If you had a credit card, loan or credit account between January 1987 and May 28th, 2008, you are eligible to file a claim in a preliminary settlement of a class-action lawsuit (though not slated to be approved until September, though it’s probably going to happen). That’s a whole lot of people. The lawsuit was filed eight years ago in Chicago and alleges that TransUnion sold consumer profile information to businesses, which is a violation of federal law. What started in Chicago certainly didn’t stay there, eventually there were 14 federal lawsuits. Yikes!

(Thanks to Cap, if you used TransUnion or TrueLink between December 1, 1999 and April 16, 2007, you can get three months of credit monitoring through a settlement in the Robert V. Townes, IV v. TransUnion, LLC and TrueLink, Inc. case, deadline for that settlement is July 22, 2008)

What Do You Get?

You may be eligible for one of two options:

(1) Basic relief. Free credit monitoring for six months, which gives you daily access to your credit report and credit score and 24-hour credit-monitoring service. This normally costs $59.75. Those who elect this option may get a cash payment if there’s money left from the $75 million settlement fund.

(2) Enhanced relief. An alternative enhanced set of services” in exchange for a full release of claims. This options includes nine months credit monitoring, a suite of insurance scores and TransUnion’s mortgage simulator service. This option normally would cost $115.50. You won’t be entitled to any cash payment under this option. [Source: Phuong Cat Le of SeattlePI.com]

What Are My Option?

Option 1, basic relief, is the only one where you could potentially get money (if there’s any left over). If you elect basic relief you can get the free credit monitoring for 6 months or a $59.75 cash payment. I don’t think there will be any cash left over in the $75 million settlement fund (there never seems to be, plus you figure with the internet and how fast information spreads, you’ll get a pretty high percentage of the estimated 160 million eligible Americans registering for this).

Option 2, enhanced relief, has no cash out option and comes with three aditional months of credit monitoring, and a “suite of insurance scores.” There’s conflicting interpretation of “suite of insurance scores.” Some news outlets are reporting that it’s your credit score, others call it a different score that insurance companies use to determine your rates. I didn’t know that there were even separate scores (there may not be) in the first place. Bottom line, you will get a credit related number for free that you otherwise would’ve had to pay for.

My Thoughts

1. All the estimates put the settlement cost in the billions, yet TransUnion said they’d earmarked $75 million (this could always go up). They must not think people are going to sign up for this.
2. Option 1 seems more like a waste of time for the consumer and a boon for TransUnion. Getting credit monitoring for six months and then not renewing is like getting life insurance for six months and then canceling. Sure, you’re protected for six months but then what? Maybe you forget to cancel something or end up renewing the service, both earn money for TransUnion (turn a big long lawsuit in a money making venture, brilliant!). I wonder if we’ll hear complaints in six months (maybe I’m just cynical) about it. Nix that, no credit card will be required.
3. Option 2 seems a little better, though it still has the failings of Option 1, but you get to see some credit related score for free.
4. If you aren’t interested in either option, I’d register for Option 1 and see if you can get cash; that’s likely what I’ll be doing. I think we need to see the options all spelled out and finalized before reserving judgment.

How To Participate

First, you’ll have to register. After June 16th, 2008, you can register online at www.listclassaction.com or by calling them up at 1-866-416-3470. As of May 31st, the website doesn’t work yet.

Lastly, you can always get a free copy of your credit report, thanks to Federal Law, through AnnualCreditReport.com.

I’m clueless about a lot of things but the number one thing on my mind lately has been risk in investing. I don’t mean stock market investing or real estate investing, I meant the concept of investing and risk (specifically, determining and being paid for taking risk).

Most people associate investing with the stock market because that’s the easiest way to invest. The stock market is the perfect investment system in that your assets are pretty liquid and the barriers to entry are low. It’s absolutely free to open a brokerage account and trades are dirt cheap (cheapest is $0 a trade at Zecco, but that has gotten mixed reviews; second cheapest reputable brokerage is TradeKing). You can buy and sell stocks pretty easily as there is never a scramble to find interested parties, though the price you get may not be to your liking. You hope for good equity appreciation (increase in stock price) and perhaps take some cash flow along the way (dividends). The rate of return on the S&P has been around 10% for the last 80+ years.

Now take the second thing people associate with investing – real estate. In real estate, the assets aren’t as liquid (especially now!) and the barriers to entry are much higher. At best you have to come up with a downpayment and transaction costs (Realtor fees, lender fees) are high, fewer people get involved in real estate investing. (Over the next two weeks I’ll have four guest posts going over real estate written by Trisha Allen, a seasoned real estate investor, so if this is up your alley keep your ear to the grindstone) With real estate, again you hope for good equity appreciation (increase in home value) and perhaps some cash flow (rent) along the way. The rate of return on this has generally been about inflation (surprisingly) according to some experts (they could be wrong).

There are other means of investing (such as owning your own Rita’s Italian Ice!) but the gist is to put your hard earned money to work for you. However, how do you analyze risk?

Every risk analysis class I’ve taken, be in undergrad or for the MBA, has always explained the same thing. You take the severity of a bad event times the probability and that’s your risk. They never talk about how to guesstimate the severity or the probability, just that you multiply and some magic number comes out. Also, they never talk about how much of a payoff you should get for shouldering how much risk. Real estate seems riskier to me than the stock market (higher barriers, more money involved, more headache), yet the stock market has greater returns. One expects riskier investments to yield greater returns.

Anyway, that’s what I’m clueless about, how about you?

(Photo by Patrick Haney)

Storage auctions made the news a few weeks back in a New York Times article highlighting the growing number of storage auctions amid our housing crisis. A storage auction is similar to a foreclosure in that the leaseholder loses the rights to use the storage unit. What’s unlike a foreclosure is that the storage facility’s recourse is that they are permitted to sell the contents of the unit to the highest bidder. What’s been happening, according to NYT, is that there is a growing number of individuals unable to make lease payments on the units and thus find their belongings being auctioned off, oftentimes for only a few hundred dollars.

Enterprising bidders are hoping to score something big when they bid on these units because you can’t closely examine the contents of the storage unit. Most places will only let you take a cursory look from the outside and then the bidding commences. Since this is a pretty standard practice across the board, it seems like the storage facilities know that forcing bidders to bid sight unseen will yield them higher returns. This also tells me that unless you’re willing to work hard at selling off stuff, chances are you won’t be hitting a gold mine with 99% of auctions (though you always hear of miraculous finds at garage sales).

To find out more, rather than just read off the internet, I attended a storage auction being held locally. I called up the three storage facilities near my home and learned that the latest one was being held at the end of May, so I marked it on my calendar. The easiest way, if you don’t know where your local storage places are, is to look in your local newspaper because storage locations will usually publish auction dates there. They want as many people attending as possible, so they generally will give that information freely.

My Auction Experience

So at 2:00 PM on May 27th, I appeared at the Fort Knox Storage Facility located in Columbia, MD to revel in the sights and smell of American capitalism (I brought my camera but it was out of juice!). Joining me were five other capitalists, all of which were easily in their forties or fifties. Not many young capitalists are trying to find their fortune at a storage facility on a Tuesday afternoon – just means more fortune for me! I noticed that they all drove minivans or trucks, though one person drove their Jaguar to the affair, and carried locks and flashlights. I later learned that after the auction is over, the facility gives you a limited amount of time (it’s negotiable, it’s always negotiable) so sometimes you put your own lock on it to come back later.

Auction 1: The walk over to the first unit was pretty long, easily the length of the facility, and there was an air of eager anticipation in the air. The facility owner snipped the existing lock, lifted up the door and behold… an office chair, some old clothes, and the saddest looking subwoofer you’ve ever seen. Oh, and there was some trash in there too. The bidding was fierce but the winner walked away with the chair and the sub for $20.

Auction 2: This one actually held some good stuff but most of the attendees were turned off by the beat up pool table. There were four couches, some mattresses, a desk, that pool table, and who knows what else inside. The winner paid out $10 for the haul and it was uncontested, though everyone was immediately turned off by the prospect of dealing with the pool table.

In both instances, the facility operator was really obliging, letting everyone look inside and poke around. There aren’t really any “rules” to this auction thing, the facility just wants to be rid of it and the capitalists are looking to profit a little from getting the stuff in the first place. The operator offered the services of a moving company associate of his, to the winner of the pool table, but she said she’d just give it away online (probably through Craigslist) to anyone willing to haul it.

Parting Thoughts

Like tax lien auctions, this one has a significant personal element involved and I think my fortune can be made without tempting karma. I know the content owners have fallen behind on their leasing obligations, I know they are rightfully losing their property, but I think that there’s a measure of karma involved in buying someone else’s possessions on the cheap and trying to turn a profit from them.

What stops the facility from cherry picking the good stuff for themselves? They often know the contents beforehand because they can watch someone move in (the locks are not the facility locks, hence the cutting) but I suppose there’s a sense of trust involved.

Ultimately, I think this would make an entertaining hobby or help someone get some furniture on the cheap, but it’s likely not going to make you a fortune. Every once and a while you’ll hit a jackpot but it’s like the lottery, you play a lot and hope you get the big score… good for entertainment, bad for paying the bills.

This month’s writing project for the Money Blog Network is a retrospective one – look back ten years and see how your financial life has changed. I’m twenty-seven right now and ten years ago my finances were pretty easy. Let’s see… I was too young for any debt (since I was a minor, a lender wouldn’t be able to collect so there’s no way I was getting any debt), I didn’t have my own car so I wasn’t going anywhere to spend money, and I lived at home. There’s no concept of personal finance then, what a beautiful time!

In all seriousness, ten years ago I really had no concept of personal finance (I didn’t know much, in fact it wasn’t until a few years into college that I learned the difference between a Republican and a Democrat – politics hardly mattered to me then), which isn’t that surprising for a 17 year old. I didn’t know anything about the stock market, I knew even less about investing in general, but I had the benefit of growing up in the age of the Internet and the wealth of information available online. In fact, I consider that one of the main reasons I am even close to being savvy about personal finance now. I didn’t grow up in a time when stock quotes were only available with the morning paper the day after (though I do remember times when real time quotes were considered premium content, rather than free!).

My first taste of personal finance was with the Motley Fool series of books. I think I borrowed each and every one of them from the library and tore through them in a month. They were entertaining to read, straightforward, and comprehensive. The folks behind the Motley Fool are brilliant in their delivery and I wholeheartedly recommend that you start reading their stuff if you want to learn the basics (and they have always advocated buying for the long haul and going with index funds, which is probably why I’m always biased towards index funds).

In ten years, I think a lot has changed and that has to do with the fact that these have been the most exciting ten years of my life so far. Wonder what the next ten will be like…

It’s always fun to see discount broker rankings. Last week, I wrote about a little preview to the SmartMoney 2008 Broker Survey in which SmartMoney released some preliminary results from their annual ranking of brokerage firms. SmartMoney has published the full details of their report and I’m sad to say that TradeKing did not retain the top spot they enjoyed the last two years (third place isn’t bad!).

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Visitors to the website will notice something new at the top of the sidebar, it’s a little covershot of a free ebook I wrote titled College Grad Money Guide. The College Grade Money Guide is a five-step guide for new (and recent) college graduates entering the working world for the first time. It discusses everything from opening up bank accounts and setting up bill pay to discussions of 401(k) and Roth IRAs to budgets and housing, all packed into thirteen pages. I give enough detail for you understand what’s going on but for more you’ll have to dig deeper through other resources… best of all it’s absolutely free. Simply follow the instructions on the College Grad Money Guide download instructions page for how to download the ebook.

If you are reading this from your RSS reader or via email, you already have access! Simply look at the bottom of this article for a Download College Grad Money Guide link and its yours.

With the recent spate of incredible shrinking product sizes, it’s important to double check your grocery store rack labels and their math. I know a lot of people use those white and yellow labels to help decide whether they’re getting a good deal, I use them all the time, but with producers shrinking products, there can often be a mismatch between the label and the product.

For example, Breyer’s recently lowered the size of their ice cream from 1.75 quarts to 1.50 quarts and didn’t change their UPC bar codes. This meant that a 1.75 quart Cookies & Cream had the same bar code as the 1.50 quarter Cookies & Cream. When you combine that with a supermarket staff not advised to change the labeling, you get bad math. Here’s an example:

I apologize for the poor image, I took it with my cell phone, but you can make out that the package size is 1.50 quarts (the new, smaller size). The label shows that the retail price is $4.99 and the unit price is $2.85 per quart.

The unit price is actually $3.33 per quart ($4.99 / 1.5) and the $2.85 per quart unit price applies to the older larger version ($4.99 / 1.75).

Grocery stores aren’t trying to trick you into thinking you’re getting a better deal than you are, they simply aren’t paying close attention – but you have to. Stay sharp!

The paradox of choice is that the more options we are given for a particular choice, the less likely we are able to make a choice. Penelope Trunk discussed it in her article about taking a job, any job and references Dan Ariely, an MIT behavioral economist, and his book Predictably Irrational. In the book, Ariely discusses a study about how people ended up buying more jam when given six potential samples versus twenty four. Twenty four potential samples was simply too much and people ended up not deciding, even though they had more information.

How does this apply to banks and credit cards? Too much information paralyzes us. It paralyzes me. In the case of jams, there’s no pain in not buying a particular flavor. In the case of credit card debt, there’s a significant pain in not paying down a card. With a bank, there’s a bit of pain in interest not earned and a bit more if you overdraft because you forgot which account held how much (or you forget how much you need to keep in an account to avoid fees because you have too many accounts). Too much information, like juggling many balls, hampers our ability to make good decisions and causes us unnecessary pain.

The solution is the simplify your finances.

If you have credit card debt, pay down the smallest amounts first. This may sound similar to Dave Ramsey’s Snowball technique and that’s because it is. However, rather than focusing on the psychological benefits (yay! another debt conquered! let’s get the next one!), I argue that removing one headache from your life, even if it’s not the most financially distracting one, is beneficial. Next, try to consolidate bigger debts into as few accounts as possible without sacrificing the interest rate. By not sacrificing the interest rate, I mean don’t consolidate lower interest cards to higher interest cards (which sounds obvious but sometimes we make mistakes). The number of credit cards offer zero fee 0% balance transfers are dwindling but they often have a fee transfer cap that could be to your benefit.

With banks, don’t keep accounts you no longer need. I kept an old employer’s credit union account open for a year and a half and it cost me $20. I had transferred money into that account from my Emigrant Direct account and written a check. The check didn’t get cashed for several weeks and before it could be cashed, I went into my account and saw some money sitting around. Not remembering why the funds were there earning a low interest rate, I transferred them back and got dinged with an NSF. While I was able to get the NSF removed, it was entirely my mistake but caused by keeping an account I didn’t need or use anymore. There are no negative credit impacts of closing bank accounts, so close the ones you don’t need anymore and drop juggling that ball.

Simplify your life and reduce the number of things your brain has to manage, you’ll be happier and richer for it.

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On a happier note, my post on the Top 5 Online Banks made it into this week’s Carnival of Personal Finance hosted by Canadian Dream.

Last Friday I discussed the CEO of LifeLock’s appearance on the Today Show and how many of the services they offer are things you can do yourself. So, rather than leave it all vague, here’s what you can do for a do it yourself solution.

AnnualCreditReport.com

Through AnnualCreditReport.com, you can request a copy of your credit report from each bureau once a year. I generally like to stagger it every 4 months so you can keep up to date absolutely free. For example, get your Experian in January, then your TransUnion in May, then your Equifax in September, then Experian again the following January.

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If you know nothing about the stock market, consider yourself lucky.

If you think the stock market is a scary place that you don’t understand, you’re actually in good shape.

I learned about the stock market in a time of prosperity, in pieces, and probably in the worst possible way and it’s burned me on numerous occasions. When everything is going up and there’s an irrational exuberance, you are afforded the opportunity to have good results come out of bad decisions and that can lead to the development of bad habits. So, if you know nothing about the stock market and are scared of it, that’s actually the best time to start learning about it.

So, if you’re scared and I have bad habits, why should you read anything I have to say about investing? I don’t actually talk much about investing outside of discussing ideas and theories (and recommending index funds from Vanguard) but today I’ll outline a few good resources I’ve found to help you learn more about investing in the stock market.

Morningstar Investing Classroom

Morningstar is great. The number one best place to start, if you know absolutely nothing, is with Morningstar’s Investing Classroom. They have four areas of beginner study – Stocks, Funds, Portfolio and Bonds. Each classroom has five levels of study with the exception of Bonds, it only has two, and each level has anywhere from five to eleven courses. I’ve taken several of the courses and they begin with the basics and move onto progressively more advanced topics.

As a bonus, you earn points for answering the quizzes following each course and can redeem those points for various rewards (you have to be a free registered member to earn these credits).

Motley Fool’s Investing Basics

If you’ve completed all of Morningstar’s Investing Classroom courses, Motley Fool’s Investing Basics is a great place to reinforce those ideas but with a witty and humorous twist. Depending on how quickly you went through the Morningstar site, you probably glossed over a few topics or forgotten others, so review can’t hurt. Plus they’re entertaining to read.

Decisions Decisions Decisions…

At this point, armed with the basics, you have to make a decision. Do you want to invest the your stock allocation in index/mutual funds or do you want to try to go your own way and invest in individual stocks? If the answer is index and mutual funds, you probably are armed with enough information go forth and conquer. Open an account with a Vanguard or a Fidelity and have it (those two always seem to dominate Top Fund lists). If you want to go after individual stocks… there is more learning ahead. (some would say there is more to learn but from here but between Morningstar and Fool, you have enough information to Google search from here)

Securities and Exchange Commission

The SEC has a great guide to financial statements, which you’re going to have to decipher and interpret if you hope to be able to pick some winners in the stock market. I would also get myself familiar with EDGAR, which is the SEC’s database of company filings (EDGAR Quick Guide, Comprehensive EDGAR Guide). EDGAR is far more versatile (and comprehensive) than navigating company websites for their filings. They also have a pretty extensive Publications section that has all sorts of valuable information.

Google Finance

If you want a very quick snapshot of a particular company, I think Google Finance has the most amount of information on a single page and provides the easiest interface to reach it. Simply type in the ticker or name of the company and you can get a wealth of information on one page. You can access their related companies, their latest financials, recent and future events, key stats & ratios, a brief summary as well as links on their company website, list of officers and directors, as well as links to other resource reports such as SEC filings, MSN Money’s listed major holders, etc. All that information is one page, that’s why I like it over other similar services like Yahoo Finance (Yahoo Finance’s advantage is that you can add a lot of technical indicators to their charting services).

Wall Street Journal Markets Data Center

So, armed with that information, you probably have enough to go out and do some serious damage to your portfolio (take that any way you’d like ). Are you ready to be inundated with market data? If so, and my inundated I mean like drinking from a fire hose, then check out the Wall Street Journal Markets Data Center. Pages and pages and pages of financial information at your finger tips. (if it’s intimidating, but that’s okay… and that’s just the home page, you can drill down even more!) It’s absolutely stunning… now go forth and conquer!