By Randy Diamond | MainStreet.com

The economic downturn is bringing attention to a little known practice by auto insurers that targets consumers with blemished credit histories. Insurers can charge higher rates, decline to renew coverage or deny coverage to these customers.

A task force of state insurance commissioners is examining the issue. They’re expected to make recommendations by August as to whether auto insurers’ use of credit reports should be more tightly monitored, or even outlawed.

“We are trying to cut through the rhetoric and get the facts to make an informed decision,” says Michael T. McRaith, an Illinois insurance regulator who chairs the task force.

Three states currently ban auto insurers from using credit reports: California, Hawaii and Massachusetts.

The insurance industry argues that studies correlate poorer credit with an increased likelihood of filing an accident claim. Consumer advocates, on the other hand, question the fairness and ethics of using credit reports to rate auto insurance customers. They are also concerned that consumers already affected by the current economic crisis may get a double whammy when they see their auto insurance rates go up.

“I don’t understand why someone who lost their job because of the poor economy is suddenly a worse auto insurance risk,’’ says Robert Hunter, insurance director of the Consumer Federation of America.

The insurance industry has statistical correlations but can only theorize about the reason for the connection between credit scores and a higher claim frequency.

“If you’re particular about managing your finances, then that same personality may make you a more attentive driver,” says Alex Hageli, of the Property Casualty Insurers Association of America.

Credit-based insurance scoring has been used since 1993 and is now used by 95% of auto insurers. Insurance representatives insist the current financial crisis hasn’t meant the sky is falling in for auto insurance customers. Rates haven’t risen in general, they say, because insurance scores derived from credit reports have remained flat on average through the financial crisis.

But Lamont Boyd, a project manager for FICO, which sells the most widely used industry model for credit scores, said scores have declined for those directly impacted by the economy.

“As a small but growing number of consumers have experienced recent financial hardships, it is impossible to generalize about the impact of such an event on an individual’s credit-based insurance score,” Boyd says.

The nation’s biggest auto insurer, State Farm Mutual Auto Insurance Company, says it has not seen a spike in higher insurance rates.

Regardless of whether motorists are paying higher rates due to the impact of the poor economy, opponents of insurance scoring say the practice is wrong.

Florida Insurance Commissioner Kevin McCarty says studies have shown that scoring has a disproportionate effect on minority groups. “The industry’s attempt to ignore this issue shows a failure to treat its consumers fairly and equitably” he says.

Hunter, with the Consumer Federation, says another big issue is that the information in credit reports is not always accurate, leading to inaccurate scores. (Which is why you should check your credit report regularly and correct any mistakes.) Scores can also vary, depending on which of the three credit reporting bureaus an insurer is using, he says.

What You Can Do Now to Save
Consumers are advised to shop around for auto insurance. Among companies that do factor in credit, different auto insurers assign different weights to it. Having poor credit could account for 30% of the total premium for one insurer and only 5% for another, says Boyd.

It may even pay to talk to more than one insurance agent because different agents represent different insurers, Hunter says.

He also says under federal law insurers must inform consumers who don’t get the best rates because of their credit history the reasons their insurance score was less than perfect. Consumers are then entitled to a free credit report from the credit agency used by the insurer.

By Althea Chang | MainStreet.com

The days of easy credit are coming to an end. Banks have already been tightening their lending practices as more customers default and wary investors pull financial backing. And the banks argue that new protections for credit card holders may make it hard to get credit at all. Subprime and secured credit cards, which consumers with fair to poor credit have relied on, are the most likely feel the pinch as credit card companies become more selective in who they issue cards to.

The new rules, which President Obama signed into law last week, are a boon for cardholders. Among other things, they eliminate fees for paying by phone or paying a few days late, and they make it more difficult for banks hike interest rates. The credit card industry, not surprisingly, says it could potentially cause billions of dollars in revenue losses, part of which the companies will attempt to recover in other ways.

Reduced financial backing by investors wary of the banking industry has already made credit harder to get, leading to credit line cuts. As more people default and others pull back their credit card spending, banks have increased interest rates. The American Bankers Association, which represents the industry and opposed the reform legislation, has threatened to continue raising rates before new rules take effect in February 2010.

Here’s what you need to know about getting credit:

Community Banks
Credit from community banks, which are often considered more consumer friendly than big banks, will tighten even further, says Emily Peters, a credit analyst at Credit.com.

Community banks already tend to be more selective about who they grant credit, since without big-bank underwriting they are less likely to take risks with their money. And in some cases, Peters says, their background checks are more thorough than the automated ones performed by the big banks.

These small banks will be subject to the same regulations as their larger competitors, making it harder to get a consumer friendly credit card. In fact, credit cards could shift from being an everyday convenience to a privilege—even a luxury—granted only to those with excellent credit, says Peters.

To get a great credit card at any bank these days, you’ll need a credit score of at least 750, Peters notes. That’s a relatively high figure, considering that the highest possible score is 850 and that a few years ago, anything above 700 would get you a good card.

If you have decent or poor credit, there are other options to consider, but even they could end up being few and far between.

Subprime Credit Cards
Currently, consumers with a credit score of around 620 can get a subprime card with an interest rate of up to 30% from a large national bank, Peters says. Those with extremely poor credit—say, a score of around 420—can get a subprime card from a smaller card issuer, likely with an even higher interest rate and plenty of fees.

Subprime credit cards, also known as “fee harvester” cards, are notorious for their high fees, disclosed as “annual,” “activation,” “acceptance,” “participation” and “monthly maintenance” fees, according to the Federal Trade Commission.

They can appear monthly, periodically, or as one-time charges, and can range from $6 to $150, and when charged to your credit card account, they could drastically affect your available credit. For example, a $250 credit limit and $150 in fees leaves you with $100 in available credit, the FTC says.

Under new credit card rules, these fee-harvester cards aren’t allowed to charge fees beyond 25% of the card’s credit limit. While this is undoubtedly better for those cardholders, subprime credit card lenders are losing the ability to hedge their bets and reduce their risk from cardholders more likely to default, says American Bankers Association spokesman Peter Garuccio. This turnoff to subprime lenders could make subprime cards harder to get.

“It’s possible that subprime credit cards will go away,” Garuccio says.

Secured Credit Cards
Secured cards are available to anyone who wants to establish or improve their credit. You have to put of the entire worth of your credit line as collateral, but making the payments every month helps build credit.

The best secured cards earn you interest on your deposit, have low fees and low interest rates, and report to all the credit bureaus, says Peters. However, as subprime credit card lenders make their way into the secured credit card market, more secured cards may have higher fees.

What It All Means
As easy credit—and therefore, the ability to buy things we can’t afford—dries up, things are getting much tougher for a lot of people. There’s no glossing over that. But in the end, learning how to exist without relying on credit (and under a cloud of debt) may make us a stronger, smarter class of consumers. It’s not an easy transition, but that’s why sites like MainStreet exist: to help you take control of your finances and your life.

By Michael Schreiber | MainStreet.com

When it’s time to retire, a great career in any field means little if you didn’t save enough.

So when it comes to savings, even legal eagle Sonia Sotomayor is not free from judgment.

After President Obama nominated the U.S. Court of Appeals judge to the Supreme Court her saving habits became the center of intense speculation.

As The Washington Post reported last week:

Sotomayor, an avid Yankees fan, lives modestly, reporting virtually no assets despite her $179,500 yearly salary. On her financial disclosure report for 2007, she said her only financial holdings were a Citibank checking and savings account, worth $50,000 to $115,000 combined. During the previous four years, the money in the accounts at some points was listed as low as $30,000. When asked recently how she managed to file such streamlined reports, Sotomayor, according to a source, replied, “When you don’t have money, it’s easy. There isn’t anything there to report.”

The above news nugget led to blog attacks on Sotomayor. The sharpest crticism came from Harvard economics professor Greg Mankiw, who declared Sotomayor is a “spender” who “lives paycheck to paycheck” and who would have “shocked and appalled” Mankiw’s dear old grandmother because the Supreme Court nominee apparently saves so little.

But it’s possible Sotomayor already has six figures or more squirreled away in her Thrift Savings Plan. Money in that account, which is a version of the 401(k) for federal employees, does not need to be publicy reported, as Mankiw eventually acknowledged. (You can check out the last few of her financial disclosures here.)

Another econ professor, J. Bradford DeLong from U.C. Berkeley, retorted that Sotomayor’s finances are fine. DeLong says she has about $1 million in equity in her Manhattan condo and her pension is worth $2.5 million, though he doesn’t source either of those figures.

For fun, let’s assume for the moment that the Post’s unattributed Sotomayor quote is true, and she has no real savings.

At almost $180,000 a year, it would be ridiculous for someone not to put any money away. It flies in the face of everything we preach here at MainStreet. Given she doesn’t have children, $180K is a lot of money, even in pricey New York City. We’re kind of fantasizing about her saving habits coming up during confirmation hearings.

If Judge Sotomayor isn’t saving, it may have something to do with the fact that, as a federal judge, she can keep her job for as long as she wants. And when she does retire, she is, in fact, guaranteed a nice pension for life. So why save?

Well, when it comes to saving, we at MainStreet advocate a more conservative approach. Here’s what we would tell the high court nominee:

Remember, Your Honor, ideally your pension is just one of three legs of your retirement funding strategy. The other two are Social Security (which will hopefully be around when you retire) and your savings.

Consider this: You’ve been on the federal bench for about 11 years, which means your total income over that period has probably been just under $2 million. If you had put away just 10% of that, you’d have banked $200,000, and that’s not counting all that delicious compound interest.

Now, if you land the Supreme Court gig, you’ll get a nice little raise. You’ll make $208,500. (Beyond that, you’d be moving from New York to Washington, D.C.. If you live in the city proper, you’ll have about $70,000 more in disposable income including your raise, according Salary.com’s Cost of Living Wizard.)

We think it would be wise, and we hope you’ll agree, to start saving more. With federal budgets being what they are, you never know what could happen to your pension. So, assuming you get the new job, why don’t you start putting away the difference between your current salary and what you’ll make at the high court? That’s $19,000 a year. If you could swing that, all of our savings objections would be overruled.

By Marek Fuchs | MainStreet.com

Finance and having fun can fit together, it just takes some creativity. Of course, some strategies are more fun than others.

Example of a lame way? When I was a financial consultant, I’d perch a bowl of candy on my desk as a consolation for those who dreaded coming to see me to talk retirement goals. “Wish this were more fun? Here, have a miniature Krackel. In fact, take three.”

Or take my friend Kate Lombardi, who lives in Westchester County, N.Y., and uses a check book that reads “Joke Book” on its cover. When her husband asks her to use it for bills, she says, “I just pour myself a drink and hope it goes quickly.”

Gulp.

Have hope, though, says Bill Gustafson, the senior director of the Center for Financial Responsibility at Texas Tech University. He is faced daily with the unenviable task of speaking to a lecture hall full of non-majors about financial planning (yikes). But he insists that there are ways to make budgeting exciting, without resorting to sugar highs and Scotch.

Here is his four-point plan:

1. Give Yourself a Reward
An easy trick for couples is to set aside a small amount of money for a monthly bill paying completion celebration. When you and the missus (or mister) are finished paying all that month’s bills on time, take 50 bucks and blow it on a dinner and a movie. The point is to turn yourself into one of Pavlov’s dogs, associating your regular financial planning with a reward. This also, of course, works if you’re single.

“You can even celebrate with a walk in the park, which consumes less money,” says Gustafson. “But have it be a special, regular reward, directly linked.”

2. Set Up Countdown Calendars
When it comes to big numbers, don’t count forward, only backward. Take your mortgage. If you sit down to pay it with the 20 years or, say $300,000 you have left in mind, it is intimating. That’s a big, nearly incomprehensible nut, and being cowed is never fun. Gustafson suggests a Great Mortgage Countdown. Make a reverse, tear-off calendar that counts down the months left until you’re paid off. Once you make a payment, tear off that sheet and stomp on it in a dance of joy.

3. Involve the Kids
Gustafson once knew a minister who, over a period of time, involved his three sons in monthly bill paying, as well as long-term planning. Not only did the sons grow into knowledgeable spendthrifts, but the man of God got more than he ever thought possible out of household cash management. He got a lasting teachable moment.

4. Think in Bigger Terms
Financial planning can appear very small ball. Pay out a water bill here and the contractor’s invoice there, all while skirting overdraft. Unless you have a natural affinity for such details, they will probably induce narcolepsy. But if you are a big picture person, Gustafson suggests thinking in bigger terms, like your goal of financial security or a comfortable retirement. Gustafson helps run a clinic where financial planning majors help counsel graduating students and even professors, keeping that larger, holistic goal in mind.

“At that level, financial planning is quite altruistic,” he says. You are taking care of your family, a parent or a friend. At Texas Tech, they are sending people out on the right path in life. And that, at heart, is a fun and rewarding notion.

Of course, even Gustafson does not get too taken away with financial planning.

“Actually,” he said, “I do like the idea of booze.”

Cheers.

By MainStreet.com Staff Writers

If you pay your credit card bill late, you shouldn’t be surprised to see your interest rate go up. But many cards also have a “universal default” clause, which means your bank can hike your rate if you make a late payment anywhere.

Essentially, the universal default clause allows credit card issuers to raise your interest rate if you default on any of your outstanding credit obligations. (That is, if you’re more than 30 days late on a payment.) Even if you have never been late paying on that particular card, your rate can still be affected by late payments to other creditors. For many credit card holders these penalty rate increases occur without warning or explanation.

The good news? The new credit card legislation signed last week puts an end to universal default. The bad news? That law doesn’t go into effect until February 2010.

Credit card issuers began inserting universal default clauses in their agreements in the mid- to late 1990s after a wave of bankruptcies. In the interim years, virtually anyone could get a credit card (sometimes with very low introductory interest rates) regardless of his or her credit worthiness.

Now, when a credit card holder shows signs of financial difficulty, universal default allows issuers to change the terms of the credit card agreement to increase the interest rate. It’s a way to address the risk retroactively.

Almost anything can trigger a universal default rate increase. Of course, a late mortgage payment or a late payment to another credit card will suffice, but even a late payment on your phone bill or water bill might also do the trick. When the rate increases, it becomes whatever the pre-determined universal default rate is, which can be as high as 29.99%. It doesn’t matter what your rate was at the time of the default. Even if you are in a period of 0% interest, your rate can go up with a universal default clause.

The effect of a universal default rate hike can be dramatic if you carry a large balance on your credit card. For some, the rate can go up 20% in one jump. If you have a credit card with a balance of $5,000 on it, that would equal an additional $1,000 a year. With the current state of the economy, this practice can be even more burdensome for families than it has been in previous years.

If you’ve never heard of the universal default clause, you’re not alone. The terms are often buried in the fine print of your credit card agreement, and many consumers either don’t fully read these agreements or don’t understand the language. It’s growing resentment over these unseemly practices that led Congress to pass, and President Obama to sign, a new law that will end universal default and restrict the circumstances under which banks can hike your interest rate, among other things.

But you can be sure that credit card companies will try to get as much money out of you as they can before the law goes into effect in February. Until then, there are some things you can do to protect yourself from having your rates raised out of the blue.

First, check the terms and conditions of your credit card agreements carefully to determine which ones have universal default clauses. Next, organize your finances so that you don’t make any late payments. Paying bills when you receive them rather than waiting until they are due can help. An even better way to avoid late payments is to set up automatic online bill pay so you never have to worry about overlooking a bill.

By Althea Chang | MainStreet.com

If you’re planning on getting a reverse mortgage, you’ll likely need a reverse mortgage counselor. In most cases, such a counselor is required.

Here are answers to some common questions about reverse mortgage counseling.

1. Why do I need counseling?
The U.S. Department of Housing and Urban Development requires a certified counseling session for a federally insured reverse mortgage, also known as a home equity conversion mortgage.

“This is a very important financial decision for a senior citizen who wants to make use of the assets they have available until they die,” says Sue Hunt, housing counseling program manager at Consumer Credit Counseling Services.

“We certainly don’t want to have seniors making decisions that aren’t well educated and well informed,” she adds.

2. Does everyone need counseling?
If you’re part of the majority of reverse mortgage borrowers choosing a federally insured reverse mortgage, you’re required to get counseling before you apply.

If your home is worth more than the $625,000 federal limit, you may want to apply for a reverse mortgage through a proprietary lender. In that case, you may not be required to get counseling, but it’s generally recommended, says Peter Bell, president of the National Reverse Mortgage Lenders Association.

Some lenders may first suggest that you speak with their own consultants to learn about your reverse mortgage options, but it’s not the same as official counseling from an independent HUD-approved counselor who’s certified to work with you on your options.

3. How do I find a counselor?
Reverse mortgage lenders are required to provide prospective borrowers with a list of 10 reverse mortgage counseling agencies. Five of the agencies must be local, with at least one a reasonable driving distance from your home. The other five must be national intermediaries such as AARP.

At HUD’s web site you can find national counseling agencies, as well as local HUD-approved counseling agencies. The counselors can meet face-to-face or provide counseling by phone.

4. What will the session entail?
In reverse mortgage counseling, you’ll get information and advice based on an analysis of your budget.

More specifically, you’ll discuss why you want a reverse mortgage. You’ll also review your current income, if any; debts, including an existing mortgage if you have one; your monthly expenses; medical expenses; planned home improvements; your current access to emergency cash and the possibility that you’ll move, either into a new home or a nursing home within a few years.

You’ll receive a projection of how much you can expect to receive from a reverse mortgage, Hunt says. And you’ll compare which lenders and payout terms would be best for you.

Reverse mortgage counseling has to be done in person or on the phone. It’ll take about an hour, or more if you have several questions. If it’s over the phone, it may take more than one call. (In North Carolina, counseling can only be done face to face.)

5. What do I need to bring to my counseling session?
“It’s a good idea, before your session is scheduled, to make some notes about how much money you’re making and how much your expenses are, including housing, utilities, food, transportation and medical expenses,” says Hunt. You don’t necessarily need to provide your actual pay stubs or bills, she says.

You’ll also want to know if there are any liens on your house, she says. In addition, although you don’t need an official appraisal yet, you may want to call a real estate agent who does business in your area, or visit Zillow.com to get an estimate on how much your home is worth, Hunt suggests.

If a lender has given you a projection of your reverse mortgage payout, bring it your counseling session as well, Hunt suggests.

6. How much will it cost?
The fee for a reverse mortgage counseling session is usually $125, but it may be waived if you’re facing foreclosure, bankruptcy, an immediate medical crisis or another hardship.

If you’re not facing an immediate hardship, but you can’t pay the fee, your counselor is required to work with you. A counselor with Consumer Credit Counseling Services, which offers reverse mortgage counseling nationwide, for example, may look over your income, debts and expenses. If your expenses are more than your income, CCCS will allow you to pay your fee from your reverse mortgage payout. If that payout is less than $7,500, the fee is waived, Hunt says.

Some counseling agencies, like the Catholic Charities of the Diocese of St. Cloud, Minn., provide free, independent reverse mortgage counseling.

“You’ll have to call and ask what their policies are,” says Bell. That may mean calling everyone on the list you receive from your prospective lender.

7. What is a certificate of HECM counseling?
A certificate of HECM counseling is written proof that you’ve received counseling.

The form cannot be filled out until your counseling is completed, and in order to process your application, your lender will have to have an original copy of the certificate signed by you as well as your reverse mortgage counselor, according to HUD. If you’ve had counseling by phone, you and your counselor may be able to send your lender separate original certificates, signed.

8. What if I’m acting as a legal guardian or have power of attorney?
A reverse mortgage counselor may require proof of your guardianship or power of attorney before conducting a counseling session. Around 5% of reverse mortgage counseling sessions conducted by CCCS are conducted on behalf of people who have a legal guardian or someone with power of attorney, Hunt says.

9. Who can I contact if I have a complaint about my counselor?
Contact the counseling agency your counselor works for. You can also contact your local HUD office and file a complaint with the person in charge of reverse mortgage counseling. The Federal Trade Commission also handles consumer complaints.

By Stacy Baker | MainStreet.com

It’s easy to slip into bad habits when you’re under stress, and unfortunately many of our anxiety fixes impact our pocketbooks, making matters worse, rather than better.

“Stress seems to create behaviors such as over-eating, substance abuse, or shopping, that result in immediate, short-term gratification,” says Dr. Leslie Torburn, author of Stop the Stress Habit. “When we’re stressed, the bigger financial picture just doesn’t come into the decision making process.”

Big mistake.

An immediate-gratification mindset triggers our need to make ourselves feel better in the moment, despite the impact on our health or wallet.

“Stress leads people to seek comfort that is often obtained by spending money,” she says. “It’s important to step back and see how you spend your money. What are your financial goals and how are these bad habits sabotaging those goals?”

Here, Dr. Torburn’s cheap, but effective, fixes for the five most expensive stress habits:

1. Smoking. At around $9 per pack in some places, a pack-a-day cigarette habit can cost you $63 per week, or three grand a year. Just one extra pack per week (less than three cigarettes more a day) can up your expenses nearly $500 a year.

How to save yourself: Dr. Torburn suggests that getting your body moving can re-focus your attention off your craving and onto good health. Plus, filling your lungs with fresh air feels a lot better than smoke.

“If you’re at work and [usually] take a break to smoke, go walking instead, or walk for five minutes before you start smoking,” she says. “Take your breaks with non-smokers rather than fellow smokers. Sometimes all you need is a distraction to curb the temptation.”

2. Drinking. If the average cost of your favorite cocktail or glass of wine is around $10, two glasses a each week will add more than $1,000 a year (not including tax, tip and cab fare). And a six pack of beer at home (around $7) or a budget-friendly bottle of wine ($10) won’t save you much.

How to save yourself: Dr. Torburn suggests that if you’re looking to unwind, choose different activities, like walking, biking or hitting the gym. If you’re into the happy hour scene, start with water and intermix a less expensive seltzer with wine. “You’ll stay well hydrated and keep your bar tab down,” she says.

3. Shopping. Some estimates put leisure spending at about $113 per trip. Adding just one day of shopping to your weekly budget can rack up almost six grand in impulse purchases.

How to save yourself: Keeping busy and clear of stores can help. “If you do all your errands on the weekend, you may find yourself spending extra time shopping and buying things you don’t really need,” says Dr. Torburn. “Try getting your errands done during the week when you are on a tighter schedule with less time to browse. Then, on your days off, avoid shopping altogether. Do other fun things with your family, work in the garden, exercise, or take in a movie.”

4. Over-eating. Snacking or over-eating (say, suddenly adding dessert to your dining out tab), even just one little splurge a day, can quickly zap your budget. For instance, the average purchase at Pinkberry is $5.50, a small movie popcorn runs nearly $5 and a gourmet cupcake can run $3 and up.

How to save yourself: Dr. Torburn recommends bringing healthy snacks like fruit and vegetables, such as carrot and celery sticks, wherever you go. They’re not only cheaper but they’ll keep you full so you’re less likely to spring for dessert or eat too much at mealtime. Inexpensive healthy snacking (especially on foods that naturally fight stress) can be beneficial, she adds, in keeping you from overeating after a stressful day at work because you’re already full.

5. Caffeine addiction. Anxiety and lack of sleep can cause you to reach for a caffeine pick-me-up, but a medium latte runs you around $3.10. That’s nearly a hundred bucks a month sipped away.

How to save yourself: “Although it may be tough, opt for drip coffee,” recommends Dr. Torburn. “That will save you a few bucks. If you must, treat yourself to your favorite fancy coffee drink once a week. To save even more money, brew your own coffee at home and at work.” A pound bag (averaging about $7) will get you 20 to 30 cups of home-brewed joe.

Higher gas prices will likely be a thorn in the side of consumers who are starting to feel more optimistic about the U.S. economic recovery.

By Molly Mann of Divine Caroline | MainStreet.com

I used to work full-time in public affairs. Chained to my desk for eight- to twelve-hour days, I often wondered whether I would ever get to enjoy the money I was making when I was spending all my time in the office.

When I really couldn’t take being hemmed into a cubicle next to other disgruntled employees any longer, I would take a break and search the net for some masochistic research about how much better workers in other countries have it than we do in the United States. I would rub salt in my wounds by reading about the Kapauku people of Papua New Guinea, who think it’s bad luck to work two days in a row, or the Kung Bushmen, who only work two and a half days a week and never for longer than six hours a day.

That, I thought, is life. Not a living, but a life. The United States lags far behind other countries, especially the European Union, in granting workers vacation time, flexible working hours, and parental leave. American employers don’t seem to have grasped quite yet what other nations have turned into law: that a happy, relaxed worker is a more productive one.

Time Off Is Time Well Spent
Why do the French live longer than Americans despite consuming plenty of fat and red wine? Maybe it has something to do with the fact that Americans are workaholics, whereas the French get four to six weeks of vacation time every year, along with their fellow EU members. Australia also grants their employees an average of twenty days per year. In the United Arab Emirates, employees vacation for about thirty days a year, whereas most American workers have only fourteen days of paid leave.

Vacation time in these countries is applicable to all employees, regardless of their length of service; not so in the U.S. Eighty-two percent of American employers provide workers with at least two weeks of vacation after one year of service, according to the human resources firm Hewitt Associates. After five years, 75 percent of employers will grant three weeks, and only after fifteen years of service will 87 percent of employers provide four weeks of paid vacation time.

Europeans will laugh at Americans’ talk of budgeting sick days, too. They get paid time off if they’re sick, no matter how often that happens. When you think about it, it makes sense. You weren’t planning that flu, and your coworkers wouldn’t want you in the office anyway, so why should you be penalized for not working?

TGIF
EU law calls for a forty-eight hour maximum workweek, but individual countries typically opt for a thirty-five hour week, although their motive is to preserve jobs more than it is to give workers time off.

The French, for example, typically work a thirty-five-hour week with no paid overtime allowed. That amounts to an additional twenty-two days a year that Americans spend in their cubicles. That’s not to mention the myriad public holidays for which workers also get time off.

Australians, though they are not part of the EU, have it even better. Their workweeks are a little over thirty hours on average, though the national limit is thirty-seven.

The working day is different in some other countries, as well. In Spain, for example, workers start at 9 a.m. and then break around 2 p.m. for an extended lunch and lounging period that lasts until 4 p.m. They leave for the day at 6 p.m. This is common in Mediterranean countries, where the middle of the day is usually too hot to get any work done. Southern France, Greece and Italy have similar practices, although globalization is slowly forcing all major economies to conform to the 9 to 5 shift.

From Cubicle to Cradle and Back
Though all countries provide mothers with at least some protected job leave, the amount of time and the level of compensation varies, as does the amount of leave for the father of the child. France ranks highest in providing paid maternity leave, with 162 weeks. Germany and Spain follow close behind. Switzerland and the United States are the least generous, with fourteen and twelve weeks, respectively.

Some countries offer more than a year of job-protected leave for fathers on a “use it or lose it” basis. Spain tops the list at 160 weeks, along with France at 156 weeks. The United States offers twelve weeks, the same for mothers, which is better than Australia, Canada, Japan, and Switzerland—they offer no paternity leave at all.

Of course, time off isn’t really all that great if it’s not paid. Spain offers 312 weeks per couple of parental leave, but only pays for eighteen of them. By contrast, Finland offers only forty-eight weeks per couple, but pays for thirty-two of them.

Parents can also take leave on a part-time basis in some European countries. Greek parents can take their leave continuously or reduce their schedule by one hour per day for thirty months. Spanish workers are eligible for part-time schedules until their child’s eighth birthday. Norwegian moms and dads can take leave together if both work part-time.

Work Ethic or Burnout?
Although American workers don’t have as much legislated vacation time and flexibility as most European countries, we actually don’t come off too badly. The Japanese have a term, karoshi, to describe death from overwork. And were I in a developing country like Burma, I would be complaining about the fact that my fingers were bleeding from sewing clothes for twenty hours straight, not that my computer monitor hurts my eyes.

The truth of the matter is that even if we were allowed more time off, most of us wouldn’t take it. Even though 40 percent of American workers report their job to be extremely stressful, we only take about 71 percent of the vacation time we already have. Either we’re too busy at work to get away, we feel too much social pressure to stay in our offices, or perhaps we just don’t make enough money.

How do other countries manage such a permissive attitude toward working time? It’s simply due to a difference in priorities, specifically regarding the place of money in society. Americans work to accumulate wealth; the more money, we think, the happier we will be. The French, however, understand that happiness precedes income. To them, happiness comes from having time to spend with family and recharge, not from keeping up with the Joneses.

By Marek Fuchs | MainStreet.com

Bank of America (Stock Quote: BAC) announced today they’ve raised $26 billion of the $34 billion the government told it to raise after the results of recent stress tests. That’s the amount of capital, according to the government, that the bank needs to absorb future investment losses.

But what about you? Can your finances withstand unpredictable, money-draining stress?

Financial planners say you should stress test your own personal finances. And it takes considerably less fuss and public debate.

“What we are really talking about is living beyond means,” says Scot Stark, the president of Stark Capital Management in Freeland, Md. “It boils down to whether or not you are being irresponsible.”

Personal Stress Test Simplified
Running an effective stress test on yourself is not complex financial engineering. If what is going out outweighs what is coming in, you fail.

Failing a stress test, Stark points out, is not much of an option. It a long time to resuscitate a credit score or your emergency fund. Moreover, you’ll need to change all your habits and make sure the new ones stick. It’s no easy lift.

The upshot: Catch yourself before you fail.

Toward this happy end, Stark has a secret. He sits down once a week to make certain his household expenses are not exceeding his income. Maybe that’s asking too much of a financial planning civilian, he allows, but once a month is absolutely mandatory.

Personal Stress Test: What to Look For
Besides making certain that inflows and outflows are matching up, you should make certain that your mortgage payment does not exceed 28% of your gross income, and that you have a stash of rainy day money.

If you work on commission or otherwise have a salary that fluctuates, you want nine months of salary to draw on in an emergency. If you work on salary and stand to earn a severance if fired, you can probably get by with three months and still pass. Anything less, in either case, is the equivalent of getting a warning notice from the school dean. “Watch it, Frosh, you are headed for failure.”

Beyond that, telltale signs of am impending failure of a personal stress test are:

* Not paying off your credit card every month;
* Your credit rating declines significantly;
* You are late on any mortgage, utility or car payments; or
* You’re getting any sort of late notices in the mail.

If you are starting to fall short in any of these categories, you need to recalibrate what you are earning or spending, or both.

And if your credit card is a stubborn part of the problem, “just cut it up,” said Stark.

When you’re auditing, remember that this is your life. You’re not adding up these figures for a school class. The cost of failure is steep.

“I don’t think the government can run a birthday party,” said Stark, no fan of the Treasury Department’s bank stress test. But when it comes to your own private version, it’s easy to do, wholly accurate and, in the final estimation, essential to your future well-being.