Monday's Personal Financial Planning class in @RowanUniversity's School of Financial Planning: buying/leasing an automotive vehicle. (You can't say "car" anymore since trucks, pickups and SUVs are 81% of the market; passenger cars are only 19%!) I explained that vehicles, homes and degrees are the top 3 expenditures, but only vehicles decline in value over time. So, they need to learn how to minimize the damage. I showed that the average one loses 20% upon purchase and 12% annually for the next 7 years, a 63% total loss. I also explained why leasing appears less expensive but is often higher, and how to avoid leasing traps (such as Gap insurance, cap cost reductions and buying options on a leased vehicle). Most importantly, I had them surf the web to find a "car affordability calculator." There are dozens - and all of them are fatally flawed and thus highly misleading. The calculators merely reveal the monthly payment and how to reduce it (by increasing the loan's term from 48 months to 72 months). So, I gave them the calculator I created for my nephew when he graduated from college 10 years ago. My calculator asks you to input your salary (so I had my class surf to learn what they can expect to earn from the job they hope to get) and then decide what portion they will allocate to transportation. (I gave them USDA data showing the average US household budget; 14% goes to transportation.) I then had them name the make/model/year of the vehicle they want and input its price, closing costs, money down, loan interest rate and term, miles per gallon and cost of fuel per gallon, and the amount they cab expect to spend annually on maintenance and repairs (all obtained from web searches). Then I asked how many miles per year they'll drive, whether they'll pay tolls and/or parking to get to work (with frequency and amounts, if so). The calculator then tells them if the vehicle is within their 14% budget allocation. The discovered that every online calculator said "yes" but my calculator answered "no." One example: an online calculator told a student the monthly cost would be $850, while mine said the cost is actually $1,789. That's because I include the total cost of ownership, not merely the cost of acquisition. My message to the class: don't trust online calculators; they are false and misleading, designed by the auto industry to trick you into buying a vehicle you can't actually afford. (This explains why 2.2 million vehicles were repossessed last year, and another 5% of auto loans are 90+ days past due. Imagine the financial strife that inflicts on people!) The solution? You know: Buy one 4yrs old, coming off lease, thus in good condition; a vehicle 50k new is now just 27k) and keep it for 10 years. And be sure the vehicle will meet your future lifestyle needs (married with kids) not merely your current lifestyle. #CFP #financialplanning #education #college #buyacar #auto #leasing #usedcar #caraffordabilitycalculator #financialcalculator

The exam results are in! The students in my Personal Financial Planning course at @RowanUniversity completed their first exam, and after scoring it, I thought it would be helpful if have those who did best shared their study habits with their classmates. I wasn’t expecting some of what I heard. The highest achievers all scored more than 100%, thanks to bonus questions they answered correctly. How did they do so well? One revealed, “I re-read everything in the textbooks that you had assigned to us. Then I gave the handouts you gave to us to my husband and he quizzed me on everything. Even though he didn't know what I was talking about, I knew what I was talking about!” What I wasn't expecting? “I gave Gemini all the reading assignments from your books and asked it to produce a 50-question quiz based on your content. Once I scored high enough on those, I figured I was ready. I think Gemini is why I did so well on the test.” Turns out several high-scoring students used AI this way. Should I be annoyed ? Was this cheating? Violating my copyrights? Hell, no! These students used the latest tech to create a unique study method that helped them comprehend and retain the knowledge they need – not merely to pass the exam, but to support and improve their lives as they tackle personal-finance issues. I am impressed with their resourcefulness! And it'd be crazy NOT to use AI, since it'll be vital in every aspect of their professional lives. Other top students were equally inventive. One said, “I watched TikTok videos on topics we discussed in class." But it wasn’t just tech that led to success; All of them reported plain ‘ole hard work. As in, “Whenever you emphasized something in class, I'd write that down.” And, “The most beneficial thing for me was just paying attention in class and making sure I was writing down what you were saying, taking notes on everything and then reviewing my notes in detail while studying for the exam.”   These students also made clear that there’s no substitute for completing all the reading assignments. “Reading before the class is really helpful – it’s what helped me overall.” One final observation: I asked the class what these top students had in common, and everyone knew the answer: they're the ones who participate the most in class. So, in addition to recommending that everyone study as these Grade-As did, I urged everyone to engage more in class. And as an incentive, I reminded them that class participation counts as part of their overall grade. I’m impressed with my students, and can’t wait for their second exam in a few weeks! #CFP #college #financialplanning #study #exam #AI

I was away hosting a conference this past Wednesday so asked Ed Moore, CFP® to guest lecture to my students in the Personal Financial Planning course we’re teaching at @RowanUniversity's new School of Financial Planning. Ed is my dear friend and was my #1 at Edelman Financial Engines for nearly four decades- most of them as my president - and there’s no better financial advisor or leader in the wealth management field. So, you can imagine what how great it was for my class to hear from him! Ed spend much of the time sharing career advice, and they were so enthralled that even though class ended at 4:45, Ed didn’t leave until 5:30! And he’s already had several requests for 1:1 follow-up conversations! Funny, I’ve not been asked to hang around til 5:30…maybe I should get Ed to teach the rest of the course!😀 Today's class is devoted to buying an auto - there’s hardly any topic of more relevance to (or interest by) college seniors! #CFP #college #education #financialplanning #buyingacar #autoleasing #autoloan

I made an unsettling discovery in my undergraduate class on financial planning last week. While explaining mortgages, I asked my 38 students this question: if you buy a $400,000 house and pay 20% in cash towards the purchase, what will be the amount that you finance? Not a single student could tell me the answer. Despite the fact that they are all juniors and seniors majoring in business. I added more questions: what is 30 percent of 80? 60 percent of 90? They didn’t know. The closest they got was when one student said, in response to my query of “40% of 70”, that “I know it’s 4 times 7 but I don’t remember what that is.” Another student helpfully added, “28.” They explained to me why they couldn’t answer these math questions: they were never taught multiplication tables, percentages or fractions during their K-12 schooling. Instead, they were taught how to use a calculator. Without one, they are not able to do basic arithmetic. I later asked the dean about this, and he lamented that this isn’t a thing just for our university’s students; it’s a thing for their entire generation, nationwide. When I was in K-12, the fierce debate among parents and educators was whether to allow calculators in class. The calculators won. Today, the debate is about AI. And like before, the tech will win. But will that truly be a victory? Rowan University #college #math #loans #CFP #financialplanning

Completed the second of two classes on taxes in my Personal Financial Planning course yesterday. This one was devoted to strategies that lower/defer/avoid taxes on estates and investment gains, and we covered everything from gifting to tax-loss harvesting. Also dove deep into annuities (explaining - with my disclosed bias of generally hating annuities - why these overly complex products need to be avoided) and municipal bonds (explaining why almost no investor should buy them, other than retirees who spend the interest monthly). It's not what you earn that matters, I taught my students, but what you keep - and I introduced them to the famous 1934 quote from Judge Learned Hand that no one has a patriotic obligation to pay any more in tax than the law requires. They found this point both surprising and reassuring! Monday: their first exam. They're nervous, but I'm confident they'll do well. Meantime, I'm still grading their last homework assignment. @RowanUniversity #CFP #taxes #estatetax #capitalgainstax #education #college #financialplanning

Did the first of two classes Monday on taxes in my Personal Financial Planning course at @RowanUniversity's new School of Financial Planning. Monday was devoted to reducing taxable income. Almost all of my 38 students work part-time as W-2 workers, but none of them have filed a 1040 yet. I explained such ideas as deferring income and accelerating deductions, but the biggest item they struggled to digest pertained to W-9 withholdings. They all listed zero dependents, and I explained that, as a result, they are likely to have far too much money withheld from each paycheck. To fix it, I said, they should file a new W-9 and claim far more dependents. They didn't understand how they could do this since they are unmarried with no children. I explained that the form has nothing to do with truth, and instead is focused on accuracy; the goal is to not get a big refund in April (and not to owe money, either) - and you achieve this goal by claiming the "right" (meaning, accurate) number of dependents. Falsify a federal tax form? They struggled with this notion. I told them that they won't be falsifying anything, and that this is a standard tactic. Go visit a CPA, their HR department at work, or even an IRS office, for help on this, I told them. Just a small example of how bizarre our tax system is, and how ordinary consumers struggle to manage their tax planning effectively. Millions of Americans give the IRS an interest-free loan because of this! Tomorrow, I'll give them strategies to lower taxes on their investments (yeah, I know, they don't have any investments yet, but they will one day - and their parents already do). So, tomorrow will be a great conversation. #CFP #taxes #CPA #college #financialplanning

Upgrade! 😁

.@RowanUniversity's support and enthusiasm for the new School of Financial Planning has far exceeded my expectations. They've created an entire suite for SFP on the 3rd floor of the Rohrer College of Business at Rowan University: it has a large reception area, conference room that holds 12 (which I've already been using for lots of meetings), a catering kitchen, 4 offices and a very large configurable meeting/event space complete with workstations that students are already using. Just last week, Edelman Financial Engines held a 2-day offsite there with management and a dozen financial advisors (topped off with a private showing at the Ric & Jean Edelman Planetarium). They assigned me Office 305E (the others in the suite will be filled by the faculty we're busy hiring) and outfitted it perfectly with all essential furniture and gear. I'm pretty much living in it Mondays-Wednesdays each week. And they just installed the name plate outside my door, identifying my residency. So, I'm official! I just can't express my thanks sufficiently to the entire Rowan team who have been so thoughtful and helpful. And that's why I haven't said anything to anyone about the name plate. Mistakes happen - and the best ones are both ironic and funny. So, I love my door plate - it helps keep my ego in check! Go Profs! #college #CFP #financialplanning #proofreading #typos