AskDong

I really liked your saving priority list. I found it very helpful and have a
saved it to my desktop as a reminder. In addition, I have had two questions
I’ve been meaning to ask you.

QUESTION 1
I recently heard about credit cards offering a percentage back towards funding
529 plans. Fidelity offers one that give 1.5% back. I am interested in this
type of card but wanted to know (1) can I fund a 529 account for children that
are not yet born? Perhaps I put the fund in my name till I have children? (2)
Is there a card that you recommend? (3) Can I still claim a tax credit for
contributions made to the 529 via the credit card?

QUESTION 2
Have you used mint.com? What are your thoughts about the utility of this
website?

-m

I’ll answer the 2nd question first because it’s more straightforward.  Yes.   I do use Mint, but not that much.  I’m still more of a fan of Yodlee as it has better overall coverage.   What Mint offers is a simpler view, and pitches of money saving alternatives.   For some individuals the offers are useful, but not me.  Generally speaking, I’ve already done my shopping when it comes to accounts.  The simplified view is nice, and I would be more apt to use if I were just starting with account aggregation.

In truth however, I’m looking at PageOnce.   PageOnce offers a very similar service to Mint, but like Yodlee is much  comprehensive.  In addition, PageOnce also offers an iPhone App.

529 Accounts

Yes, you can still can claim the tax (state) credit even if it’s funded from you Credit Card. I don’t believe the source of funding matters.  For the tax deduction it has to be a state sponsored plan for your state of Virginia.  I don’t believe Fidelity runs any of those plans, so it’s unclear in reality how you would be able to fund the 529 plan with a credit card.

While you cannot sponsor a 529 plan in the name of child that yet to be born, you can sponsor a plan under the name of another relative, and switch the plan’s beneficiary at another date.  The age of whom can be named beneficiary vary’s state by state.

This past weekend I got back from 10th year college Reunion. I didn’t reconnect with many lost acquaintances. This was no great shock. I was not a social person in college. I ended up going to reunion and hanging out predominantly with friends I already see regularly in Boston. Despite not being the most social person in college, I was also a pretty mediocre student. Returning to college, I was reminded exactly how unacademic I truly was. I passed all my classes (excepting one early withdrawal), but my GPA was rather unspectacular, and my class attendance less than exemplary. I had no relationship with any professors. I never made use of office hours. All in all I wasted the academics of college. This not to say college was wasted. I made good friends, and laid a solid foundation for the rest of my life.

Reunion provided a opportunity for reflection. I didn’t set myself up for future success with my college academics. However, I was fortunate that my academics in high school allowed me to attend a prestigious school such as Dartmouth, and I had solid work experience during my off terms. I graduated into a good job market and was able to land myself a job in consulting. From there I’ve caught some breaks to be in the place I am today. Thankfully I’ve worked harder at my career than I ever did in college.

Traveling back to school and reveling in my mediocrity made me both appreciate where I am today, and affirmed my belief that everyone can have a second chance, and even a third. While the mistakes of the past certainly impact the reality of today, they do not spell doom for the future. The key is a willingness to reevaluate and do what it takes to make changes to either or both work and personal habits. You might be in dead end job but that doesn’t mean you need to be in a dead end career.

A reader, P,  asks:

I recently got accepted to a Non ABA certified Law School. Given the nature of the beast. What are your thoughts on such an endeavor, as there are pros and cons to the affair?

I’m certainly no expert on education. I have but one degree, and nary a desire for another. I’m done with school. That said, I believe it’s generally in everyones’ best interest to attend the best school that he or she can. This does not mean the most expensive as there are many affordable public institutions that outclass expensive private schools.  However, all else things being equal, ABA accredited school is by definition superior to a non accredited one.

To practice law, one must pass the bar exam. To take the bar exam, one must attend an ABA accredited school. In that light, it would seem that attending a non-accredited school is not worthwhile. Of course it’s not that simple as different states have their own individual bar associations that may allow graduates of non-accredited schools to take the bar. By passing the Bar in one state, and then practicing law for a few years, it’s often possible to take the Bar in any state. Of course with ABA accredited degree, you can take the Bar anywhere.

The more interesting question is not if you can take the Bar or not, but rather what doors an ABA accredited school would open versus a non accredited school. My initial read into the matter, is “a lot.” The ABA has gotten criticized and justly so for being a elitist institution that is in the business of exclusion. From what little I can gather, this seems to be true. Ironically because this is true, it’s better to member of the club than excluded.

So why would anyone want to attend a non accredited school? They are cheaper, and often easier to get into. The former is a good reason and the latter is a good reason only for those who can’t get into another school.  I don’t believe my reader is such an individual.  He’s clearly a smart guy if he’s reading AskDong.  It’s important to attend the best school that you can get into, and not just the best school that you know is easier to get into. Shoot for the moon, I say. Even when it comes to cost, I think the extra money can be well worth it if more doors are open because of it.
My attitude towards education is biased. I don’t believe that a diploma is a necessary prerequisite of learning. I don’t believe the ultimate value of education is not what’s learned, but what doors that diploma can open. A diploma is a key, and it’s clear from what little I know about the ABA and law jobs a degree from ABA accredited school is a much better key. Is it fair? No, I don’t think it is, but it’s how the world works.

I was fascinated by the discussion that took place recently at The Simple Dollar around suggestion that Trent made about “trust.” which was actually in response to one his answers from his mailbag. Trent in his original advice suggested a way to hide money from the financial aid office by “giving” it to an uncle. Trent to his credit admitted that his original suggestion was a not so good, and removed the offending answer (though again to his credit left it in the comments for posterity stake). Commententators fell into three general camps.

1. Thought Trent’s advice was great.
2. Thought Trent’s advice was unethical even if it were legal.  I fell into this camp
3. Were to busy fawning over Trent’s talk on Trust and failed to realize that Trent pulled a fast one on them in essentially confusing the topic. While it’s not my place as a blogger with nary a subscriber to criticize The Simple Dollar, one the best and most popular PF blogs there is, I have noticed this is not the first time Trent has engaged in Jedi mind tricks on touchy topics as he did when he responded to an accusation that he made things up.

The topic of financial aid is one that is dotted with many unmarked ethical landmines. I generally think well of people. I think most people are good, decent, ethical people.  I also believe that most people are far from perfect, and have ethical lapses - the only exception would probably be my previous roommate, but he was an Eagle Scout, literally and figuratively. I’ve certainly made my fair share of bad calls in life.

So why is Financial Aid such a hot topic for me? In my own experience in College, I witnessed first hand families that gamed the system better than others by employing tactics such as the one mentioned by Trent: Hiding money with different family members, holding onto cash, deferring income ahead of financial aid awards, the list goes on. On the other hand, most of the people who have gamed the system are far from being wealthy. Most of these families could use the extra help - good people who worked hard.  The problem I find with gaming the system is that financial aid comes from a limited pot of dollars.  A dollar that goes to one family is a dollar that won’t go to another potentially more needy family - a family that might just be little more honest or one that may not know how to best game the system.

While I might be quick to pass judgement on act of potentially sheltering funds, I also realize it’s a slippery slope to be too judgemental.  Is it unethical for family to be spendthrift? A spendthrift family will get more money in the financial aid process when compared to frugal family that has squirreled away savings for college. The problem with Financial Aid, and many other things in life the right decision is not necessarily clear cut, and certainly not easy. There are plenty of legal, and some would even perfectly valid techniques to get the most financial aid possible. Many argue that it’s your duty to maximize every single opportunity that exists because of loopholes.  Where as many people do disagree if it’s really ethical for instance to shelter money from the auspices of financial aid, most people would unlikely have succh problem exploiting a tax loophole.

I’ve commented in the past how some personal finance bloggers can across smug. However, given the audience, this smugness is not a big deal. The fact is the writers of personal finance blogs reflect the attitudes of the readers. I’m both a writer and reader, and I can personally attest to the fact that I probably too often fall victim to a “holier than thou” attitude. This isn’t really a problem in the blogsphere where we cavort amongst ourselves. The greater problem is in the real world. Despite, my self effacing shell, I am rather self satisfied.However, I do feel very strongly about spreading the wisdom of prudent finances. A “I know better than you” attitude often gets in the way of that. Nobody wants to listen to a know it all. I certainly don’t. I think if we are to give advice to family and friends, we should first admit our own financial shortcomings. I know some of mine are:

1) I’m less careful than I should be - I get more parking tickets, and other fines than I should

2) I spend alot of money of food and vacations

3) I enjoy expensive hobbies like skiing and golf

Telling somone that every life choice that they make is wrong isn’t a way to gain influence and win friends. We shouldn’t be telling people what they’re doing wrong, but rather working with them on doing things better. Criticicsm is healthly, but in small manageable chunks.

Just as important as being able to impart wisdom upon friends is also keeping an open mind for oneself. Just because your plan works today doesn’t mean it’ll work tomorrow. I find it useful to get off my high horse at least on occasion and revevaluate some of my beliefs. It’s the only way to keep on learning. For example, I used to be much more dismissive of commodity investing than I am today. I realize in the current market there’s really nothing else like commodities as much as I wish there were.