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This Week in Your Wallet: Decisions, Decisions, Decisions

One of my favorite reads each week is the Sunday New York Times.  I start with the Styles section – light and fluffy, yes, but a nice precursor to the Business section and the opinion pages.  This weekend, a piece in the latter caught my attention.  Written by Noreena Hertz, author of a new book called Eyes Wide Open: How to Make Smart Decisions in a Confusing World, it was about why we often make bad healthcare decisions.  Among the reasons: We’re reluctant to challenge the so-called experts.  “Anxiety, stress and fear…distort our choices.” And being overly optimistic doesn’t help.

She could have been writing about money.  All too often, I find, people listen to financial experts (or people they believe have financial expertise in the form of hot tips), rather than doing their own homework.  Too much optimism is not a good thing.  Feeling like everything is going to be okay in the months, years and decades to come gives us an excuse not to stockpile emergency funds and opt out of life insurance.  And, as with our health, this is a realm in which many people feel overwhelmed and stressed out.  And that makes choosing well even more difficult.

The lesson?  Just like I’d hope you wouldn’t hesitate to reach out for not just one qualified medical opinion, but perhaps a second, when your health is on the line, it’s important to feel comfortable waving the white flag when it comes to your money.  And yes, for the record, it’s something I do myself.

Now, onto the other financial news of the week…

Student Loan Trickle Down Economics

If you’ve been wondering what the impact of that huge student loan tab might be, this week brought one very real answer: It’s likely to hurt the housing market.  Here’s how: Rising college tuition rates and a sketchy job market make it tough for students to graduate from college debt free, let alone have the income or credit scores to jump into the housing market.  This is one reason why so many recent college graduates are moving back in with mom and dad.

TIME covered a report from the Consumer Financial Protection Bureau in which the experts are saying the nation’s $1 trillion worth of student loans could play a major role in stunting the current growth in residential real estate. In the report, Rohit Chopra, the student loan ombudsman for the CFPB, places the  blame on private loan services. Private loans have higher interest rates and less repayment flexibility, and according to Chopra, they also make borrowers jump through hoops to pay them down.  Whether or not student loans are a “bubble” waiting to pop like tech stocks or mortgages remains unclear.  Regardless, the aftermath is clearly no party. You can see the full CFPB report here.

Maintaining Your Car’s Value

Depreciation in your car’s value costs an average $3,571 a year. That’s what AAA estimates in a recent article by US News & World Report. If you were surprised by that figure (I know I was) and want to be sure your personal depreciation doesn’t climb higher, then you should know about the six different ways the story suggests you could be decreasing your car’s value right now. Among them:

Sacrificing maintenance: Skipping your regular maintenance checks to save money could cost you in the end. Car dealers (and their tech staffs) have ways of figuring out whether or not you’ve been regularly taking care of your car. Whether you lease or buy, the article suggests holding onto all of your maintenance receipts as proof of when and where your car was last checked.

Going the distance: High mileage decreases a car’s value – it’s a simple but hard fact. Sometimes this is inevitable, I know.  But the fact that leases now come with routine mileage allotments of 12,000 to 15,000 miles (and sometimes as few as 10,000) means that if you’re putting more miles than that on your car (even if you own it) you could be decreasing the value.

Giving your car a makeover:  Sure those rims are cool.  Those speakers are amazing.  Just be careful to think about the next owner when making modifications to your car.  Just like the next owner of your home may not welcome a backyard pool or a home office, these add-ons might take the value of your car down.  Even painting your car a not-so-popular color can hurt.  And of course “installing anything that will void the manufacturer’s warranty is not a good idea,” Eric Ibara, director of residual value consulting for Kelley Blue Book, points out.

Drive safe — and have a great week!


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