On Sunday, I reviewed Gotcha Capitalism, a powerful and comprehensive guide for consumers, and gave it glowing reviews. Today, I want to talk about a couple stats Bob Sullivan shares with the reader about complaining to companies and success rates (Keep in mind that the book was published in 2007).

The point of the section was to illustrate that the places where you are more likely to succeed are exactly the places that people don’t try. The success rate at a grocery store is 57.1% but only 14% of people ever try, whereas the success rate with a television company is an abysmal 20.2% yet 84% of people complain. If you want to make the most out of your time, go after credit card companies. Ask to have fees removed, refunded, or waived because you’re such an awesome customer.

Here are the numbers:

1. Credit card companies: 64.6% success rate
2. Airlines: 60.0% success rate
3. Grocery stores: 57.1% success rate
4. Retirement: 52.2% success rate
5. Internet: 51.5% success rate
6. Hotels: 37.0% success rate
7. Banks: 33.3% success rate
8. Insurance: 28.9% success rate
9. Cell Phones: 26.8% success rate
10. Television: 20.2% success rate

Here are the rates at which people actually complained:

1. Television: 84% complaint rate
2. Credit card companies: 79% complaint rate
3. Cell Phones: 71% complaint rate
4. Hotels: 54.0% complaint rate
5. Insurance: 38% complaint rate
6. Internet: 33% complaint rate
7. Retirement: 23% complaint rate
8. Banks: 18% complaint rate
9. Airlines: 15% complaint rate
10. Grocery stores: 14% complaint rate

If you have all the time in the world, complain to everyone!

(Photo by aturkus)

I had a lackluster experience with an alleged financial planner and I’ve read many articles detailing how you should find a financial planner, what you should ask him or her, and everything else you need to do to make sure you don’t a raw deal in the process. I’m sure many of you have read those same articles warning you about how you need to find fee-only financial planners or sleep on their advice. Well, I wanted to highlight a columnist at CNNMoney called “the Mole.” The Mole is an actual practicing financial planner who gives you the full skinny on what you should do to get the right financial planner.

Here are the one’s I felt were valuable reads:

• When you should dump your adviser – some red flags that your financial adviser isn’t up to snuff.
• Are investment newsletters worth it? – “You’d be much better off just throwing the money in the nearest dumpster than buying these newsletters and risking a big chunk of your nest egg in following the newsletters’ advice.” (he’s very honest)
• What a good financial adviser should be doing for you – Discussion on the various aspects financial advisers should help you with.
• Four good questions to ask your adviser
• What your adviser doesn’t know might hurt you

You can find all of The Mole’s articles here.

Cash-Rich Retirement by Jim Schlagheck, seen on public television’s Retirement Revolution, seeks to turn the retirement advice community on its head by taking “the investing techniques of the mega-wealth” and bringing it to the masses. It’s quite a bold statement to make, since we all know the mega-rich are afforded a much different set of rules than the rest of us, so we’ll see if Mr. Schlagheck can deliver.

The dust jacket says that Schlagheck’s advice “breaks with conventional advice that tells the public to invest mightily in stocks, flip holdings, and seek capital gains.” I’m not sure that the conventional advice says you should be actively trading stocks, but then again personal finance bloggers live in a world where we are exposed to the sage advice of Buffett and Bogle, two accomplished investors who actively advocate index funds for the masses. However, even if you accept the belief that the conventional advice is flipping stocks, Schlagheck advocates investing for “prudent income… Build a ‘life-cycle’ annuity package for lifetime retirement income. Focus on dividend-, interest-, and rent-producing investments and insurance.” If your alarms went off when you red “life-cycle” annuity package, you weren’t alone – mine went crazy. Annuities are actually one of the “six straight-shooting, show-me-the-money steps” in the Cash-Rich Retirement plan. We can see what Schlagheck means when we get to them.

The six steps are:

• Change your “automatic pilot”
• Diversify your holdings in radically different ways
• Build out your investment plan with funds and objective research
• Get all the professional help you can
• Build income streams with a ladder of annuities
• Invest in long-term health care insurance

Setting the stage

The book begins by discussing retirement and how the rules of the game have changed. Schlagheck has a very straight forward and easy to understand writing style and the book is organized in a way that makes it very easy to follow. He makes excellent points about how the retirement is changing, given the changing demographics, solvency of Social Security, and a whole collection of other issues. It really does drive the point home that the old rules of retirement are changing (because they are!).

Let’s see these six steps…

Change your “automatic pilot”

Schlagheck’s term of “automatic pilot” refers to the fact that you concept of “saving for retirement” is investing for speculative gains. It means taking stocks in your Roth and going after high flyers, it means pushing your 401(k) contributions into microcaps or other more risky investments, and he argues that you need to rewire the way you think and act differently. Less like a slot-machine player and more like a saver and cautious investor. Mostly, he’s saying you need to take your retirement seriously right now. What does he recommend you do?

• Save at least 20% pre-tax income
• Hold savings in tax-sheltered accounts (401k, 403b, etc.)
• Automate saving (think, Automatic Millionaire)
• Don’t chase speculative gains

So far, nothing super incredible or only within the realm of the super-rich. It’s just straight up, smart personal finance advice that’s been repeated before, though it does have some eye-opening statistics not often included in other books.

Radically diversify your holdings

This chapter focuses on how your asset allocation is probably off, though it focuses on many of the simple mistakes people may make such as investing too much in company stock or being too risky in allotments. He advocates investing in things that provide cash flow. That includes dividend stocks, interest bearing accounts or investments, and “rent” producing REITS or rental properties. This is probably where the “Cash-Rich” in the title comes from. Another category he says you should increase in is international exposure, an idea that probably would’ve netted you quite a tidy sum had you implemented several years ago.

From here, this book has some nice ideas but nothing that’s radically new or unheard of. Since the annuity chapter sounded some alarms, let us skip to that chapter.

Build income with annuities

Annuities are like timeshares, they’re not inherently bad, they were just pitched by inherently bad people. The book makes an excellent case for annuities and one that I buy into, though, as they say, the devil is in the details. Annuities provide protection against longevity risk, which is the risk that you’ll outlive your retirement savings, by providing a guaranteed constant income stream and Schlagheck recommends using them after everything else (401k, Roth). I believe that to be prudent advice.

Schlagheck explains annuities, how they are structured, the four main types, the benefits, drawbacks, etc. If you want a primer on annuities, Schlagheck has a good one in his book. He warns about the costs of an annuity, which are 2.3% average, and says that there are many excellent ones at a fraction of the cost.

So what’s this life cycle strategy? The idea is that you want to ladder your annuities so that you get different amounts of income at different points of your retirement. His example has three annuities, each paying out for three different time periods. The first pays out income for 9 years from age 65 to 74, #2 pays out for 9 years from 75 to 84, and #3 pays out from 85 and onward. I’m afraid the details are outside my capability to detail with much clarity so you’ll have to check out the book if you want to know how their structured. He also provides a lot of explanation that I think is crucial for understanding how to ladder annuities, such as tax implications, purchase tactics, etc.

Overall Impressions

Overall, I felt Schlagheck did a good job explaining his cash-rich retirement plan, even though I skipped a few of them in this review, though nothing seemed exclusive to the mega-wealthy. Granted, the ability for most retirees to invest in rental properties is slim (but not unheard of) but investing in dividend stocks, buying annuities, and many of the other suggestions are not anything special. His explanation of annuities, for someone who knows little about them or the fact that laddering them would be a good technique, was comprehensive and easy to understand. If you have the basics of retirement down and are looking to learn more, I think getting this book, either at the bookstore or your local library, would be a great first step.

A bank is a bank is a bank is a bank right? So, why are there so many banks in the United States? Well, there are plenty of reasons but one of which is that each and every bank out there solves one problem or another for those people who hold accounts there. In the next few hundred words I’ll tell you which types of bank accounts you’ll need and where to go look for that type of account. By types of account I don’t mean savings, checking, money market, brokerage, retirement, or whatever account – I mean the purpose of the account. Once you identify the purpose of the account, it’s far easier to pick the right bank for you.

Daily Access Account

The daily access account is an account that you want conveniently located such that it’s easy for you to get your money very quickly. With the proliferation of automated teller machines (ATMs), it’s often just as good to have access to your bank’s ATM and not an actual full service branch. For me, my daily access account is a savings and checking account at Bank of America. I’ve heard of some horror stories from Bank of America (then again I’ve heard horror stories from every bank) but when it comes to ATMs, I don’t think anyone has them beat. Everywhere I go I see a Bank of America ATM and anytime I’ve needed money, a BoA ATM was just around the corner. What you need is a bank just like that in the places you go.

One important consideration with your daily access account is whether there are fees. Usually you can avoid fees by keeping a balance above a certain amount or by setting up a direct deposit. Since your daily access account’s interest rate will probably suck big time, you will want to keep as little as possible. You also want to pay exactly $0 in fees so pick this account wisely.

High Yield Savings Account

Let’s face it, right now CDs and bonds just don’t cut it. Everywhere you turn is another online bank that is offering you over 4.00% APY on your savings. While I’d be wary of picking any hole in the wall, ING Direct and FNBO Direct have been doing the online thing for quite some time. Emigrant is also an online extension of their brick and mortar bank. Either way, your high yield savings account is where you will want to store the bulk of your regular savings. Emergency fund? Stick it in a high yield savings account.

One recommendation I have is that if you happen to be one of the lucky folks who has their Daily Access Account at Citibank, you’re in luck because they also have a high yield savings account that you can link directly to your regular Citibank account. Instead of waiting the 5-7 days to transfer funds from one bank to another, Citibank customers can do it instantaneously. If it were convenient I’d have a Citibank account.

International Account

If you do a lot of traveling, an international account is a must. I don’t know how many banks do this but one big one is HSBC. Many of my relatives hav HSBC accounts that they can get access to whenever they are in Taiwan and China or here in the good old US of A. From what I hear, the international account and the domestic account are held separately but you can transfer funds between the two relatively easily. Either way, I think that this is preferable to exchanging cash at the ripoff counter at the airport. (if you have a Capital One card, you can make international purchases without that pesky surcharge, Discover too but that’s less widely accepted)

Good Loan Terms Account

Nothing beats a credit union in this department. In fact, I’m a member of a credit union only because they generally have favorable loan terms! (I currently have exactly $6 in my account there) Credit unions are designed to work in favor of its members, so it will usually have the best loan terms compared to a commercial bank (they are designed to work in favor of its shareholders). Everyone can find a credit union they can join and everyone should join one because it will likely cost you nothing and you never know when you’ll need a loan.

Retirement Account

This can be at a bank or with a brokerage but having a retirement account is crucial. What you want to do is pick a bank or brokerage that has what you want with the lowest amount of fees. You want mutual funds? Life cycle / target retirement funds? Find the cheapest brokerage because those little percentage points are going to add up over the next few decades.

Brokerage Account

Everyone should have a brokerage account if they are saving their money and have more than they need in an emergency fund. This account can be tied into your retirement account but you will want one so you can start putting some of your hard earned money to work.

That’s it, those six bank account types cover essentially everything you need. (I hope! If I’m wrong or missed something, please let me know!)

It’s Week 16 for the National Football League and after nearly an entire season, I’ve finally collected enough ammunition to put together a post that ties together personal finance and America’s real pastime – tackle football (baseball? what? steroids?). So, after the week in which the Miami Dolphins won their first game over the hapless hometown Baltimore Ravens, losers of eight straight, and a week after my Jets gave the undefeated Patriots a pretty good run for their money – what can football teach us about personal finance? Let’s begin with the basics.

Lesson 1: Offense, Defense, Special Teams

Coaches often talk about winning the three phases of the game: offense, defense, and special teams. Sometimes it’s okay to win only two, but if you want to dominate then you’ll have to win all three phases of the game. Surprisingly, personal finance has three phases as well: income, spending, and investing. Income can be seen as your offense, since you go out and earn that money. Spending is really defense, you need to defend against unnecessary spending, fight off those emergency spending situations, and protect your loot. Finally, investing is where I see special teams. Special teams plays infrequently, about as frequently in a game as you want to be touching your investments. However, once and a while, especially if you have Devin Hester of the Bears on your team, an investment can bring in a big play that can change your financial picture.

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My fiancee and I put a portion of our savings, that is those funds aren’t earmarked for future taxes, weddings, or other purposes; in a Vanguard mutual fund account that is fully invested in the Vanguard Target Retirement 2050 fund (and a high yield savings account). The latest rattlings of the stock market have unnerved me and while my brain is telling me “think long term,” my heart is telling me to sit out the next month or so and let everything settle down. I know a lot of you will probably respond by saying “you should be thinking long term! why are you trying to time the market!?!?” and a less open blogger would’ve probably never mentioned it, but I feel that it would be remiss if I didn’t share with you my decision and why I did it.

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This is a psuedo-Devil’s Advocate because it’s not generally assumed that one should always roll over their 401k’s when they leave their job but a lot of folks have recently been asking me, since I had just gone through the process, who they should roll their 401k over to (I wish with Vanguard). The troubling aspect of that question is that they’ve already decided to rollover their 401k before they’ve answered the crucial questions leading up to that decision. See, you should rollover your 401k if it makes sense – that is if you can get better options, better pricing, and better management elsewhere. By asking “where” to go after “if” you should go, you can’t analyze the differences. There are many reasons why you should stick with your 401k administrator even after you leave your job, here they are:

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The fundamentals of personal finance aren’t very complex and I doubt you’ll find anyone who can reasonably dispute that but it’s a lot like the law, the difficulty is in the various nuances and unique scenarios that always seem to crop up. I’d like to put these fundamental concepts up for critique and ask what you think of them, whether one should be replaced, one should be added, etc. so that we can reach a consensus on what the ten fundamental concepts of personal finance are.

1. Spend Less Than You Earn

Don’t eat more calories than you burn, don’t spend more dollars than you earn, it’s pretty simple and it’s the number one thing that you can do that can guarantee you’ll be financial prosperous. Heck, you can probably stop reading here if you follow #1 and do just fine.

2. Thinking About Money Sucks, But It Can Be Easy

Thinking about money and thinking about the future isn’t a lot of fun for most people. You probably don’t know what you’re doing this weekend, let alone what you’ll be doing when you retire in 20, 30, 40, or 50 years. That’s okay, the beauty of a lot of financial planning is that you can set it and forget it, Ronco style, enjoying the fruits of your smart decisions down the road with a minimum of pain now. For example, if you’re employed and have a 401(k), just drop 5% into it each month. You probably won’t feel the pain but you’ll enjoy seeing the balance when you retire.

3. You Don’t Have To Follow The Crowd

If you see the latest stock or investment start climbing in value, you may feel tempted to jump on the bandwagon so you aren’t “left behind.” This is as true in other aspects of life as it is in investing and it’s something that you have to come to grips with. Not moving forward is not the same as not moving back, you have to remember to pick your spots and remember your fundamentals, whether its your moral code or your investing decisions. Sometimes the boat sails with you on it and sometimes that boat hits an iceberg and sinks to the bottom of the sea, remember your fundamentals and you’ll end up doing just fine not chasing the latest fads.

4. Retirement Savings Order – 401k With Match, Roth, 401K, Everything Else

When it comes to saving for retirement, nothing can beat a 401(k) plan where your employer kicks in a few dollars to match your own contribution. Nothing in life is free but this is pretty darn close. Once you maximize that, start funneling money into a Roth IRA until you max that out. Then, polish off the 401K. If you still have money you want to save, put it in an investment fund but remember to enjoy life.

5. Avoid Debt Unless It’s For A House, Car, or Education

There are three things in life that you should be willing to go into debt for – your house, your car, and your education. Heck, the government even gives you a tax break for financing your house and your education, so you should take advantage of it while you can. As for the car, it’s probably necessary if you want to get anywhere in most places of the United States. With all three, don’t go all out, only buy that which you think you’ll reasonably need and you’ll do fine. That also means don’t get deep deep into debt if you can avoid it, so don’t buy too much house and too much car – ultimately no one else will care (or they will take advantage of you, which is even worse).

6. Showing Off Breeds Either Jealousy or Annoyance

You know that whole keeping up with the Joneses concept? Think about the last time you saw someone drive around in a flashy car, you probably thought he or she was overcompensating for something. How about that big television they were showing off to you? How about that gynormous house? You probably were either jealous of them or you were annoyed at them showing it off, either way the feeling is negative. So, why would you want to try to keep up and have other people be jealous of you or annoyed at you? Either way they won’t like you!

7. Scrap The Latte Factor

This is a term coined by David Bach and it’s the idea that if you cut out small unnecessary spending, like a cup of Starbucks, you can put that money away and it can grow tremendously. Think of all the little dinky crap things you buy, maybe from impulse, maybe from habit, and try to cut them out because you could save yourself some serious money.

8. If It’s Too Good To Be True, It Is

There will come a time when someone will come to you with an offer that seems unbelievable, whether it’s a hot stock tip or a great investment or some other scheme – don’t buy it. The true path to financial prosperity takes hard work and diligence, not sending envelopes of money or cashing a check for a guy in Nigeria. Your brain can sniff out a scam, don’t let your greed block out the scent of a bad deal.

9. Life Is About Enjoyment, Not Money

You can’t buy love and the best things in life are free. Think about all the lottery winners who end up dead in a ditch, or the star athletes getting into domestic disputes and thrown in jail, or the powerful executive that missed his or her children growing up – life isn’t about the cash. Life is about enjoying the time you have here with your loved ones, not about getting more and more money. Money can’t buy you time and time is precious.

10. Always Act Morally, Ethically, Truthfully & Legally

No matter what you believe in spiritually, the judge of your actions here on Earth will ultimately have his, her, or their say and money carries no weight there. And if you don’t believe in anything past this life, always remember that your Mom is watching.