Jobless rate falls to 7 year low ... Stop working yourself to death ... Is your 401(k) safe during a volatile market? ... 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.

The unemployment rate is the lowest it has been in 7 years

At 5.1%, the August unemployment rate is the lowest in 7 years, the Labor Department said today. It’s nearly half of the 10% level we saw during the Great Recession. The economy added 173,000 jobs in August, but that number is below economists’ expectations. Wages grew by 2.2%. And while that’s in line with expectations, it was below the Federal Reserve’s target of 3.5%.

SECOND THOUGHTS: The numbers are good, but are they good enough for the Fed to start raising rates in September? Unfortunately, this report makes the picture a little muddier, especially with wage growth being under the Fed’s target. There were already concerns about a global economic slowdown and stock market volatility, and the jobs report may have reinforced those concerns, notes CNN Money.
September 4, 2015

Working more than 55 hours per week is really bad for your health

If you want to decrease your risk of stroke, work 40 hours a week or less, says The Washington Post. According to a study published in the British medical journal Lancet, people who worked more than 55 hours per week had a 33% higher risk of stroke than those who worked 35 to 40 hours. Their risk of coronary heart disease was higher, too — by 13%. The Post also points out at least a half dozen other studies that link overwork to all sorts of ailments — type 2 diabetes, poor sleep and risky alcohol behavior.

SECOND THOUGHTS: Work-life balance is a crucial component of productivity. Working super-long hours doesn’t really make a difference in productivity output anyway. One study published by a Stanford researcher showed that after about 55 hours per week, productivity plummeted, with no difference in output for those who worked 70 versus 56 hours, notes The Post. So do your work, but then take it easy.
September 3, 2015

Emotion hurts your stock returns more than the market

Your emotions are hurting your stock returns more than the market. The New York Times points out that loss aversion can have a huge psychological impact on those invested in the stock market. Losses yield around twice the psychological effect of an equal gain. At the daily level, the stock market can seem like a rollercoaster. But historically it’s done very well. Stocks have risen nearly every decade since 1900 with only two exceptions, notes the Times.

SECOND THOUGHTS: Stop checking your portfolio 24/7. If you buy your stocks when their high and sell when they drop, you’ll only lose money. So when it comes to the current stock market, take the advice of behavioral economist and Times contributor Richard Thaler – “Inhale, exhale. Repeat. Then watch ESPN.”
September 1, 2015

Is your 401(k) safe during a volatile market?


August 31, 2015

Despite all the craziness, stocks end week with gains

We can understand why that might be more than a little surprising after what Marketwatch called one of "the most tumultuous weeks of trading in recent memory." But it's true. Stocks ended the week with modest gains. The Dow Jones Industrial Average was up 1.1%, the S&P 500 gained 0.9% and the Nasdaq Composite 2.6%.

SECOND THOUGHTS: Of course, that wasn't enough to wipe out losses from earlier in the month. Although August is usually a middling month for the markets, over the past six years it has produced several big downers. And with just one trading day left in the month, September is just around the corner. Historically, it is the stock markets' worst month. So be prepared to ride out another wild month.
August 29, 2015

Surprise! Airline tickets are getting cheaper

According to new government data, airline ticket prices have dropped by 5.6% over the last 12 months. In July, they fell at the steepest rate since 1995. And they are likely to drop even more as the busy summer season ends. How much less can we expect to pay now than a year ago? About $10, according to data from private research firm Hopper. The firm also notes that overall, ticket prices are likely to end up about 5% cheaper than we saw in 2014.

SECOND THOUGHTS: Surprised? The airline industry hasn’t exactly been outstanding lately. It seems as though it’s doing everything to increase prices for travelers and make things even more uncomfortable — checked-bag fees, less leg room and Delta’s latest move to kick standard seat assignments to the curb. So we should enjoy this nice price break while it lasts.
August 28, 2015

Market turmoil makes interest rate hike less likely next month

William Dudley, the influential chairman of the New York Federal Reserve Bank, says turmoil in global financial markets has reduced chances that the Fed will start raising interest rates in September. But Dudley told a press conference that a rate increase remains on the table at next month's policy committee meeting and he still expects the process of "normalizing" interest rates to begin this year.

August 27, 2015

College grads snag just about all of the 'good jobs'

According to a new report from Georgetown University, 97% of the “good jobs” created since 2010 have gone to those with at least a bachelor’s degree. The study defines “good jobs” as those paying a median $42,700 or more (in 2013 dollars). That moves up to $53,000 annually for full-time, year-round work. "The numbers are clear: postsecondary education is important for gaining access to job opportunities in the current economy," researchers wrote in the report.

SECOND THOUGHTS: This is more proof that it pays to get a college degree. Of course, if you’re a parent and want your kid to have a shot at college — without taking on too much debt — you’ll need to start saving. Here’s how to figure out if a 529 plan is right for your family.
August 26, 2015

New home sales surge as loans remain cheap

Purchases of new homes posted their biggest gains of the year in July, climbing 5.4% to an annualized rate of 507,000 sales. The Commerce Department said the average selling price rose by 2% to $285,900. Economists expect the demand for new homes to keep growing, with unemployment and borrowing costs low and relatively few existing homes on the market.

SECOND THOUGHTS: Anyone out to buy a home should be delighted to find that mortgages are cheaper than they were last August. That's surprising because it's been almost a year since the Federal Reserve ended a campaign to drive down long-term interest rates — a move that was widely expected to push mortgage rates higher.
August 25, 2015

Should you tip your Uber driver? If you don't, your rating might suffer

Just as we give our Uber drivers a rating of up to five stars, they give us a rating. And as it turns out, not tipping your Uber driver can lower your rating, at least according to a recent story on MarketWatch. Uber’s app does not have a tipping option, so all tipping must be done in cash. And while many assume that tip is included, it’s not. That’s causing some major confusion in the marketplace. In fact, some drivers are even starting to expect tips.

SECOND THOUGHTS: Whether or not to tip your Uber driver is a debate among many right now. Of course, the major appeal of Uber is that it’s seamless — no cash, no signing, no receipts. The app does everything. If Uber drivers are going to start expecting tips, perhaps the company needs to include a tipping option in the app, or better yet, tie the tip in with the ride total. What will happen if you don’t tip your Uber driver? You might get a lower rating — say, 4.6 out of five stars. But if one driver won’t pick you up, chances are the next one will.
August 24, 2015

Another year of ho-hum raises on the way

According to a survey of large employers by Towers Watson, the average pay raise next year will be around 3%. That’s typical of what we’ve seen in recent years, notes CNN Money. And while it’s not the biggest bump we’ve seen, it’s still well above inflation, which was just 0.1% in June — 1.7% excluding food and gas prices. Only 1.9% of companies are expected to skip raises altogether. The best employees can expect a bump of 4.6% next year, while average ones will see just 2.6%. Below-average workers will see a jump of only 1%.

SECOND THOUGHTS: Use that pay bump wisely. Stick it in savings. If you’ve been getting along fine on your current salary, it makes sense to tuck away a little more money for retirement. If you’re diligent enough, you may even reach the $1 million mark in your 401(k).
August 23, 2015

Long bull market could be ending

Fears that China is leading the world into an economic slowdown drove Wall Street to its steepest one-day drop in nearly four years on Friday and left the Dow industrials more than 10% below its record high set in May. The summer selloff suggests investors are growing nervous about paying high prices for stocks at a time of minimal earnings growth, tumbling energy prices and an expected interest rate hike by the Federal Reserve.

SECOND THOUGHTS: Markets go up. Markets go down. The most critical thing new investors should have learned from the financial crisis and recession of 2009 is that you can't panic and bail when share prices fall. That's the equivalent of buying high and selling low, and it's no way to build wealth.
August 22, 2015

Middle-class families hurt by changing student aid formula

Over the past few years, changes to part of the government’s financial aid formula have cut financial aid eligibility for many middle-class families, notes Bloomberg. The changes impact the Asset Protection Allowance (APA), which has to do with shielding certain assets that aren’t held in a retirement fund. A higher APA means a family can subtract more from its net worth and increase the chances of qualifying for need-based financial aid. But the APA limit is falling, and many families no longer qualify for aid.

SECOND THOUGHTS: The APA calculation is confusing. But if your family’s eligibility falls next year, you’ll know why. Also keep in mind that a state-sponsored, tax-free college savings plan can really help with that tuition bill. Here’s how to figure out if a 529 plan is right for your family.
August 21, 2015

The CEOs who make the most compared with their workers

The SEC recently ruled that corporations will soon have to disclose the ratio between how much they pay their CEO and how much they pay their average worker. That rule hasn’t yet been implemented, but Bloomberg did some research on its own and put together a chart of companies whose CEOs make the most compared with their workers. It turns out that McDonald's is the worst of the bunch. The fast-food chain’s CEO-to-worker pay ratio is 644 to 1. That’s well above the second-place contender, Community Health Systems, whose ratio is at 414 to 1.

SECOND THOUGHTS: At the 350 largest U.S. companies, average CEO pay surged 997% from 1978 to 2014, according to data from the Economic Policy Institute. Meanwhile, non-supervisor employee pay has jumped by just 10.9%.
August 20, 2015

Men will suffer most as robot workers take over jobs

Machines will take over 47% of today’s jobs within a few decades, according to a new report from two researchers at Oxford University. And men will take the biggest hit. The researchers analyzed skills required for more than 700 occupations and found that jobs typically performed by men are most at risk. Jobs held by men often involve perception, manipulation and physical exertion, notes The Atlantic — think truck drivers and construction workers. Machines with advanced sensory abilities are particularly good at those skills.

SECOND THOUGHTS: Women tend to work in more chaotic environments where they need the ability to read emotions and stress, such as in hospitals, day care centers and customer service, notes The Atlantic. Women may well one day be the primary bread winners, while men take care of the household. But without two incomes, many households will struggle.
July 19, 2015

Where you’ll find the best, and worst, wireless performance

Despite booming advances in technology, we’re often still plagued by dropped calls or bad cell service. So RobotMetrics ranked 125 of the most populated cities based on mobile network performance, including reliability, how quickly you can connect to the network, download and upload speeds, dropped calls and text message transmission speed. The best five cities for overall wireless performance were, in order: Atlanta, Chicago, Knoxville, Nashville and Jacksonville. The worst areas: Hudson Valley, Reno, Omaha, Colorado Springs and El Paso.

SECOND THOUGHTS: Your wireless performance really depends on where you live and your network. AT&T and Verizon are still the best networks available, notes CNN Money. But Spring and T-Mobile are closing the gap.
August 18, 2015

Retirement: It’s good for your health and well-being

Retirement is good for you. That’s the conclusion of a new analysis by the National Bureau of Economic Research that asked the question, “Does retirement improve health and life satisfaction?” As it turns out, retirement can improve your physical and mental health in addition to life satisfaction, though it can take up to four years after retirement for health benefits to show, notes the study. The study analyzed data from the University of Michigan Health and Retirement Survey on people who reported working for the last 20 years.

SECOND THOUGHTS: If you have another 10 years to work, retirement might seem a long way off. But the clock is ticking. To make sure you have a comfortable nest egg, here’s what to do as retirement nears.
August 17, 2015

Young people are poorer now than they were in the past

The odds of becoming a millionaire if you’re over 62 are pretty good — about 1 in 7. But if you’re under 40, they are much worse — about 1 in 55, according to a new paper from the St. Louis Fed’s Center for Household Finance. The odds of becoming a millionaire have gotten worse for young people over the last 25 years, and there’s an increasing gap between the young and old. Old families had 7.6 times the median wealth of young families in 1989. In 2013, they had 14.7 times the median wealth of young families.

SECOND THOUGHTS: The income gap between young and old may be growing, but young people can improve their chances of retirement success by emulating older folks. That means keeping an emergency fund, paying down debt, avoiding high-cost credit and stashing away money into high-return investments, notes The Washington Post. You can also help to ensure a secure retirement by avoiding these retirement-ruining money mistakes.
August 14, 2015

Netflix employees can now take unlimited parental leave

Netflix recently announced that it will offer unlimited paid parental leave for employees. For the first year after a child is born or adopted, parents can take as much time off as they want. They can come back for a few months, work full-time or not work at all. The California-based streaming service will offer full salaries and benefits to parents on leave, notes CNN Money. "Netflix's continued success hinges on us competing for and keeping the most talented individuals in their field. Experience shows people perform better at work when they're not worrying about home," said Netflix chief talent officer Tawni Cranz in a blog post.

SECOND THOUGHTS: If you want a good parental leave policy, work at a tech company. Facebook employees can take four months off. New moms at Apple can take 14 weeks, and their partners can take six weeks. Google offers 18 weeks for new mothers.
August 13, 2015

Chase is making jumbo mortgages easier to get

If you need a jumbo loan, keep Chase in mind. The bank is easing its lending requirements for jumbo mortgages, which are loans in excess of $417,000 in most parts of the country and $625,500 in more expensive areas. Borrowers now only need a credit score of 680 and a 15% down payment to qualify for a maximum loan of $3 million. That’s quite a change from the 740 minimum credit score and 20% down payment the bank formerly required.

SECOND THOUGHTS: The fundamentals of wise home-buying never change. It’s about figuring out how much you can afford and sticking to that budget. Qualifying for a jumbo loan doesn’t necessarily mean you can afford one. Here’s how to figure out how much house you can afford.
August 12, 2015

SEC's new CEO pay ratio rule should shed light on disparities

Starting in 2017, public companies will be required to disclose how their CEOs’ compensation compares with that of their regular workers. The Securities and Exchange Commission has just approved a rule that will require most public companies to regularly publish that ratio. The hope is that this will shed light on the sometimes vast -- and steadily growing -- differences between CEO and worker pay. In 2013, chief executives were paid nearly 300 times more than their employees, notes The New York Times. Fifty years ago, CEOs made more like 20 times their employees’ pay.

SECOND THOUGHTS: The disparity between CEO and employee pay is becoming a bigger and bigger issue. And while this new rule doesn’t limit how much companies can pay CEOs, it still will call attention to what has become a sore point. “This simple benchmark will help investors monitor both how a company treats its average workers and whether its executive pay is reasonable,” U.S. Sen. Robert Menendez, a New Jersey Democrat who backed the rule, told The Times.
August 11, 2015

Defiant, rule-breaking kids out-earn rule followers

According to a new study published in the journal Developmental Psychology, kids who break rules and defy parental authority tend to bring in higher incomes than their rule-following peers. The study looked at 745 children in Luxembourg from 1968 (when they were about 12 years old) to 2008 (age 52). Occupational success, it found, was closely associated with IQ, socioeconomic status of the parents and the child’s studiousness. That’s not surprising. But the fact that rebelliousness correlated with higher income was a surprising find, notes Quartz.

SECOND THOUGHTS: If you’re a parent with a rebellious kid, look on the bright side: Your son or daughter may grow up to make a fatter salary than their more well-behaved peers. Pair that with lessons about retirement savings from an early age, and you’re sure to have a kid who will be comfortable in their golden years. Teach them these 7 rules for a successful 401(k) retirement account.
August 10, 2015

Now's the best time to book holiday flights

If you’re planning to fly during the holidays, booking a flight during the week of Aug. 10 will save you the most cash, according to a new study from Skyscanner, a flight comparison site. It found that last year, holiday flights booked on the 33rd week of the year were the most affordable. That week, flights for Thanksgiving were 5.5% cheaper than flights booked the week of the holiday, while Christmas flights were 19% cheaper. New Year’s Eve flights were 15% less expensive.

SECOND THOUGHTS: The problem: Many of us have yet to make our plans for the holidays, notes The Washington Post. And predictions based on last year’s data may not apply to this year. Fortunately, many sites, including Skyscanner and Kayak, offer deal alerts. It’s a good way to track deals.
August 9, 2015

Job market continues to improve in July

The economy created another 215,000 new jobs in July to set the stage for the Federal Reserve to raise interest rates next month. The steady flow of new jobs during the late spring and summer offer further proof the economy has regained its footing after growth slipped earlier in the year during a harsh winter onslaught. We've now added an average of 235,000 jobs a month since May, up sharply from a 195,000 pace in the first quarter. The unemployment rate remains at 5.3%, a seven-year low.

SECOND THOUGHTS: The Fed has been planning to raise short-term interest rates this fall, after pushing them to record lows nearly seven years ago. After its last meeting in July, the bank's policy-setting committee said it wanted to see “some further improvement” in the labor market before it went ahead. The July employment report offered exactly that.
August 7, 2015

Delta’s frequent-flier program getting pretty hazy

Delta has become very vague about its frequent-flier program, notes The New York Times. The airline no longer has an award chart pointing to how many miles a free trip will require, nor does it offer a transparent miles redemption system based on cash. Instead, it offers hazy proclamations about when rewards can be redeemed. It’s getting pretty difficult to understand what those miles are worth. And it’s not only Delta that is moving away from standard mile programs. Airlines like JetBlue have moved toward rewarding customers with points based on what they paid.

SECOND THOUGHTS: Frequent-flier miles have always been somewhat of a trick. The seats that airlines give away are ones that probably weren’t going to be filled with paying customers anyway — no loss to the airline. But it still seems a little magical — if you fly enough, you get a free ticket. This latest move by Delta is simply annoying. “Most people are no longer getting the leverage out of the programs that made them special,” Gary Leff, who runs a service to help people redeem their miles, told The Times. “They’ve turned them into rebate programs, almost like a punch card.”
August 6, 2015