AFCPE 2024: Ten Take-Aways and a Barbservation

I recently returned home from the 2024 Symposium of my professional “home,” the Association for Financial Counseling and Planning Education® or AFCPE®. This conference serves an amazing mix of researchers, practitioners, and educators whose work positively impacts the financial wellness of U.S. families. 

Below are my key take-aways from #AFCPE2024 and a Barbservation:

 

Motivational Techniques- These approaches can be used for positive changes or for fraud. Reciprocity is where you get something (e.g., a free meal) and feel pressure to return the favor. Social proof is when you are told about others who have done something that you are being asked to do. In addition, people who agree to small things are often asked to agree to something bigger. Fraudsters keep getting better at developing strategies that nudge consumers to part with their money.

 

Student Loans- The Saving on Valuable Education (SAVE) program that replaced a program called REPAYE is frozen with no new enrollments as a result of a court injunction. Borrowers were placed in an interest-free forbearance. Lawsuits were brought against SAVE because it costs a lot of money to forgive debt and this was not approved by Congress. Public Service Loan Forgiveness (PSLF) was approved by Congress but could always be undone in the future.

 

Fraud and Scams- Classic strategies (e.g., “pump and dump”) are being used with modern technologies to reach victims with pitches that prey on emotions (e.g., greed, fear, and fear of missing out or FOMO). Scarcity (“this product is only open to the first 100 investors”) is another common ploy. Everyone, regardless of education, can be a fraud victim during a moment of vulnerability.

 

High-Income Households- AFCPE members were advised not to ignore this demographic as more than half of Americans earning $100,000+ a year live paycheck-to-paycheck. Financial challenges of high-income households include lifestyle inflation, social pressure, family and community obligations, over-leveraging debt, and complex financial planning needs.

 

Gig Workers- This term includes freelancers and self-employed individuals. There are about 63 million U.S. gig workers in 2024 or 38% of the total workforce. One in five makes six figures. Gig workers should avoid comingling personal and business expenses, set aside money for taxes, and track jobs that provide 1099 forms for income reporting so they know if they are missing any 1099s at tax time. Hallmarks of a maturing business include registration with a state Secretary of State, a business bank account, good credit, 3-6 months of bank statements, and a business plan.

 

Financial Abuse- Abusive relationships often develop gradually and the key driver is control.  Indicators of economic abuse include: threatening harm, controlling or sabotaging a victim’s work, and limiting a victim’s future career growth (e.g., taking classes). The reason that people stay in abusive relationships is often similar to those who don’t heed warnings to evacuate during storms: they don’t know where to go and/or lack the ability to move pets and possessions.

Artificial Intelligence (AI)- The better an AI prompt, the more useful the output. Positive uses of AI in financial education include automated financial advisors, fraud detection, personalized financial products, and the creation of quizzes, discussion questions, rubrics, and templates. Negative aspects of AI include privacy invasion, biased decision-making, authoritative erroneous output called hallucinations, over-reliance on automation, and erosion of skills.

 

Veterans Benefits- VA benefits are all about Veterans- not their spouse or children. Debunked myths included “My VA disability benefit will continue for my spouse after my death,” “I will be able to go to a VA long-term facility,” and “I get free life insurance from the VA.” The VA will pay up to $2,000 toward burial expenses for a service-connected death and up to $978 for a non-service connected death. This is not automatic, however, and government paperwork is required.

 

Financial Well-Being- Becoming financially secure is hard and many people feel like they should be doing better. Shame is common as evidenced by a majority of engaged couples who do not disclose debt to each other. Achieving financial well-being is a behavioral problem, not a knowledge problem. Symposium attendees were advised to consider taking a periodic "financial health day” to focus on finances and to encourage their clients to do the same. 

 

Powerful Presentations- Presentations about personal finance (or any other topic) should have a strong opening with a statistic, quote, story, demonstration, or question. Likewise, the end of a presentation should be equally strong with a call to action. In other words, So What? Now What? How can audience members apply the presentation content to their life or work?

 

I close with a personal Barbservation.

 

In informal conversations with dozens of attendees and in some questions asked of speakers, there was a strong undercurrent of worry, anxiety, concern, and/or dread about the incoming administration and potential federal agency leadership appointees. The Symposium attracts a number of government employees (e.g., Securities and Exchange Commission (SEC), Consumer Financial Protection Bureau (CFPB), U.S. Department of Defense, U.S. Department of Agriculture, and U.S. Department of Veterans Affairs) as well as financial education entrepreneurs like me (full disclosure) who work on federally-funded projects.

 

Yes, people are worried about the potential loss of their government-funded jobs but equally as important, the loss of the valuable services that their agencies provide to ordinary Americans. Below are some examples.

 

Will billionaire cost cutters understand, or care about, the financial education and counseling services that Personal Financial Managers (PFMs) provide to service members on military installations worldwide? 

Or the valuable professional development training that OneOp provides for military service providers? 

Or the financial education delivered by Cooperative Extension educators who help individuals and families across the U.S. improve their financial well-being? 

Or the preventive financial education and regulatory enforcement programs provided by the SEC and CFPB that help combat fraud?  

I certainly do hope so, but recent news headlines have me feeling uneasy and apprehensive too.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

Scams, Schemes, & Fraud: Tips From Law Enforcement

 

I recently attended two separate programs about consumer fraud, The speakers included a county sheriff, non-profit agency representatives, and state attorney general’s office staff.

 

Below are take-aways from these presentations to help you avoid becoming a fraud victim:

Romance Scams- In 2022, nearly 70,000 people reported a romance scam and losses hit a shocking $1.3 billion to the Federal Trade Commission. Program speakers advised taking any new relationship- especially a virtual one- slow, asking lots of questions to get to know the other party, and looking for inconsistent answers and excuses for why not to meet in person.

 

Phone Scams- There are many varieties: “grandparent” scams requesting money for a grandchild in need, fake charities, pretexting calls purporting to come from a bank or government agency (e.g., the IRS), and fake lotteries and sweepstakes. One speaker advised the following: “Don’t answer phone calls with an unfamiliar number. Let it go to voice mail.”

 

Top Three Scams- The top scams being reported to authorities include 1. AI powered scams (e.g., the use of just 5 seconds of someone’s voice for use in scams such as grandparent scams), 2. Funeral scams (pretexting a funeral home and contacting bereaved families to request money for services), and 3. Tech scams (via pop up messages on a computer with malware links or phone calls claiming to come from companies such as Apple, Google, and Microsoft).

 

Card Skimming- Skimming devices illegally installed on gas pumps or ATMs are used to collect information from the magnetic strip on credit and debit cards to commit crimes. Tips to protect yourself include making transactions inside, using machines closest to physical buildings, and looking for signs of tampering such as loose parts. At gas pumps, paying with cash, credit cards (zero liability policies), or “tap and go” is recommended. If you must use a debit card to pay, experts advise using the “credit card” option instead of entering a PIN.

 

Evergreen Fraud Advice- The following statements are true anywhere, anytime, for anyone:

¨   Legitimate lotteries do not collect credit card data and charge handling fees for prizes

¨   Do not send money to “cold callers” (phone, e-mail, etc.) who you do not know

¨   Do not purchase gift cards or wire money for payments. Instead, Stop. Think. Go Home

¨   If you suspect possible fraud, say something; the worst that can happen is you are wrong

¨   Real technology companies do not contact people out of the blue to request money

¨   If something sounds fishy, walk away, hang up, or delete. Don’t engage with fraudsters.

¨   Monitor bank and credit card statements regularly to quickly identify suspicious activity

¨   Taxpayers can get a PIN (from the IRS) to reduce the risk of being defrauded on their taxes

¨   Vigilance, caution, and time (don’t be rushed into decisions!) are key protective factors

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Highlights of Recent Webinars

 

It’s that time again! Every so often, I like to review and summarize my notes from recent webinars and classes. Below are some interesting tidbits that caught my attention from recent programs:

Financial Education- Financial educators don’t teach content- we teach human beings- and our authentic self is an advantage. Share stories of your struggles as well as your successes to accrue trust over time. As Dr. Shaun Murphy noted in the final episode of The Good Doctor, “When you touch one life, you don’t just touch one life, you touch every life that that life touches.”

 

Cash Assets- The right amount of cash to hold in an investment portfolio is a personal decision. Ideally, this money is for emergencies and short-term goals. Some people hold much more than that in cash but the trade-off is losing an opportunity for growth. Ultimately, investors need to determine an asset allocation that makes sense for them, track it, and rebalance as needed.

 

Consumer Spending- When people feel comfortable with their finances, they spend more. Consumer spending has been robust because many older adults have paid off mortgages and many other homeowners have low-interest mortgages and are unaffected by current high interest rates.

 

Election Year Finances- The most important influence of Presidential elections on financial markets is policies that result from them (e.g., tax laws and retirement account rules) rather than elections themselves. In addition, financial markets are typically more affected by what Congress and the Federal Reserve do compared to the President.

 

Tax Planning- Run projections of next year’s tax liability and make fourth quarter adjustments, if necessary. SALY (same as last year) is rarely a good strategy. Good times to accelerate income to reduce taxes are early retirement years before required minimum distributions (RMDs) begin, sabbaticals with lower income, years with large losses, and the last year of filing a joint tax return.

 

IRMAA- About 8% of Medicare recipients pay a higher premium called the income-related monthly adjustment amount (IRMAA). There is a two-year income lookback so start paying attention to this at age 63. IRMAA is not a tax, per se, but it is a drag on older adults’ bottom line.

 

Financial “Rules”- Many financial “rules” (guidelines) are too deflating for people (e.g., saving three months’ expenses in an emergency fund). They feel like a failure, throw up their hands, and give up. It is far better for people to have a series of “small step” goals that they can succeed at.

 

Retirement Savings- The more money that people can save for retirement, the more likely they can replicate- or even exceed- their pre-retirement lifestyle. People are often amazed how much they can save when they put some structure in place and save automatically. Just remember that tax-deferred defined contribution plans and traditional IRAs are “a lifelong partnership with the IRS.”

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Spending Money: Insights and Recommendations

 

Recent data from government agencies and retailer organizations indicate that U.S. consumers have continued to spend money robustly in 2024 even with inflation increasing the cost of many goods and services (a.k.a., cost-of-living creep). Not surprisingly, delinquency rates on credit cards have increased, with 8.9% of balances transitioning into delinquency during the past year according to data from the Federal Reserve Bank of New York.

I recently attended a seminar called The Psychology of Spending that delved into emotions and other factors that prompt people to spend money. Below are seven insights and recommendations:

 

Emotional Appeals- Advertising campaigns frequently appeal to people’s fears and desires. Some common examples include: a desire for good health and well-being, a desire to be loved, a desire to project a positive self-image, and a fear of physical decline and financial insecurity.

 

FOMO is Real- Whether it’s called “fear of missing out” (FOMO) or “keeping up with the Joneses,” it is human nature to compare ourselves with others. As a result, people buy things to “fit in” or appear successful. It is important to remember that “you are not what you buy.”

 

Timing is Everything- Studies have found the longer people are in a store, the more likely they are to make unplanned (impulse) purchases. Therefore, solid shopping advice is: create a shopping list, follow the list, and don’t linger in a store or mall. Also, shop alone as much as possible and avoid browsing, free samples, trying on expensive clothes, and talking to salespeople.

 

Spaving Does Not Work- A new financial term, “spaving” (i.e., the practice of spending money to save money to get a perceived deal), made headlines in 2024. Unfortunately, it is simply a trap to entice consumers to spend more (e.g., “Buy 2 - Get 1 Free”). Smart shoppers look for sales on items that they need or were already planning to buy. Otherwise, bargain hunting can be costly. The best “bargain” is actually not to buy something if you do not need it.

 

Impulse Buying is Costly- Average Americans spend $315 monthly (over $3,700 per year) on impulse purchases, which feel exciting, especially when combined with spaving (i.e., the thrill of a deal). An example is “retail therapy,” where people get a temporary “rush” by shopping to cheer themselves up. Experts recommend free mood-boosting activities (e.g., walking outdoors) instead.

 

Spending Habits Can Change- It is not easy, but it can be done. For example, research shows that people spend more when they use credit so leaving credit cards home may help. Also, waiting 24 hours for purchases over, say, $50 or $100. Another habit that I wrote about in my book, Flipping a Switch, is that deeply ingrained values of frugality are also difficult to change.

 

Hard Questions- Self-evaluation can help people analyze spending habits and emotional triggers. Good questions to ask yourself are: what do I enjoy spending money on and why?, what are my best spending habits?, and what spending habits do I want to change and how can I do it?

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Inflation Impacts and Financial Clawback Strategies

Unless you’ve been living under a rock during the past three years, you know that inflation- i.e., an increase in the cost of goods and services- has been a major concern of U.S. households as their dollars purchase less than they did prior to the pandemic. While virtually no household purchase has been exempt, areas of highest recent concern are food, vehicles, insurance, and housing.

As a result of inflation, Americans have faced a number of challenges including the following:

 

¨   Eroded Savings- Cash accounts lose value if interest earned is less than the inflation rate

¨   Increased Cost of Living- Essential expenses are more expensive, straining household budgets

¨   Retirement Challenges- People with fixed incomes find it especially hard to cover expenses

¨   Debt Burden- Mortgage and credit card interest rates have risen in an effort to fight inflation

¨   Wage-Price Spiral- Workers get higher wages, increasing prices and perpetuating inflation

 

What to do? Try to claw back the extra money that inflation is costing you so you don’t feel like you are falling behind. Below are ten specific strategies:

 

No Nonsense Budgeting- Create and stick to a detailed spending plan that includes realistic numbers for income and expenses and puts a priority on essential needs.

 

Reduce Discretionary Spending- Cut back on non-essential expenses such as dining out, beverages (except water) for restaurant meals, paid entertainment, and luxury items.

 

Cut Utility Use- Enact energy-saving actions to reduce electric, gas, and water bills. Example:  turn the thermostat up 1-2 more degrees (summer) and down 1-2 more degrees (winter).

 

Shop Secondhand- Visit thrift and consignment shops, flea markets, and/or online sales websites (e.g., Facebook Marketplace, Craigslist, eBay) to save money versus new purchases.

 

Food Shop Carefully- Take advantage of sales, coupons, and reward/discount programs to lower food costs and consider bulk buying at warehouse stores if the math works to save money.

 

Increase Savings Rate- Save a higher percentage of income, by freeing up cash through reduced spending, to build a financial buffer against rising expenses.

 

Diversify Investments- Purchase investments in different asset classes (e.g., stocks, bonds, cash equivalents, real estate) to hedge against both inflation and investment risk.

 

Raise Your Income- Request a meeting with your boss to discuss a salary increase based on your productivity and value to the company. Another option: a “side hustle” income source.

 

Shop Secondhand- Visit thrift and consignment shops, flea markets, and/or online sales websites (e.g., Facebook Marketplace, Craigslist, eBay) to save money vs. new purchases.

 

Negotiate Bills- Contact service providers to negotiate lower costs on utilities, a cell phone plan, insurance premiums, credit card interest rates, and more.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.