Should your bosses get to look at your credit score?

Employers have been using credit reports as one way to evaluate potential employees for years. But the recession-that-won't-end is effing up thousands of people's scores, so now some states and Congress are thinking about banning the practice, according to this Wall Street Journal piece.

I think banning the use of credit reports in most (but not all) hiring is a good thing: anyone can be a good employee and have financial trouble along the way. For most of us, it'd only take one emergency or a couple months of unemployment to ruin a good credit report. Companies argue that the credit score is a good predictor of potential problem behavior with employees but I don't see how that argument carries weight in an era where all manner of personal information is available with a quick Google search, and criminal background checks are cheap and easy to conduct.

But I'm cynical: what took legislators so long to wake up to the fact that this is a problem? It seems to me that the only reason they're taking on this issue now is that it's affecting people more in the economic "mainstream" (read: middle class whites) who have been hurt by the recession. Poor people and minorities, especially blacks and Hispanics, have had their economic prospects hurt for years by this and other practices which unfairly and disproportionately impact their job prospects (see: using credit scores to determine insurance rates). It makes no sense to use credit reports to bar people from getting jobs when getting a good job in the first place can help improve the score.

It's amazing how something that's been harmful to a great number of people for a long time is ignored by politicians and regulators until it starts hitting their poll numbers. Then what's been a bona fide crisis for years becomes an official one and finally there's debate, if not action. 

Do the wealthy know what 'recession' means?

Sometimes I get questions that make me scratch my head, like this one someone posted to formspring over the weekend:

Not all of us are living paycheck to paycheck and the word 'recession' ain't in some of our vocabs. How would you advise the significantly wealthy to increase their income and investments?

My answer: Who you foolin'? Truly wealthy people understand recession as well as anyone. The recession took a huge toll on investors in the equity markets and on business owners. Since wealth is measured by assets (the value of what you actually own), not income (how much you make), and since most wealthy people's assets are tied to investments or businesses they own, the idea that the wealthy don't have "recession" in their vocabulary is misplaced bravado at worst. At best it suggests a lack of understanding of the difference between assets and wealth, money and income.

Just because you don't live paycheck to paycheck doesn't mean you're not subject to the same economic realities that impact everyone else. They simply may not impact you the same way.

In terms of how to increase your income and investments, I'd need to know how you make what you make and how you invest what you have to give an informed answer.

*If you've got a question you'd like answered on my blog, tweet me here or post to my formspring here.*

Have we forgotten MLK was a champion for economic justice?

I should've posted this on MLK Day or last week on King's actual birthday. But I must've been thinking the same thing as NYT columnist Bob Herbert with regard to the King holiday this year. Herbert writes that despite all the celebration, from the school & workdays off, to the speechifying to the ridiculous MLK parties thrown by promoters in every city, we all seem to have lost sight of the part of King's vision that's perhaps most relevant of our time: the fight for economic justice.

I've written numerous times that a man who once impressed me (but later disappointed) told me in the early months after my college graduation that "the civil rights movement of the 21st Century is economic." That turned out to be prophetic: with the first decade of the millennium in the books, a devastating recession is eroding gains made in home ownership, income and employment equity that for the better part of two generations were the legacy of Dr. King's civil rights era. In short, we're moving backwards and despite a Black prez, there isn't much in the way of progressive economic policy being done to help, Herbert argues.

Amen. He's right and that hints at the reason for this blog's very existence: As with other hard-fought social gains, the only true way to maintain economic gains is through education, and financial education is woefully inadequate at any level in our system, from pre-K through college. So, not to be too high-minded, but when you read this blog and think about how you can transform your finances, remember that there are people who marched, fought and died for your right to do that, too.

image: free-stock-photo.com

It's Payday!

Not literally, but that's the name of a radio show I taped last week. The host, Zachary Rinkins (on twitter here) is a phenomenal young business journalist who's hustled enough to get his own show on air. We talked for about an hour about how the recession has affected young professionals and young people should be doing to find the best opportunities in a continued downturn. Check it out.

Obama's 100 Days, my 100th post

I discovered something interesting a second ago: this is my 100th post on this blog. Wow. I guess it's appropriate that this post is about President Obama's first 100 days. Let's get right to it:

Yesterday I asked readers to grade the president's performance on three economic areas: his handling of the housing crisis, the Wall Street bailouts and the economic stimulus package. Now, here's my grade:

Overall, I give President Obama an "I" for incomplete on his performance on the economy. That's not a bad thing but it's not great, which is the point. Despite his high approval rating and Democrat-controlled Congress, the idea that the economy would improve this soon because of anything the president has done is unrealistic. It's easy to blame Bush's eight years for the problems but our economy had fundamental problems -- most notably all of us living off credit -- long before that.

On specifics, I give Obama a B on housing, mostly for signing a package that gives an $8,000 tax credit to new homebuyers. On the stimulus package, he gets a C. I'm optimistic that much of what's in it will help, but it's taking a while for federal and state bureaucracies to start spending the money, and I'm no fan of bureaucracy anyway. There's always waste and corruption involved. That grade could easily go to a B or an A, especially if any of this funding for improving passenger rail service actually happens.

Last, on the Wall Street bailouts, another C. Something had to be done to prop up the financial system. Obama stepped up to the plate depsite how unpopular investment bankers are and so far none of the remaining big banks has failed. But that doesn't mean they won't, and most people still can't get over the AIG bonuses.

What's your take? Do you think the economy is getting any better under Obama?

How to make your money last during a layoff

Unfortunately, a few of my friends lost their jobs in mass layoffs in the past year. And while losing your primary source of income clearly sucks, the silver lining is that not knowing where the next check is coming from forces you to learn how to stretch a dollar really, really far.

So I asked a friend of mine -- we'll call her "Sandra" -- for some tips to share about how she held it together when she was out of work briefly last year:

• Filed for unemployment IMMEDIATELY: It now takes 5 weeks (longer than in years past) to begin getting the benefit payments, so this is CRUCIAL

• Cut off all major luxuries: (no more fancy dinners, no shopping, all trips were cancelled) and limited things like hair salon visits (non-essential dry cleaning, bi-weekly hair appointments instead of weekly)
• Paid all my essential bills up front: to make sure things like heat, car note and insurance payments, prescriptions, cell phone/internet were guaranteed to be there.
• Took a part-time job: The work was beneath me, but provided a steady stream of extra cash for pocket expenses (about $150 to $250 a week, depending on how much time a put towards it).
• Set aside enough money to pay credit card minimums: I paid 4 months worth although, I was only out of work for 2 months.
• Deferred some bill payments: I called around to see who would let me defer payments out of "hardship consideration, and both my student loans and gas company were willing.
• Reduced cable services: I kept HD channels, but dumped on-demand and premium channel services.
• Gave my family small gifts and "IOUs" for the holidays: It hurt to have to do this, but I'll make it up to them. I also skipped sending holiday cards.
• Switched to low-cost entertainment activities: I rediscovered house parties, museums, going out for dessert and coffee (instead of meals and drinks) and frequented clubs/parties where I knew people, and could be guest-listed.
• Paid more attention to what I paid for groceries: I shopped on sale days and clipped coupons on higher priced items (like laundry detergent and saline solution).
• Cooked at home WAY more: Being unemployed showed me how much of my money went to waste on food, particularly snacks, lunches and dinners, while on the go, etc., etc.
• Used public transportation whenever possible. The price of gas is less of a concern now than it was last summer, but PARKING is still way overpriced and a huge waste of money in NYC and Boston.

Hopefully, Sandra's experiences will help someone else who reads this and finds themselves unfortunately unemployed. Better yet, most of her suggestions are things that can save you money long before you lose a job. There's nothing wrong with working AND being frugal.

Real economic changs is up to you, not this guy

While Barack Obama was being sworn in, the stock market was tumbling. The Dow had its biggest Inauguration Day loss ever, of more than 300 points.

When the stock market takes dips like it did yesterday it's a buying opportunity because shares are cheap. It's like shopping at the mall during a sale: you can buy twice as many pairs of shoes at half off as you could when they were full price. The difference with stocks is that when prices come back up, you can't resell the shoes and make money; with stocks you can.

But the big questions are why did the market fall so much and is that a bad sign for the economy under Obama? Reality check: no one has the answer to either question. I've heard commentators speculate everything from another round of bad news for banks to wealthy investors being worried that Obama will repeal the cozy tax cuts they got from Bush (another reality check: Obama's already said he won't immediately raise anyone's taxes and a tax cut could well be part of his stimulus package).

Either way, here's a few words from Obama's speech that everyone should take to heart if they're really interested in seeing the economy and their own finances improve:

Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.

"Our collective failure to make hard choices". Collective, y'all. Sure there were a great many greedy folks on Wall Street and elsewhere who made bad loans and absconded with shareholders' money. But they're not the only reason the economy is where it is: If you're like me and still paying off purchases made months ago, plus interest; or if you're still spending way more than you save or invest; part of the problem rests with you, too.

Ultimately we can all wait for an Obama stimulus or the stock or housing or job markets to turn around, but if we all don't make the decision now to save more of our incomes when we get our jobs back, to only buy houses we can afford with down payments and under terms we can understand, and start saving for the retirement we know we'll have to foot (because with deficit spending, social security just won't be around), any recovery will only be shallow and temporary.

So, are you really ready for change?

Layoffs are strangling those who still have jobs, too

In 2008, US companies laid off more people than they had since the 1940s, and the evidence is everywhere. I didn't have to look, for example to the latest layoff numbers to figure out it was happening, I just kept in touch with my friends.

Last year this time, no one I knew had lost their job; as of now, I know at least a dozen, including personal friends, former co-workers and mentees. I know at least one person who was given the reprieve of keeping a job but had to swallow a pay cut. In New York of all places.

But this post isn't about the unfortunate ones who lost their jobs, it's about the misfortune of those who have kept them -- and by extension why all the layoffs will ultimately come back to cost the companies who are looking for savings from the cuts.

I had the following gchat conversation yesterday with a friend (name withheld for obvious reasons), who works for a very large company that, like many others, laid off several hundred people at the end of last year:

Friend: i feel like my job is pushing me to my limit

me: cuz of the loss of people
Friend: it's just 13 days in to the new year...7 work days in to the new year and i want to jump off my balcony

that is how stressful my job is

i resigned from my part time hustle yesterday because the full time job has become bodily consuming

Friend: i worked sunday 5pm - 3am...got home and got a nap because i then worked for 8am-8pm straight...and i mean straight...i didn't leave my couch to even get a glass of water

i didn't even turn on the tv and i was at home

me: smh
that's bad
Friend: literally i was busting ass for 12 hours straight yesterday
me: that sucks
i hope it gets better for you
and soon
Friend: it wont

2009 is bound to get a lot worse b4 it gets better

That conversation (edited slightly and used with permission, of course) shows how when major layoffs happen, workloads don't lessen. By cutting workers, companies are trying to get the infamous "more with less" -- that is steady or rising productivity from a smaller, cheaper workforce. But there are limits -- to how much one person can do with eight hours and two hands and to an employee's body, psyche and motivation level. Cut too deep into the bone and you wind up with, at best, a demoralized workforce and at worst, an unhealthy one.

In the best case scenario, angry workers just aren't as given to producing as much or as good as their bosses would like. In the worst, stressed-out, fatigued workers are prone to health problems that could increase sick days and increase employers' insurance premiums. What's worse is that remember, companies laid off more people last time than they have in more than 60 years, leaving, potentially more angry, disaffected and overloaded workers than at any point in time since that period as well. Not a good thing.

Another important point: all the layoffs are hurting not just productivity, but the spending power of even those who still have jobs as well. Look at what my friend says: she quit her part-time job because of the workload she's gotten from her full-time one. Less income, less spending, again multiplied by the millions.

In book promo, CNN gives helpful financial tips

Over the weekend, CNN ran a special called "Gimme My Money Back", which was half a "special report" on what consumers need to understand during the financial crisis and half promo for business correspondent Ali Velshi's new book, of the same name.

They managed to keep it pretty un-infomercial-ish, save for Velshi's plugs of the book, with the experts and reporters they had on offering some pretty helpful tips about the basics of investing. The unfortunate thing, though, is that basic concepts like portfolio diversification and making debt elimination a higher priority than spending are things that people should know about before they enter high school, not once they're grown and managing retirement accounts that have already taken a beating in a financial crisis. Actually, we're probably in as deep of a recession as we are precisely because so many people are uneducated about even the basics of handling money.

You can't have a successful economy in which people are equipped to make money, only to piss it away because of their financial ignorance.

Either way, watch the video. It's a pretty good primer with a lot of plain language addressing what's happening with the financial markets and what you should know now, and many of the topics are things we've discussed here.