Ashe v. PNC Goes to SCOTUS

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The Best Banking Options For Millennials

When Scratch surveyed over 10,000 millennials, they found four of the top ten hated brands are all banks. The term ‘millennials’ refers to anyone born between 1981 and 2000, and it is this group of tech savvy, futuristic individuals that see a very different future for the world of banking.

Our attitude towards banking comes from everything our generation has seen over the years, leading to the conclusion: big banks and other large institutions can’t be trusted. We have seen them lie, contribute to the housing bubble, and charge sneaky fees to hardworking, loyal customers. We have also seen that they won’t always face the consequences for their actions.

One third of millennials believe people will be able to live bank-free sometime in the future. Sounds nice in theory, but we are not yet there. So how can you —a smart, financially knowledgeable millennial— find a bank that doesn’t make your skin crawl on the regular?

Banking With The Most Hated Banks Of All

The ten most hated companies by millennials include four of the biggest banks. That doesn’t mean our entire generation avoids Wells Fargo and Bank of America entirely. Many millennials remain members at the very banks they detest. This is partly because the biggest banks offer convenience and more advanced mobile banking options.

According to app store reviews, Capital One has the highest rated mobile banking app, followed by Wells Fargo, ID Bank, and then US Bank. Big banks have even bigger budgets, but mobile banking apps are still far from perfect. For one, scanning a check through your phone isn’t as easy as it should be (although Bank of America has this feature down much better than Wells Fargo!).

Yet none of this matters if you’re sick of supporting what our generation sees as Big Banks. They still remain big, but there are simply too many other options.

Switching To A Credit Union

Millennials are 80+ million strong in the US alone, meaning we carry a lot of power. Due to millennials’ distaste for big banks, many financial analysts predict credit union banking will continue to grow in popularity. A Credit Union is not publicly traded on the stock market, so unlike big banks they are not solely set on pleasing market investors. On the contrary, credit unions are all about pleasing their customers, the real shareholders.

It’s not as difficult to become a member at a credit union anymore either. Many simply require you live in the area. Credit unions don’t have as many convenient locations, but most now offer mobile banking apps. According to overall app ratings, the very best credit union mobile banking app is offered by Eastman Credit Union, followed by ESL Credit Union, Redstone Federal, SEFCU, and VyStar.

Conduct a quick search in the app store on your local credit union(s) to see if they offer a mobile banking app, as well as what type of rating it gets.

What About Internet Banking?

When is the last time you actually walked into your bank? Bank branches are far less crowded than they once were, most millennials don’t enter the bank unless they absolutely have to. What’s the point anyway when you can use mobile banking, drive-through ATMs and customer service phone lines? For this reason many people are switching to Internet banking, a banking institution that has no store front at all.

Internet banks offer a number of ways for you to access cash and use your account, through apps, telephone, snail mail, and ATMs. But because there isn’t a physical store to pay for, internet banks are able to offer better rates and fewer fees.

According to user ratings and honorable mentions by trusted sources such as CNNMoney, ConsumerSearch.com, and BankRate.com, the best of the best in regards to Internet banking include: Ally Bank, ING Direct, PerkStreet, Connexus Credit Union, and Bank of Internet USA (Bofi).

If you feel a twist of hate for the institution that currently houses your money, you can find other options. It is this plethora of options coupled with millennials’ desire to explore those options that will help this generation shape the banking industry.

How to Easily Split the Bill

Imagine an idyllic scene where you and a few good friends go out to dinner for fondue. There are laughs, good memories shared, the food is delicious, and the wine is flowing. Nothing could make this night any better. Then the bill arrives.

Suddenly, a scene of joy and friendship turns in to one of mathematical calculation. The check gets passed around and everyone carefully throws in their money. The leader of the pack discovers there isn’t enough money to cover the bill and tip. Suspicion arises, and every person is interrogated on how they assessed their portion of the bill. The generous one throws in an extra twenty, even though he probably overpaid already. The poor one nervously shifts in his chair, because he has nothing more in his pocket to give and his credit card is maxed out. The leader pulls out a calculator and begins meticulously dividing up the bill. A fight breaks out about how so and so drank too many vodka tonics, and the rest of the group shouldn’t have to make up for it. Another battle begins about how much tip the waitress really deserves. If splitting the bill drives you crazy, there are some good rules of thumb on how to avoid the above scene. There is no reason that it should be a tough procedure every single time.

First, be thoughtful of everyone going to eat. Pick a restaurant you think everyone can afford given their circumstances. Warn people that the bill is “dutch” tonight, and email them the menu in advance so they can plan what they can reasonably eat and drink. If someone complains that the price per plate is too high, be ready with a good backup. Remind people to bring small bills if possible. Before arriving at the restaurant, see if the restaurant is willing to cut separate checks for every person at the table. This can avoid a great a deal of confusion. If the restaurant can’t accommodate you, ask your table of friends how they want to handle the bill before the meal starts: are we splitting evenly or itemizing? This way, everyone is prepared for what will happen with the bill and it is less likely to ruin the night.

Alcoholic drinks are often the root of many disputes in regards to the bill. Try having everyone order and pay for their own drinks at the bar before sitting. Don’t have the bar check transferred over to the table or start a tab. Try to avoid ordering wine for the table, unless everyone at the table, whether they drank a glass or not, agrees to share the cost. Appetizers is another area for issue. Again, best to avoid unless everyone agrees to share the cost.

Prepare to be the bookkeeper and the bank for the meal. Two of the biggest problems with splitting the bill are when everyone gets a say, and nobody has change. Bring a wad of small bills. Ask the waitress to bring you the bill. Be the person to itemize the bill and let everyone know their total with tip. Make change where necessary right on the spot. Having centralized accounting can make the entire process much smoother.

Also, consider technology to help you split the bill. There are several apps out now that can help you do this. If you need help doing mathematics, Gratuity will assist you in calculating the tip plus total and dividing out by the number of people in the party. If you are forced to itemize, there are several apps such as Tab, Divvy and Billr that will let you either snap a photo of the bill or enter the items ordered and divide out the amounts everyone should pay. You can also agree to pay for everyone and have people pay you back on services such as Venmo or Paypal. Be careful with this option because not everyone is great at remembering to pay back. It’s acceptable to send a reminder email or text a few days after the meal. Know, however, that it is possible that someone might not pay you back.

So, go enjoy a meal with friends and family, but remember to keep these tips in mind.

Bitcoin Regulation is Inevitable

The cryptocurrency, Bitcoin, is becoming more mainstream. Yesterday, online hotel booking company Expedia announced that it was teaming up with San Francisco-based start-up, Coinbase, to enable customers to book hotels using bitcoins. Digital currencies like bitcoin are quickly becoming an alternative to  traditional currencies because of the process for creating, exchanging, and storing bitcoins with the use of the bitcoin protocol and third-party miners. Bitcoin enthusiasts, economists and politicians have mused over whether bitcoin can actually be considered “money” or “currency”. These initial discussions are just thought exercises, but regulatory action is likely to follow.
 
All Eyes on Bitcoin
 
Federal Government agencies including the SEC and the IRS as well as financial regulatory organizations like FINRA have taken a look at bitcoin. The SEC has issued alerts regarding bitcoin-related Ponzi schemes. FINRA also released an Investor Alert that labels Bitcoin as a “More Than a Bit Risky”. The SEC and FINRA’s perspective on the digital currency is mostly cautious and negative. The IRS provided guidance on the tax implications of bitcoin – it would be treated like property. A complicating factor is that bitcoin transactions would be taxed based on the difference on the USD dollar value of each side of the transaction. So, if someone purchased 1 Bitcoin for $633.1 USD today and then aid 1 Bitcoin for, let’s say $1000 USD, for a product or service in the future they would owe the difference ($1000 – $633.1) in taxes.
 
There is a silver lining. Chicago Fed senior economist, Francois R. Velde, wrote a great primer on Bitcoin. Unlike some economists, Velde considers bitcoin to be a fiduciary currency. He goes into some detail about the genius of bitcoin, mining, and blockchains. However, Velde concludes that it is “unlikely that [bitcoin] will remain free of government intervention”.  Therein lies the rub. The regulators are coming.
 
Getting Ahead of the Regulatory Wave
 
What can be done to get ahead of the regulatory wave? This is a case where perception is reality. Bit coin stories about  failed exchanges, online drug-trafficking sites, and Ponzi schemes cast a very negative light on the digital currency. Moreover, in the rare event that we are headed into a bitcoin bubble, dumb money tends to follow smart money. People are predictably irrational. I have previously advocated that bitcoin exchanges come together to develop minimum standards for security, operations, hedging, and capital requirements. Developing a regulatory organization for exchanges (like FINRA) could reduce the potential for regulatory backlash from US states and the Federal Government. This self-regulating entity could also tackle other issues like consumer education, evaluating proposed legislation, and studying best-practices for hedging and tax-planning. These actions could improve the perception of the US bitcoin exchanges and prevent or lessen regulatory overreach. Government intervention in digital currencies is not possible, it’s inevitable.

Spendology Introduces Finio Brands

Washington,DC – May 23, 2014 – Spendology is introducing Finio Brands. Finio comes from bringing together FINancial intelligence with the right data Inputs to produce better Outcomes. Spendology’s Finio Brands include products and services in Business, Media, Online Financial Calculators, and Green Products. Finio Brand products and services include:

Finio Business: Training, resources, custom software and consulting for Financial Services Companies. Spendology is proud to announce that Bank of America is a Finio Business customer.
http://www.spendology.net/business

Finio Media: The Spendology Blog
http://www.spendologyblog.com

Finio Tools: Online Financial Calculators
http://www.spendology.net/calculators

Finio Green: Z Hook – The Quick-Drying Bath Towel Hook
http://www.spendology.net/zhook

About Spendology

Spendology LLC is a technology company based in Washington, DC that uses science to improve financial and ecological decision outcomes. Spendology was founded by Keith Alexander Ashe. Mr. Ashe is a graduate of Florida A&M University and Columbia University. He previously worked as a management consultant at Booz Allen Hamilton and the Corporate Executive Board.

How To Teach Kids Good Spending Habits: 5 Tips For A Financially Smart Future

We at Spendology hope all you mothers out there enjoyed a wonderful Mother’s Day! How can mothers (as well as dads and other guardians!) help prepare kids for the future? Teaching financial literacy and know-how is a great way to ensure kids will have stable futures. According to a 2012 study by the American Institute of CPAs, 61% of parents give their kid an allowance. Yet, only 1% of kids actually save any of the allowance they collect. The majority of kids spend every last penny hanging out with their friends and buying new toys. Although as any adult can attest, in the real world, if you spend all of your money on fun and games, you will end up homeless-and in great amounts of debt. While kids don’t have to worry about paying a mortgage or filling the fridge up with food, they will someday and how will anyone be prepared to save money when they have grown up doing the exact opposite?

It’s only natural to worry about your kids today, but you shouldn’t have to worry about them financially when they grow up. Here are 5 tips to ensure your child can financially stand on their own two feet someday.

1. An Allowance Won’t Teach Budgeting Alone

The average American child receives $780 each year in allowance money. While the vast majority of parents make their kids work for this money, the same study revealed parents who give their kids an allowance are likely paying their cell phone bill and other expenses too. Therefore, an allowance isn’t helping kids learn how to budget; rather, it’s providing them with an income free of budget constraints. Financial expert Suze Orman warns that an allowance can be nothing more than a lesson about entitlement, as kids feel entitled to receive this money. To make the most of your child’s allowance start requiring they chip in and pay for things like cell phone bills with their money.

2. The Value of A Savings Account

Requiring your child to save a portion of all the money she receives will give her something to be thankful for someday when she really needs it. As an adult there are always things you are trying to save up for a house, a car, or maybe that new big screen TV. Kids must be taught that patience is key to getting what you want; saving money takes time, but it always brings about worthwhile rewards. According to Clare Levison, from AICPA, parents should have their children save 20% of all money they earn.

When kids turn into teenagers, their wish list expands dollar-wise, especially around 16 when that first car glitters like gold. Show your child how a simple savings plan could help afford a car. By giving your kids the know-how to do something as huge as buying a car, you are truly helping to prepare them for life.

3. Need vs. Want

Identifying needs versus wants might seem simple – you need water but you want the latest technology gadget. However, in our fast-paced world full of instant gratification, needs and wants are all too often confused. Our needs are incredibly small – including food, water, shelter, or perhaps something important for school. When your child asks for something, get into the habit of having them identify if it is a want or a need. While they might moan and groan about it now, when they get older this scenario will continue to play in their head as they go through a store, helping to curb their spending habits.

4. Learning To Say No

You love your child and you want to make them happy, but that doesn’t mean saying ‘yes’ all of the time. Dr. Tim Elmore is the founder and president of Growing Leaders, an organization dedicated to leadership development. He fears that parents are pampering their children too much, putting them at risk for becoming poor future financial players in society. The human mind is malleable, and if you give your child everything that she wants, she will become dependent on instant gratification. The same is true if you continually buy your child something when she gets a good grade or does something nice around the house. In the real world, you might have to do a lot of productive things before you are able to splurge – let alone pay your rent. Instead of giving your child everything she wants today, Dr. Elmore suggests giving her what they need for the future. “The truth is, parents who are able to focus on tomorrow, not just today, produce better results.”

5. Example Is Everything

It is predicted that over the next decade, baby boomers will receive $27 trillion dollars in debt from their deceased parents. Don’t let your child grow up to inherit your debt. Set a good financial example for her to follow. If you are constantly spending money you don’t have, going into overdraft, or using maxed out credit cards with high interest rates, kids are going to pick up on these habits and perceive it as normal. They will be more likely to duplicate these same behaviors when they get older. Show your kids through example and experience that saving money is a good thing and that bad financial skills can lead to big problems.

The Psychology of Bubbles

Market Bubbles

The history of economic bubbles has indubitably shown enormous impact on certain markets and the public. The term “bubble” is often used by economists to describe how an asset price rises significantly over its fundamental or intrinsic value but then crashes with a market slowdown or contraction. Historical examples of this include the famous stock market crash of 1929; the Dot.com bubble in the U.S. information technology stocks in the late 90’s and early 2000’s; and, the more recent housing and credit bubble that has impacted U.S. and global markets. There is anything from small to large market bubbles that can have either local or even global impact. Although it is easy to see the consequences of these bubbles bursting, price bubbles still puzzle economic theory (Levine and Zajac, 2007). Although there is no clear agreement, price bubbles have been attempted to be explained by the effects of social psychological factors, how people’s thoughts, feelings, and behaviors are influenced by the actual, imagined, or implied presence of others.

From a social psychological perspective an individual’s thoughts, feelings, and behaviors drive our social interactions. Often an individual’s ability to process information from the environment can be overstimulated, so as an adaptive skill, she creates mental short cuts called heuristics in social situations. Although these mental short cuts can help process information efficiently, they can also create cognitive bias which leads to a distortion in an individual’s judgment or thinking. Cognitive bias is present in everyday life but can skew decision making, belief formation, and overall behaviors that can be detrimental to such matters such as economic and business decisions.

The Greater Fool Theory

Especially in highly competitive market landscapes, self belief can be a key adaptive skill for success. The Greater Fool Theory, however, demonstrates the potential destruction of this adaption on a collective scale. It relates to the naturally overconfident investor who buys an over-priced asset and still assumes that he can resell at even higher and inflated price. The goal of this buyer is to seek out even more gullible investors, known as the “greater fools” (David Dreman, 1993). The heart of this stubborn overconfidence is called self serving bias, where one can overlook negative feedback or external stimuli to maintain one’s own self esteem or worth. According to research, people have the tendency to assess themselves to be above average in various positive characteristics such as driving, ethics, productivity, and other desirable traits (Ola Svenson, 1981; Linda Babcock and George Loewenstein, 1997). If this were true in pertaining to a collective society participating in the rise of overpriced assets, the average participant in buying the asset will believe they could outsmart the next buyer therefore creating a chain effect until the asset plateaus and diminishes in value.

Herding

Herd mentality and behavior can also help describe how bubbles happen because herd behavior is rooted in how individuals tend to adopt to group behaviors, trends, and purchasing/consuming decisions without planned direction. This has been an exercised theory to help explain market bubbles since herd behavior explains how individuals are driven by irrationality and emotionally-charged decisions through the trend of the group. Another cognitive bias also known as the bandwagon effect, where despite the underlying evidence, people still participate with the trend of the group. From an individual outside of the group, seeing people participating in the group has an attention-grabbing effect that most likely acts as the best evidence of success. The Self Herd theory is an evolutionary theory that proposes the idea that it is instinctual to fundamentally feel safer with more people, leading individuals to gravitate towards a herd. These biological herd instincts could help explain when rationality is bypassed and individuals make decisions based on the trend of the herd.

Bounded Rationality

The basis of bounded rationality is that rationality is only limited to the resources or information one can have to make a decision. For instance, in experimental designs it has been shown that bubbles abated when participants traded repeatedly within the same group (Levine and Zajac, 2007). The basis of this adaptive bias is that our minds are built to adapt the best we can given the information present in the social situation. It seems that this effect could accumulate in small groups when individual cognitive processing is limited to the knowledge of the group such as wrong pricing of the intrinsic value of the asset.

Normative Institutionalism

Similar to herd behavior, economic theorists have talked about the effect of how social norms could play a significant role in market bubbles. Groups often hold onto implicit rules and expectations for the participants of the group to follow, which in time become internalized into preferred behavior by the group. For instance, the simple impulse of saying “bless you” when a person sneezes demonstrates a norm. These norms differ from culture and environment, but in all societies, become an overarching influence in behavior. Therefore in an economic market, direct communication might not be necessary to enable members of groups to internalize a belief: “the mere posting of bid and asks can be sufficient to spread beliefs and sway markets away from intrinsic value” (Levine and Zajac, 2007). This might seem like the exact same thing as herding and although very similar, I refer herding as the direct impulse and instinct to gravitate towards group trends contrary to institutionalism, where the internalization of the working model of expectations or deemed a social norm creates the effect of institutionalism.

Although there has been inclinations to separate each one of these factors to explain the phenomena of market bubbles, I would propose that the complexity of market bubbles is the result of the interactions of these distinct social psychological factors. The fragility of an individual’s and groups’ reasoning and actions can be influenced and swayed by the uncertainty of real world markets. Therefore, individual cognitive bias along with social influence could create large sways in the asset prices increases, creating bubbles imminent crashes.

Levine, Sheen S.; Zajac, Edward J. (2007-06-27). The Institutional Nature of Price Bubbles.
Dreman, David. “One More for the Road?” Forbes. New York, 1993, 363.
Svenson, Ola. “Are We All Less Risky and More Skillful Than Our Fellow Drivers?” Acta Psychologica, 1981, 47, pp. 143-48.
Babcock, Linda and Loewenstein, George. “Explaining Bargaining Impasse: The Role of  Self-Serving Biases.” Journal of Economic Perspectives, 1997, 11(1), pp. 109-26.
http://en.wikipedia.org/wiki/Social_psychology
http://en.wikipedia.org/wiki/Selfish_herd_theory
http://en.wikipedia.org/wiki/Cognitive_bias#Types

Want Less Stress and More Stability? All You Need Is A Savings Account

Happy National Financial Literacy Month! Allow the month of April to remind you that you can always take steps to improve your financial security and reduce your daily stress. If you don’t have enough money saved up for an emergency, you’re not alone-in fact, in a recent study, 76 percent of those surveyed claimed to be living paycheck to paycheck. More startling, 27 percent had no savings at all, while 50 percent had less than 3 months of livable income saved.

Perhaps that’s why the stress levels of Americans continues to rise. “Nothing helps you sleep better at night than knowing you have money tucked away for unplanned expenses, ” says Greg McBride of Bankrate.com, who released the study.

So if having an adequate savings account can help reduce stress and cushion the blow of unforeseeable disasters, why aren’t more people saving money? If you’re a part of the majority, the answer might seem simple: there is hardly enough money left to save after paying bills and other routine expenses. It’s time to start thinking of your savings as a mandatory bill, even if it’s only a $30 bill each month. Anything is better than nothing and over time you’ll be grateful you saved.

 

The Fundamental Reasons For Saving

There are truly unlimited reasons you need a savings account. No matter how passive, ordinary, or routine your life seems, the unexpected will happen. If you’re hesitant about transferring money into your savings account this month, realize that this money is only going to pay you back in the future.

Your savings account can help you:

-Have money for unexpected bills or incidents

-Protect you from steep overdraft charges

-Get a boost when you need a large down payment on items such as a house or car

-Reduce your overall stress

-Pay for college tuition

-Plan for a comfortable retirement

 

Change Your State of Mind

A savings account can actually change your state of mind. Once you start seeing your savings increase, you’re going to feel proud and accomplished. You might imagine yourself splurging on new golf clubs or a weekend getaway when you’ve reached your goal, but you will feel such a relief in having a fund for a rainy day. In fact, you will likely be motivated to save more. You will learn quickly that the good feelings derived from having savings can supersede the fun of splurging and the imminent guilt.

 

Debt Never Pays Off Alone

Are you skipping on saving because you are instead paying off debt? This is a legitimate concern, but it should not be enough to stop you from saving, even if it’s a tiny amount. Should something happen, you might re-load the same credit card you just paid off and incur the linked interest charges. This is part of the reason Forbes actually rates saving for an emergency cushionas more important than paying off debt. Try finding a balance between paying off debt in a timely manner and creating an emergency cushion. When an emergency arrives, you can use your savings instead of tackling on debt.

 

Reduce Your Risk, Increase Your Savings

Because of the low interest rates, you might be dissatisfied with the returns routine savings accounts are currently offering. On the other hand, the stock market is on a tear and placing your money in here might seem like the more lucrative option. But beware; the market could keep gaining, but there’s always sizable risk involved. Nellie Huang argues in this month’s addition of Kiplinger Magazine that bonds deserve a second look. He adds that while a safe and well-diversified stock portfolio takes around $100,000 of capital to maintain, “most bond funds, by contrast, let you through the door for $2,500 or less.”

It’s true that savings accounts, bonds, and low-risk retirement funds don’t provide the same yield as riskier investments, but it’s smart to have some money you can count on. And, you can always diversify later on, as your wealth increases. In fact, professional money advisers suggest having a variety of investments and always a reliable savings account.

Boiling the Ocean

You may have heard of a term in the corporate world called “Big Data”. This massive amount of information swirls around corporations, weighing them down with an over-extended amount of statistical data. This data is so large it is changing the infrastructure of the average corporation, requiring bigger and larger data centers, people just to manage the data, and hordes of data analysts and reporting specialists to look at it.

If you think on a personal level you are immune to Big Data, think again. As technology grows, so does the vast amount of data we can collect on our surroundings, our bodies, our families, our homes, our cars, and more. Already a common complaint is most people can’t keep up with their electronic lives. Between Facebook, online dating, weather tracking, emails, texts, online banking, and recording what you eat into that neat little app you got last week, the world has become a nightmare of constant data updates, downloads, feeds, and notifications. You can analyze everything from how many hours you sleep to the variation of gas prices throughout the state at a touch of a button. Imagine that you deal with Big Data all day at work, and then come home to a barrage of statistics on you and your family to analyze, and you can start to see the current dilemma before the average human being. Big Data can become a big problem. Just because information is available doesn’t mean that it should be used.

Trying to keep up with Big Data is akin to boiling the ocean. The real problem doesn’t lie in the absorption of the data, but in actually filtering, analyzing and using the data for something constructive and valuable. Data of any kind is only as good as its end result. Did the results of the data or analysis improve your life, waste time; or, simply, just not add any value? It is easy to get lost in an ocean of data if you don’t have a plan.

Corporations have long ago realized that automation of transactions and exception-based processing has taken the terror out of Big Data. In other words, automate as much as you can in your life so you have to touch and analyze the data for routine tasks as little as possible. It is paramount to use the right data and insights to add value to lives. However, effective use of data can help pay your bills, heat your home efficiently, send flowers to your mother each month or backup the pictures of your kids without you ever having to press a button. It is not necessary in today’s world of technology to spend as much time on the items that are constant, consistent and predictable.

The second part that Big Data can teach you is to only look at the exceptions; the items that don’t fit into the norm. You should opt to choose notifications of unusual account activity rather than email or text notifications of every transaction. For example, set up your nifty traveler’s app to only notify you when plane tickets go below $200. You don’t need a notification every time there is a special on tickets to Miami, because a “special” is relative.

It’s also important to remember that you don’t have a team of analysts, reporting gurus, and data managers for your personal life. It’s all up to you. Prioritize the data you want to see and eliminate duplicates. Don’t receive emails of your Facebook messages if you log in daily anyway. Don’t sign up for free coupons via email if you don’t have time to look at your emails. If you haven’t used an app on your phone in three months and it isn’t adding any value to your life, get rid of it. Don’t boil the ocean, you don’t need Big Data, you just need the right data.