineering and self-driving cars are on the rise. Yet, as Thompson notes, last year saw a record 17.5 million cars and trucks sold in the U.S. Sales records also were posted in China, India, the United Kingdom and Australia.

SECOND THOUGHTS: People are still purchasing vehicles, but it's more a matter of when, not if, the future will arrive, who will drive that future and why it will come, Thompson says. Some day in the not-too-far-off future, we'll be checking our smartphones while a driverless electric vehicle — that we don't own — takes us to our destination.
January 21, 2016

The index card plan for managing your money

A lot of the most pertinent advice for managing your money can fit on a 4-by-6 index card, The New York Times says. And most financial experts agree on four things: You must have an emergency fund, index funds should make up most of your investment portfolio, you should buy a home that you can afford and make sure to get life insurance.

SECOND THOUGHTS: Those items might be easy to write on a card, but they can be tough to accomplish. Millions of people lack an emergency fund, many still try to pick individual stocks, a lot of us purchase houses we can't afford and a good number of us ignore life insurance. But if you want to be secure in retirement, all of those things are important. Check out these 10 secrets to successfully save for retirement.
January 20, 2016

Liberal arts majors aren't destined to be baristas

Only around 9% of all recent grads ended up in low-skill, low-paying jobs like servers, cashiers, bartenders, cooks and baristas, according to a study by two economists at the Federal Reserve Bank of New York. And even those individuals didn't stay in those positions long — by age 27, they're typically out. However, nearly half of recent grads worked in a field after college that didn't require a degree — managers and supervisors in sales or business support. But more than a third earned more than $52,000 a year.

SECOND THOUGHTS: Regardless of your degree, once you're earning a paycheck, you've got to start allocating a portion of it to retirement. That's even if your company doesn't offer a retirement plan. Check out these 5 smart moves for a successful IRA.
January 18, 2016

Health insurance doesn't guarantee financial security

Around 20% of those under age 65 with heath insurance had problems paying their medical bills over the last year, according to a poll by The New York Times and the Kaiser Family Foundation. Around 53% of those without insurance said the same. Many families, especially those living paycheck to paycheck, simply can't afford the high out-of-pocket payments health plans often require.

SECOND THOUGHTS: Those without insurance are, undoubtedly, more vulnerable to medical bills than those with coverage. But many of the insured also struggle with medical bills. Medical debt, of course, is one of the single biggest threats to financial security. Use these 10 smart moves to save on health care.
January 14, 2016

We bought a record number of new cars and trucks last year

A record 17.5 million vehicles were sold in the U.S. in 2015. That tops the previous high of 17.4 million vehicles sold in 2002. Much of that was due to a strong demand for SUVs and pickup trucks, notes The New York Times. In December alone, manufacturers sold 1.64 million vehicles, a 9% increase from the previous year.

SECOND THOUGHTS: There are no signs of sales slowing. "The strong exit to 2015 bodes well, and we expect the market momentum to continue, with sales projected at 17.8 million in 2016," Christopher Hopson, an analyst with the research firm IHS Automotive, told The Times. If you're thinking about purchasing a new car, check out these 5 simple steps to get the best deal on a new car or truck.
January 13, 2016

It's easier to be a 1-percenter these days

It took just $429,000 in adjusted gross income to make it into the top 1% of household earnings in 2013, according to the latest IRS data. But that's less than the $435,000 it took in 2012. CNN Money notes that the drop could be attributed to higher earners shifting their income in 2012 to avoid tax changes that took effect in 2013. Going even deeper, it took $1.9 million to be part of the 0.1% in 2013 and $9.5 million to join the 0.01%. The top 10%? That only took $128,000.

SECOND THOUGHTS: Around 1.38 million households made up the top 1% in 2013, up from 1.36 million in 2012. That group also paid a lot in taxes, CNN Money says. The top 1% brought in 19% of all income but paid nearly 38% of all federal income taxes. Of course, it's important to note that high income doesn't necessary correlate to wealth. Making a lot of money doesn't matter if you spend it all on assets that decline in value. Here's how to be a smarter investor in your retirement plan.
January 11, 2016

Capital One is keen on suing its customers

No other bank sues its customers more than Capital One, according to a review of state court data by ProPublica. From 2000 to 2014, Capital One filed 56,054 lawsuits. By comparison, Citi — the bank with the second-highest number of filed lawsuits — filed only 15,579 during that time. The hardest-hit groups have been those who earn less than $40,000 a year, ProPublica says. And the suits are over debts as small as $1,000.

SECOND THOUGHTS: While Capital One has only the fourth-largest credit card portfolio in the nation, many of its cards are held by those with poor credit. In fact, it's the largest subprime credit card lender in the country, ProPublica says. That leads the company to be very aggressive at recouping losses.
January 8, 2016

You'll find gas for less than $2 a gallon in all but three states

According to new data from AAA, 71% of U.S. gasoline stations are selling fuel for under $2 a gallon. And drivers in Hawaii, Alaska and California are the only ones that won't find a single station with gas under $2. More than 16,000 stations are selling fuel for under $1.75 a gallon, and the average for a gallon of gas at the cheapest 1% of stations is $1.56. Plus, gas prices could fall another 10 cents per gallon over the next few weeks, until rising in late winter.

SECOND THOUGHTS: Gas is cheap. That means many of us have a few extra dollars in our pockets. And those extra dollars can, and should, go right to our nest eggs. Check out these 7 rules for a successful 401(k) retirement account.
January 7, 2016

Target will buy your unwanted gift cards

Target is partnering with gift card exchange site Cardpool to take those unwanted gift cards off your hands. But it will cost you. And it's not an exchange for cold hard cash. On a $100 Walmart gift card, for example, you'd get back an $85 Target gift card. The major upside? You no longer have a gift card in your wallet that you'll never use. Target will take gift cards from more than 600 brands. The program is available in 1,562 Target stores in the electronics department, CNN Money says.

SECOND THOUGHTS: Don't feel like Target is your only option. GiftCardGranny.com and CardCash.com are just two of several companies that offer gift card exchange services, CNN Money says. So if you get a gift card to say, Target, and you don't want it, there are other options out there.
January 5, 2015

The very rich shield billions in income, lowering their tax rate

Two decades ago, the 400 highest-earning American taxpayers paid nearly 27% of their income in federal taxes. By 2012, that had fallen to 17% — slightly more than the typical family making $100,000 annually, The New York Times reports. According to the Times, the ultra-wealthy have figured out a way to finance a system that shields much of their income from the tax system — the "income defense industry," as some call it.

SECOND THOUGHTS: The very rich have an ace up their sleeves when it comes to taxes. They can afford to pay lawyers, estate planners, lobbyists and anti-tax activists to exploit and defend tax maneuvers not available to taxpayers with lesser income, The Times says. For the ultra-wealthy, "our tax code is like a leaky barrel," J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee, tells The Times. "Unless you plug every hole or get a new barrel, it’s going to leak out."
January 4, 2016

Debt collectors are taking advantage of arbitration laws

Debt collectors get to have their cake and eat it, too. The Supreme Court ruling that consumers can be forced into arbitration is being used against us in new ways by debt collectors, notes The New York Times. Class-action suits are banned in arbitration, so debt buyers are using the courts to sue consumers and collect debt. Laws prevent those same consumers from pursuing a class action. Banks, car dealers, online retailers and even cell phone service providers have basically insulated themselves from being challenged on illegal or deceptive practices, The Times notes.

SECOND THOUGHTS: Debt collectors win 95% of these lawsuits, according to industry experts. Many defendants simply don't show up to defend themselves. "It's beyond hypocritical that the companies can use arbitration to avoid being held accountable in court, all the while using the courts to collect from consumers," Peter A. Holland, a lawyer who ran the Consumer Protection Clinic at the University of Maryland’s law school, tells The Times.
January 1, 2016

That year-end bonus you're getting may not be a good thing

In many cases, employers are giving year-end bonuses in lieu of permanent salary increases, notes MarketWatch. The average permanent salary increase this year is just 3%, down from 4% in 1995, according to Aon Hewitt. At the same time, variable pay, including year-end bonuses, now makes up 13% of companies' compensation budgets. "Employers have changed their compensation strategies for good, and we shouldn’t expect to see salary increases revert back to 4% or higher levels that were commonplace in the past," Ken Abosch at Aon Hewitt tells MarketWatch.

SECOND THOUGHTS: Stash that bonus away. If the only retirement plan your employer offers is a 401(k), you've got to make the most of it. And your bonus could get you that much closer to maxing it out. Use these 7 rules for a successful 401(k) retirement account to get started.
December 31, 2015

Whiskey, wine or beer, the cost for booze at bars is way up

It's always been cheaper to consume alcohol at home than at a bar, but according to the U.S. Labor Department, that disparity is growing. Indeed, prices for distilled spirits have jumped 51% since 2003 compared with a 12% increase when consumed in the comfort of your own home. The price of wine is up 44% over that time, and we even have to dig deeper into our pockets for a pint of beer, which is up 42%.

SECOND THOUGHTS: Why such an increase? When you consume libations at a bar, you're paying for service costs, more flavors and more styles of alcohol, notes CNN Money. "There's been a cocktail renaissance in this country," David Ozgo, senior vice president at the Distilled Spirits Council, told CNN Money. "People are buying higher-end products."
December 30, 2015

These are the benefit trends you'll see in 2016

Wellness programs will be at the top of the benefits list in 2016, according to U.S. News and World Report. That includes health and lifestyle coaching, smoking cessation programs and bonuses for employees who participate in fitness programs. Programs for financial health will also be big next year, along with high-deductible health care plans. And according to U.S. News, we'll also see more transparent retirement account fees and better automation and integration of benefits.

SECOND THOUGHTS: Transparent retirement account fees are certainly a boon for savers. But higher health care costs can really eat into your nest egg. Check out these 10 smart moves to save on health care.
December 28, 2015