Sunday, August 29, 2010

Exposing unethical marketing tactics

One thing I know for sure is there are companies out there who will do or say whatever it takes to get you to buy their products. Some of the more unscrupulous tactics include intentionally misleading customers and out right lying. Work-at-home schemes requiring “employees” pay upfront money and free credit reports come to mind; you do know is not really free don’t you.

The good news is we can now research bogus claims on the internet before parting with our hard-earned cash. If you don’t feel comfortable with a particular sales pitch or a claim sounds too good to be true research the product before signing on the dotted line. You will be amazed what you can learn with just a few clicks on the internet. Clark Howard frequently recommends callers check EBAY for current prices of get rich quick training materials* many of which cost hundreds if not thousands of dollars initially can now be found on EBAY selling for just pennies on the dollar.

Speaking of exposing the truth about marketing scams I would like to send a huge shout out to Lazy Man and Money for blogging about MonaVie. If you’ve ever questioned the power of blogging you have to read his story. He created so much negative buzz with his MonaVie Scam? site he received a threatening email from someone associated with MonaVie attempting to blackmail him into taking it down.

I must say I had never heard of this product until earlier this week when I received a tweet informing me of the threats made against Lazy Man and Money.

According to Wikipedia:
MonaVie is a beverage company distributing products made from blended fruit juice concentrates with freeze-dried açaí powder and purée through a multi-level marketing (MLM) business model.
Here is Lazy Man and Money's story:

He first became interested in MonaVie when his wife received a sales pitch to buy two bottles, at nearly $100, and potentially become a distributor.

He writes:
It was a perfect article for Lazy Man and Money. After a couple of hours of research I asked my readers “Is MonaVie a Scam?” It turns out that MonaVie is a very controversial subject. People who were very positive about MonaVie and people who were very much against MonaVie started commenting back and forth. The back and forth continues today, two years later with over 4,000 comments on the article.

Somewhere early in this discussion, I found myself agreeing with the people who were against MonaVie. Those people backed up their arguments logically and they were unbiased — they had nothing to gain by being anti-MonaVie. However, it was the pro-MonaVie people who really swayed me. They made bad claims that they couldn’t back up. Worse, they made illegal health claims like MonaVie could help with a number of diseases.

I started to feel bad that all this great information was being buried in the comments, so I started MonaVie Scam, a site devoted to spreading all that great information.

With so much information out there it is hard to determine who we should believe, but as Lazy Man and Money writes:

If MonaVie was really a quality product or quality company they'd openly debate the topics on my website.
And if the product really was the miracle juice it claimed to be the product would have become popular despite shady marketing tactics.

My favorite line of the story is:

So while I'd love to take credit, it's quite possible that people realized it's not very wise to spend $5000 a year on juice. And they probably also figured out it isn't worth spending another few thousand on tools and going to conferences to join a business that pays minimum wage (see MonaVie's income disclosure statement) for 85% of the distributors who are fortunate enough to make a dime at all.
Bottom line buyer beware; question everything, do your research and continue to inform others by creating blog posts and writing comments exposing unscrupulous marketing schemes.

*To read more about "get rich quick sales pitches” see my post: Where is the real money made?

Sunday, August 22, 2010

Don't panic over 2011 tax hikes

Have you received the tax hike email that has been making the rounds? My in-box both at work and at home has been flooded with it. It is a good example of the type of propaganda I am trying to expose in my “Getting a Clue series” where I attempt to keep others from being manipulated by politicians, the media and marketing scams. I am providing the email in its entirety below, so you can read what I’m talking about.*

My friend and colleague Sue, who is a tax professional, also received the email and sent a cautionary rebuttal to all of the recipients. She feels there is value in reading it, but encourages us to look further into things. She says,
“Although some of the issues discussed are fact already, the vast majority are misinterpretations of proposals being made within Congress (and not yet law) and exaggerations coupled with only half-truths.”
The purpose of the email is to get our attention so we vote accordingly in the elections in November. After reading the email in its entirety, I don’t have the energy to dissect it line by line. All I can say is, “Don’t Panic.” Or as Sue said:
Wait until the bozos in Washington get their act together and decide what exactly is going to be our fate for 2011, because from all indications, they have decided practically nothing at this time.
“There is no terror in the bang, only in the anticipation of it.”
- Alfred Hitchcock

One of the emails I received began with:

Starting in 2011… yes tax hikes starting when:
- unemployment is still 10%
- very low GDP growth
- interest rates at 0 (feds out of bullets)
- real estate still down
- market still down
Great time to raise taxes??? I think not... and don’t tell me you don’t have time to read this. =0)

-Here is the email:
In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave:
Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.

These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).
The lowest rate will rise from 10 to 15 percent.
All the rates in between will also rise.
Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%

Higher taxes on marriage and family. The“marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income.
The child tax credit will be cut in half from $1000 to $500 per child.
The standard deduction will no longer be doubled for married couples relative to the single level.
The dependent care and adoption tax credits will be cut.

The return of the Death Tax.
This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors.
The capital gains tax will rise from 15 percent this year to 20 percent in 2011.
The dividends tax will rise from 15 percent this year to 39.6 percent in 2011.
These rates will rise another 3.8 percent in 2013.

Second Wave:
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011.
They include:
The “Medicine Cabinet Tax”
Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The “Special Needs Kids Tax”
This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States , and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can not be used to pay for this type of special needs education.

The HSA Withdrawal Tax Hike.
This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Third Wave:
The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired.

The major items include:
The AMT will ensnare over 28 million families, up from 4 million last year.
According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear.
Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses.
There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced.
The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed.
Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.

PDF Version Read more:

Now your insurance is INCOME on your W2's......
One of the surprises we'll find come next year, is what follows - - a little "surprise" that 99% of us had no idea was included in the "new and improved" healthcare legislation . . . the dupes, er, dopes, who backed this administration will be astonished!

Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that's a private concern or governmental body of some sort. If you're retired? So what; your gross will go up by the amount of insurance you get. You will be required to pay taxes on a large sum of money that you have never seen. Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That's what you'll pay next year. For many, it also puts you into a new higher bracket so it's even worse.

This is how the government is going to buy insurance for the15% that don't have insurance and it's only part of the tax increases. Not believing this??? Here is a research of the summaries.....

On page 25 of 29: TITLE IX REVENUE

PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001, as modified by sec. 10901) Sec.9002 "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income."

Joan Pryde is the senior tax editor for the Kiplinger letters.

Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what is above.

Why am I sending you this? The same reason I hope you forward this to every single person in your address book. People have the right to know the truth because an election is coming in November.

Sunday, August 15, 2010

I’m under 50 do I still need an annual mammogram?

In November 2009, the U.S. Preventive Services Task Force (USPSTF) issued new guidelines for breast cancer screening. These guidelines recommend against self-breast exams, mammography and clinical breast exams for women ages 40-49 and over 75. This is different from the American Cancer Society's long-standing position that women should begin receiving mammogram screenings starting at age 40. This recommendation also comes despite evidence proving the death rate from breast cancer decreased 30-40% since the onset of regular mammography screening in 1990.

What was the Task Force rationale?
The harms of mammography including discomfort, anxiety and possible overtreatment outweigh the marked reduction in the death rate resulting from regular screening.

Many women are now confused and asking the question,
“I’m under 40 do I still need an annual mammogram?”
Earlier this year, I lost Judy, a dear friend and colleague, to cancer. She was 49. She had been diagnosed with breast cancer at age 42 when an abnormal mass was detected during her annual mammogram screening. Her reoccurrence came at age 47.

A few years ago, I asked Judy to give a presentation to my professional organization on a business related topic. She agreed to do so with one condition; she would be allowed to mention she was a breast cancer survivor and encourage every member to begin annual mammogram screenings at age 40.

This one is for you Judy:
While digital mammography is not perfect, it is currently the best tool available to detect breast cancer. Ignore the task force and continue scheduling annual mammograms every year beginning at age 40.

Sunday, August 01, 2010

What ramifications will debt write-off have on credit score?

George heard a debt settlement advertisement on his way to work claiming he could,
“Pay just 50% of what he owed."
Currently he owes $16,000 in credit card debt most of which was charged by his wife who he says is terrible with money.* He is tired of paying her debt and would love to have half of it written off. George called the debt settlement company and was told for an upfront fee plus 18% of the balance written off they would negotiate a settlement. His question for me was what effects if any would the debt written-off have on his credit score?

Let start with ~ How does a debt settlement company work?
George has been making his monthly credit card payments on time and is current on all his other debts. As a rule, creditors won't negotiate with consumers who are current on their bills, often refusing to discuss settlements with anyone who is not at least three to six months behind. Knowing this the debt settlement company will instruct George to stop making payments to his creditors. Instead he will make payments to the debt settlement company, after taking the first couple of payments as their fee; the debt settlement company will make offers to his creditors to settle his debt for a lump sum payment. This lump sum payment will come from the amounts he has paid to the debt settlement company.

What this company didn’t tell George is that debt settlement only works for a few of the consumers who attempt it; not all credit card companies will settle. Consumers who enter the process may endure months of creditors' angry phone calls, plus a growing debt load as fees, penalties and interest are tacked on to their original balance due. Plus, there's the possibility creditors will sue.

If George is successful in obtaining a debt settlement how will it be reported on his credit report?
Debts paid off as part of a negotiated settlement will generally show “Paid by Settlement” on a consumer’s credit report. If he were to apply for a new loan, the prospective lender will understand that a debt paid by settlement means that his repayment did not cover the total debt that he had accumulated, and that his creditor accepted a lesser amount.

How will a debt write-off affect his actual credit score?
His credit score is based on information contained in his credit report, with the highest consideration given to how he repaid his debts. As stated above, the first thing the debt settlement company will instruct George to do is to stop paying his debts.

According to Liz Pulliam Weston's article 5 ways to kill your credit scores:

The 680 scorer would lose 45 to 65 points with this maneuver, while the 780 scorer would shed 105 to 125 points.

Our scenario assumed that borrowers would miss one payment before settling the debt with their credit card companies. In reality, debt settlement negotiations can drag on much longer, with each missed payment taking another chunk out of your score.

Settling a debt with a collection agency would hurt less, probably much less, because the FICO formula is set up to weigh more heavily what the original creditor says about you than what a collection agency reports. But if our borrowers were settling with a collection agency instead, their scores would be lower to begin with, because they would have collection accounts on their records.

Long-term effects:
The long default on payments, followed by the settlement for less than you owed, is going to stay on your credit report for seven years and look just as bad, or worse, than a bankruptcy (particularly a chapter 13 bankruptcy.)

Other considerations:
George will receive a 1099 form from each of the credit card companies he settles with. The amount of debt forgiven is considered income and is taxable.

This is the hidden cost of higher insurance rates (insurance companies now check credit reports when renewing auto policies) and higher interest rates on any debts he might incur in the future.

What to do instead:
Before George goes the settlement route, he should visit a consumer-credit counseling agency for advice. The first visit is free.

The National Foundation for Credit Counseling ( has a tool for locating counselors nationwide. Credit counselors offer debt-management plans. Under these, creditors agree to accept reduced monthly payments or lower interest rates in return for the consumer agreeing to pay the full debt on a set schedule. But consumers who can't afford the monthly payment won't qualify.

Next, he should talk to an attorney to assess whether bankruptcy makes sense. Debt settlement "is not a decision you make without talking to a bankruptcy attorney, because you could be sued" by going the settlement route.

He should try to negotiate with the credit card companies himself:
George did call two of the credit card companies. One said their company did not negotiate debt settlements. The other would not consider debt settlement at this time because he is current with his payments. As a courtesy, they checked his credit report finding only one bad mark; a late student loan payment from several years ago. The only relief they could offer currently was to restructure his debt over a five year period. During this time he could no longer use his credit card to make purchases, but his total outstanding credit would show on his credit report. They could not reduce his interest rate; he already had the lowest rate they offered. He did not accept the restructure.

Realizing debt settlement was not an answer to his problems George is now looking for other methods to get out of debt.

*I recommended George and his wife take one of Dave Ramsey's money management classes offered at many churches in our area. I know several couples who have taken this class and have found it to be helpful.