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Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985.  Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand (which is now part of PricewaterhouseCoopers).  She attended the University of Michigan and Wayne State University.


  • SAT scores wanted by employers in hiring process

    chart published in the Wall Street Journal Did you think that once you got into the college of your choice that you could forget about your SAT scores? As it turns out, they might follow you from job search to job search. What employers are looking at these scores? McKinsey & Company , Bain & Company , Goldman Sachs . Even though performance on ACHIEVEMENT tests rather than APTITUDE tests (like the SAT) is a better predictor of success, the differences aren't enough to make employers develop their own tests. It is easier for employers getting thousands of applications to use the usually-available SAT test score to weed out candidates from these large applicant pools. And according to the NYT article, the SAT " measures what psychologists call 'g,' or general mental ability — how well a person might respond to an unspecified challenge. In this age of rapidly changing technology and constantly upgraded skills, 'g' may be a better predictor of success than expertise in a specific software package . " Sources: " How Businesses Use Your SATs ," by Shaila Dewan, the New York Times , March 29, 2014. F ollow up: What do you think about the pros and cons of using SAT scores to weed out candidates for employment? What did the article say were reasons that some employers do NOT use SAT scores in their hiring decisions?
  • Too late for Obamacare?

    image from healthcare.gov website Many individuals who have not been lucky enough to have parent-sponsored or employer-sponsored health care--as well as uninsured individuals--procrastinated when it came to signing up for insurance under the Affordable Care Act (Obamacare). Some of the hesitation was due to the technology failures, but some of it was due to a mis-perception about where one might land in the pie-chart below. The big fear, of course, is that one would be unable to get a good deal on new insurance, and would fall into the 3% "potential losers" category. In any event, the "deadline" for enrollment was March 31, 2014. But there might be ways for those who did not manage to obtain coverage to still be enrolled, according to an Associated Press article. image from offeringhope.org Here are some possibilities to obtain a second chance to sign up, or avoid a fine for being uninsured: TAKE ADVANTAGE OF THE GRACE PERIOD : If you started to enroll by March 31, but couldn't finish, have until April 15th to complete an online application or until April 7th to turn in a paper application. USE A SPECIAL ENROLLMENT PERIOD : Special 60-day enrollment periods are being considered by the federal call center (800) 318-2596 and by the state marketplaces. Some of the special extension are being granted for emergency hardships, for example: bad weather, domestic abuse, illness, errors by advisors and insurance companies. These special enrollment periods also open up throughout the year for life events (job changes, marriage, divorce, parenthood). SIGN UP FOR MEDICAID : There is no deadline for those eligible for Medicaid to sign up--and now Medicaid is open to adults making less than $16,100 per year, as well as families with children. BUY INSURANCE OUTSIDE THE GOVERNMENT MARKETPLACES : Even if you can't get the government subsidies this year, you can still buy insurance privately. Obamacare means you can't be refused for pre-existing conditions, so it will be more "worth it" than it was before. PLAN AHEAD FOR THE NEXT ENROLLMENT PERIOD : It starts November 15, 2014 and it runs for 3 months. Do your research early! Sources: " Putting Rate Shock Into Perspective ," by Joan McCarter, The Daily Kos , October 31, 2013. " It's STILL not too late to sign up for Obamacare ," by The Associated Press via blackamericaweb.com , April 1, 2014. Follow up: What is one of the hurdles that people wanting to take advance of the grace period or special enrollment periods have to jump through? Will proof be required, or is it on the "honor system"? Explain the pros and cons of this. In an ideal world, how would health insurance be handled? Do some research and provide support for your answer.
  • IRS says Bitcoin is not currency, it is "property"

    [View:http://community.cengage.com/GECResource/themes/gew/utility/ :550:0] video from BizJournals Bloomberg Even though Bitcoin has an internet presence as a currency, the Internal Revenue Service sees it differently. This means that transactions in Bitcoin have to be reported on tax returns in a way similar to a stock investment. The plus side is that the ruling by the IRS gives Bitcoin more legitimacy. The downside is that tax consequences have to be a consideration in all Bitcoin transactions. The rationale used by the IRS in its determination was that Bitcoin "does not have legal tender status in any jurisdiction." What this means to an individual possessing Bitcoin is that a gain or loss between the date acquired and the date spent now has tax consequences...and there are vastly different consequences for short term transactions (taxed at "ordinary rates"--up to 39.6%) and long term transactions (taxed at "capital gains" rates, which are far less--20%). This may cause a slowdown on transactions in Bitcoin, as holders might "hoard" the currency to achieve "capital gains" rate status. The ruling by the IRS has shifted Bitcoin from an unregulated status to a traditional investment asset, at least for US taxpayers. For some Bitcoin enthusiasts, this is definitely unfavorable. Source: " I.R.S. Takes A Position On Bitcoin: It's Property ," by Rachel Abrams, New York Times , March 26, 2014. Follow up: What do you think the IRS ruling will have on the use of Bitcoin as an intermediate or virtual currency? Do you see the ruling as a positive or negative event for Bitcoin? If you were (or are) a Bitcoin enthusiast, what actions would you take with respect to the status of your investment as it now stands?
  • Long-term care insurance hikes rates 90%

    image from www.planaheadny.com The above chart represents nursing home costs increases, which are probably at the root of the rate hikes charged by private insurers. If you are a student, you are probably more interested in the health-care options of Obamacare than in long term care insurance. But because your parents are more likely to be drawing on long term health insurance, its cost and viability might be of some concern to you. The main "bright line" of sustainability and fairness separates the positions on long term care along the same line as it does on general health care: Does the private insurance marketplace provide better coverage per dollar, or would a government-sponsored "single payer" plan be better? One couple with private long-term insurance, provided by John Hancock, was recently informed that their premiums would almost double from last year to this year: Up to $3,714.38 for the husband and $4,642.97 for the wife. On a percentage basis, this represents a 90% rate increase. Nothing has changed about the couple themselves, but the marketplace of nursing care costs and the possibility of future claims has caused the insurance company to hike the rates. To put it more clearly: this couple, the Holtzmans, have been paying premiums for 10 years. They have never made a claim. Still, their premiums have increased this much. " This seems unconcionable ," Holtzman said. Would this happen with single-payer, government-sponsored insurance? Probably not. We have not seen these kinds of spikes in Medicare insurance payments, and that is the currently operative single-payer plan that is in place in the U.S. What does this mean in terms of risk management on an individual level? Source: " Feeling ill effects of private long-term care insurance ," by David Lazarus, The Los Angeles Times , March 25, 2014. Follow up: Would you buy long term care insurance? Do you want your parents to be covered by this insurance, or are you willing to take over their care if they become disabled for a long period of time?
  • Unpaid Internships cartoon: Not Funny

    part of a graphic story by Matt Bors, published by Upworthy Here is another story about unpaid internships. It seems as though unpaid internships have gotten out of hand. In 1992, 17% of post-college positions were unpaid; now it is 50%. Many interns do work that for-profit businesses usually need to pay people to do. They are profiting from unpaid labor. The argument made by corporations (and sometimes college counselors) is that an unpaid internship can lead to a job. But, check out these statistics: worked an unpaid internship....and got a job: 37% did NO internship....and got a job: 35% worked a PAID internship...and got a job: 63% So, it looks as though the employers willing to pay are more willing to employ. An organization now working to end unpaid internships is FairPay Campaign . Source: " Half Of Interns Are Victims Of This Illegal Act After College. It's Really Not OK .," by Matt Bors, edited by Joseph Lamour, Upworthy , posted on Facebook , March, 2014. Follow up: What is the elephant in the room regarding economic class and unpaid internships? What are the far-reaching consequences of the increase in unpaid internships related to this issue?
  • Borrowing money from your boss...good idea or bad?

    image from blog.financialsecurity.org Let's say you have an sudden financial crisis. Your car needs an unexpected, major repair...or your dog needs a few thousand dollars worth of surgery--and you don't have the cash. If you can't reasonably take on (additional) credit card debt, if you don't have family members to ask, or you don't have a major asset such as a house to borrow against, where can you turn for a loan? Well, there's the "workplace loan." At first glance, it might seem like a good idea. Get a cash advance from your employer and pay it back as a payroll deduction. The "messy" part of setting up the loan contract can now be handled by middlemen, such as Think Finance's product called " elastic ." Through this vehicle, loans of $200 to $1000 can be made...with a fee of 5% of the loan amount, plus interest. Another company, FairLoan , offers a similar service...at interest rates ranging from 18% to 30% plus a 5% loan origination fee. This sounds pretty pricey to me. The set-up is starting to remind me of historical " company towns ," where employees seemed to be taken care of by companies that built housing around coal mines or factories and provided stores and short term credit. But what resulted over time were employees that became so indebted to their employers that they could not move or take any stand against company policy. Also, the employer controls the interest rate and fees. The only other source of emergency loans for those with limited credit resources is the " payday lender ," which often charges up to 300% on an annual basis. image from forums.debtcc.com Source: " Take Out A Loan--From Your Employer ," by Gigi Douban, Marketplace American Public Media, March 21, 2014. Follow up: What is a "payday loan"? What are the pros and cons of this type of loan? What unforeseen consequences might be the result of an employee owing money to its employer, in terms of workplace events? How can a third-party facilitating the loan mitigate these possible consequences?
  • Coffee convenience bad for the environment (and expensive)

    image from www.coffeemarvel.com As a committed coffee enthusiast, I periodically pine for a Keurig single-service brewing machine. The problem is, the little cups that that machine requires are not only expensive--they are bad for the environment. Still--the convenience and the visual artistry of it all does speak to me. I have to admit that the first time I tried to use this machine--at a motel--I had no idea how to manage it, and I made every mistake, creating a colossal mess. Now, however, I am an expert, and each morning--as I am either making my pot of home brew or walking the 1/2 a block to my neighborhood coffee house--I fantasize about what it would be like to have one of those splendid little single-brew machines. I'm not alone. In 2008, single-pod coffee sales were $132 million; in 2013, they were $3.1 Billion. But there are issues. First, to properly recycle the remains of the pods means separating the aluminum top, from the plastic pod, from the wet coffee. Do users really do that? Probably not. Moreover, the #7 plastic that almost all of the K-cups are made from is not recyclable. In addition: there are a lot of tiny cups to recycle. To put it in perspective, the 8.3 billion cups produced last year by Green Mountain for Keurig machines would circle the earth more than 10 times. For now, I'm sticking to home-brewed or my Tall red-eye half-caf dark in a personal cup at my local coffee place. Source: " Your Coffee Pods' Dirty Secret ," by Maddie Oatman, Mother Jones , March 19, 2014. Follow up: Make a chart comparing the cost of a cup of coffee, 5 cups, 10 cups, 20 cups, 100 cups and 365 cups brewed vs. K-cup. What can you conclude from this analysis? What are all of the environmental and health issues of these cups, according to the article?
  • The "Income Upshot" tool--what does it say about Homer Simpson and one of the Two Broke Girls?

    the income upshot tool link This article specifically addresses two fictional incomes--that of Homer Simpson and that of one of the "two broke girls" living in Brooklyn. It is fascinating to adopt several different personas to see what "big data" might say about some basic demographic data. I input my personal data and found myself to be riding with the majority on all parameters that were reported. Am I deceiving myself to think that I would NOT have been with the majority on other parameters? Source: " Income Upshot: Homer Simpson Edition ," by Jolie Myers, Marketplace-- American Public Media , September 12, 2013. Follow up: Did you use the link to fill in your income? Is the assessment of this tool relevant to your personal situation? What do you think this link is trying to sell or monetize? What information can "big data" analyzers provide? What are the most relevant parameters, in your opinion, to marketers of various products? What other parameters might be important to marketers? Do you think the selected parameters were relevant and appropriate?
  • Foreign shoppers in the United States

    image from internetretailer.com When American shoppers choose to shop in one state vs another--it is probably only the tax rate they are looking to get a deal on, as most product prices are similar. Moreover, this price dodge will even out in the end, as state taxes have to be paid in the state the product is going to be USED, anyway. But product prices between countries can change a lot. Here are some examples: Slingbox 350 : When it goes on sale in Mexico it will cost $75 more than it costs in the U.S. This is possibly because of the way things are taxed, but also because there is less competition among electronics dealers in Mexico. Apple computers : These can cost $500 more in the United Kingdom than in the U.S. And iPads can cost $160 more. Car tires : Black Friday sales on car tires brought Canadians over the border for bargains. Adobe software : According to the article it is " cheaper to fly to the U.S. and back to buy Adobe's software than it is to buy it in Australia" Some products, such as Photoshop, cost $1700 more overseas. Middlemen try to create other buying opportunities for foreigners: image from info.opas.com Source: " Why Foreign Consumers Shop In the U.S, " by Jeff Tyler, Marketplace Morning Report on American Public Media , March 7, 2014. Follow up: What products are cheaper for Americans overseas? What international laws may be violated in some of the travel-and purchase transactions? Can the workarounds be justified ethically?
  • Jobs added in February: what does it mean?

    [View:http://community.cengage.com/GECResource/themes/ gew/utility/ :550:0] Link to video from Bloomberg , via LA Times. How can the number of jobs increase by 175,000 in the last month...at the same time the unemployment rate ALSO goes up by .1%? And is this news good or bad? Part of analyzing labor reports is looking at what had been predicted...so since 150,000 new jobs had been predicted by economists, the increase of 25,000 more than had been predicted is a positive outcome. 162,000 of the new jobs were private sector jobs and 13,000 of the new jobs were government jobs. The unemployment rate was expected to stay flat at 6.6%, but it did increase to 6.7%. Is this because more people than were expected to look for work were entering the job market? Is it because the bad weather decreased job opportunities or eliminated some part time jobs? The Labor Report is filled with statistics, but not many answers. Other factors measured include: The percentage of people in the workforce The length of the average workweek in hours Average hourly earnings (which were at $24.31/hr in February) Source: " Economy adds 175,000 jobs in February; unemployment rate up to 6.7% " by Jim Puzzangherra, Los Angeles Times , March 7, 2014. Follow up: How much has the bad weather affected the employment rates, according to the video? What employment sector LOST jobs in February? How would you explain this loss?
  • Bank Fraud and Seniors

    image from www.exploitationelderly.com A study done by the Pew Research Center and evaluated by Go Banking Rates has determined that senior citizens are not getting the discounts available to others or advertised as being available for them. In addition, they are being exploited in other ways by banks, primarily through excessive fees or unneeded services. For example, a $25 account maintenance fee was established at one bank for accounts with balances under $1500. For seniors, however, a balance of $5,000 had to be maintained to avoid this fee. I recently had a questionable experience with a bank I will call "Seaside Bank" in Florida. In the course of their dealings with my step-parents (who are ailing and aged 83 and 94), the bank told my parents "someone" had been writing improper checks out of their account, pressured my parents to fire their attorney of more than 20 years, and attempted to have my parents assign check-writing authority to the bank's designee, which was going to cost "a pretty penny" according to my stepfather. But when clear action was taken in defense of these seniors, the bank was quick to back down. This perhaps provides a cautionary tale to those who might be laissez-faire regarding oversight of bank transactions. Source: " Study: More than One Fifth of Banks Ripping off Senior Citizens " by PR Web, PRWeB.com, October 3, 2012. Follow up: Have you ever had a situation where the bank made an error which you found and brought to their attention? How were things resolved? If there was an explanation provided for how the situation arose, what was it? What other demographic group do you think may be targeted by banks for exploitation? Why? How can this be overcome?
  • Upcoming IPOs...and a source to watch for more

    screenshot of "Money Morning" IPO advertised website for IPOs. "Money Morning" (above) is an ad site, but the "IPO activity" site linked below is a more neutral source of new public stock offerings for those who are interested in investing in risky but potentially mega-profitable new companies. Source: "I PO activity ," Nasdaq.com, February 28, 2013. Follow up: Review the IPO activity items for the last 5 months. Do any of the issues interest you? Have any become news items? Could you have predicted the ones that have done well? What were the sources that helped you identify the "winners"? Pick three IPOs from the last year and track their performance to date.
  • "Old Economy Steve" meme-- Millenials comment on parental advantages

    This meme started with a picture of a young adult, circa 1970. Economic conditions, business environment, and opportunities were pretty different in the 1970's (although I do remember a pretty profound recession and extreme competition for jobs and grad schools when I graduated from college in 1975...of course, that was a peak baby boomer year). Although it is not "hot" right now, the meme had its "15 minutes of fame" on Reddit . So--what is the "New Normal" in terms of skills and life-style opportunities for young adults today? In my own family, it doesn't look as though there is a "normal" set of expectations--everyone seems to be carving out their own lives, in ways that work for them. The big difference that I see in general is the disparity between the very rich and the majority of Americans. The "middle class" lifestyle seems to be more difficult to obtain, and there seems to be less of an interest in sharing the wealth by progressive taxation. How are economic conditions affecting you? Source: " Old Economy Steve: a Meme for Frustrated Millenials ,"by Daryl Paranada, Marketplace, American Public Media, May 28, 2013. Follow up: Search the internet Images of the Old Economy Steve meme. Find one that speaks to you. What about the economic inequity can you change, or work with others to change? Would it be worth it? Explain. What about the meme you picked is totally out of everyone's control? Are there any advantages for people in their 20's in today's economy...compared with conditions in the early 1970's? What are they?
  • Corporations push 401(k) benefit toward a slippery slope

    image from Vanguard The slippery slope of pension benefit "norms"...here we go again. Forty, thirty, twenty--even ten years ago in many industries, the standard for pension benefits was a "Defined Benefit" plan. Corporations would set up plans to fund retirement benefits that were usually based on a formula valuing time-on-the-job and salary. For example, a typical benefit might be 2% of final salary x the number of years employed. Someone who had worked at one company for 30 years, and who retired with a salary of $100,000 would get 100,000 x 2% x 30 or $60,000 per year as a defined benefit pension. Now the standard has moved to the "Defined Contribution" plan, exemplified by the 401(k). In a typical scenario with a 401(k), the employee contributes a a pre-determined "defined" amount out of each paycheck and the employer matches that amount, or a percentage of that amount. The contributions are invested until the employee retires, and the benefit received in retirement is dependent on the success of the investments over time. (No guarantee.) But with all pension plans, a key factor is "the time value of money." Most employers contribute their portion at the same time the employee contributes: at each payday: However, lately, big employers have been shifting their policy to a "lump-sum" contribution. AOL was making this this shift during its recent privacy kerfuffle. As you can see from the graph above, waiting till the end of the year to make the payments means that the company has the use of the money for longer...and employees lose out on investment earnings. In addition, if employees change jobs mid-year, they lose the employer side of the contribution entirely--again saving the employer money. Employee compensation is a combination of salary, paid time off, reimbursed expenses, health benefits, retirement benefits, and other factors. Although it may be easiest to focus only on salary, all factors must be evaluated over the long term to really know what an individual employee is being paid. Sources: " Beware the End-of-Year 401(k) Match ," by Ron Lieber, New York Times, February 14, 2014. " Making Retirements Less Secure ," by the NYT Editorial Board, New York Times, February 14, 2014 Follow up: Read the article. What is the lifetime differential mentioned in the Vanguard analysis presented therein, based on typical job-changing events that would be likely to occur over an individual's working life? If you were looking for a job, what type of pension benefit would you look for? Would this be a major or minor factor in your job decision, assuming you had multiple offers? How might your decision change if you were in your 40's or 50's?
  • Investing in...forever stamps?

    image from moneysavingmom.com The new price to mail a letter is 49 cents. A week ago it was 46 cents. That 3 cent difference represents an increase of over 6.5%. This might not mean much to you and me, with a few books of stamps sitting in our drawers...but to big retailers who sell stamps at the current rate, it represents a substantial return. Some retailers who may have benefited from this include Staples and Office Depot...as well as any large companies who send mail at first-class rates. Source: " If you bought Forever stamps forever ago, you are getting a good return ," by Allan Sloan, Marketplace, American Public Media , January 29, 2014. Follow up: Do you have any Forever stamps in your drawer? Count them and calculate your return on investment (ROI) in dollars and as a percent (if you bought the stamps before the price increase.) Note which number you use in the denominator (46 cents or 49 cents) when you are calculating a percentage change or ROI. What businesses are most affected by changes in postal rates?
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