eBay & Human Quirks
The Art of Selling
Banking On Security
Green Design Saves Green
Fiscal Responsibility: It’s Never Too Early
Your Estate: Keeping Control
Corrections or additions?
This article was edited and prepared by Scott Morgan for the April 16, 2008 issue of U.S. 1 Newspaper. All rights reserved. For the complete calendar of business meetings and arts events in central New Jersey, go to www.princetoninfo.com/us1evts.html
Top Of PageeBay & Human Quirks
Every year the people of planet Earth generate about $125 trillion worth of stuff. So, what do we do with last year’s multi-trillion dollar accumulations? For 135 million of us, the answer has been to sell $4 billion of it on eBay. Since Iranian computer programmer Pierre Omyidar founded the website in San Jose, California, in l995 by selling a broken laser printer for $14.95, eBay has become the ultimate garage-emptying recycler.
Yet eBay has grown into far more than an online auction house where folks can pick up a few bucks for their used goods. Kenneth Steiglitz, computer science professor at Princeton University, insists that for millions of people eBay provides entertainment and the addictive excitement of wheeling and dealing, all of which he explains in his new book "eBay and Human Behavior: Snipes, Shills and Sharks." The New Jersey chapter of the IEEE/ACM has invited Steiglitz to detail his theories and anecdotes on Thursday, April 17 at 8 p.m. at the Sarnoff Center. The event is free and open to the public. For details call 609-587-1886.
If one were browsing Steiglitz in the library card catalog, one would more typically come upon such titles as "Combinatorial Optimization: Algorithms and Complexity" or "An Introduction to Discrete Systems." He is, after all, a scientist who has delved into computer frontiers since the days of the vacuum tube. Steiglitz grew up in western New Jersey and graduated with a bachelors degree in electrical engineering from New York University. He remained at NYU, completing his doctorate with a thesis in digital signal processing. "I was warned back then that such an event would take rooms full of machinery," says Steiglitz. "I remember telling them `just you wait.’"
The whole Steiglitz family considers eBay a major computer site in their browsing. Ken’s wife, Sandy who hosts WPRB’s "Sunday Morning Opera with Sandy" (6 – 10 a.m.) says, "Oh, I find it a necessity for finding my old opera albums." Ken feeds his numismatics collection, particularly Roman and Greek coins via eBay. Their daughter, Bonnie, recently unearthed a shill – eBay’s term for a user who, in cahoots with an auctioner, artificially drives up the price of an item.
Steiglitz even teaches a course on electronic auctions at Princeton. "For those who study human/economic behavior, eBay has provided a wealth of data that just hasn’t been available before," he says. There must be something that explains a rare baseball card being bought for a whopping $1.2 million, and the hundreds of people bidding hundreds of dollars for a sacred plastic cup once sipped by Elvis (some water still remaining.)
The eBay design. There are many kinds of auctions, each carrying its own excitement of the unknown and breathless anticipation. Some of the more popular include the sealed bid auction where bidders individually put in the highest amount once, and unbeknownst to any other bidder. The lucky winner pays his full bid price. More personal is the English auction with its ascending price, competitive vocal bidding, and the final gavel calling for full price payment.
Gathering the best of all styles, eBay holds its auctions with early bid encouragement and rapid deadlines, all aiming at a high turnover rate on the site. An eBay auction mimics the English, ascending bid style, but with a few twists. The item winner pays only the second highest price, not the price he bid for. And eBay shows only this second highest price on the site at any time, plus one bidding increment. You never see the highest bid. Meanwhile, the countdown clock to deadline is up and ever ticking.
"There is a baseline auction theory," says Steiglitz, "that if everybody involved acts rationally, each type of auction will sell a particular item for exactly the same price." This sounds fine, but researchers have yet to find a single auction in which all parties acted rationally.
Sniping for profit. Labeled by many as greedy, unfair, and a spoiler of the game, the snipe is simply a person who swoops in with the highest bid in the final seconds. Keeping one eye on the rising bidding, and another on the deadline clock, the snipe plans that exact final moment in which he can post his bid, before anybody else can react, thus netting him the prize. For those who have not neither time nor inclination for such bleary-eyed clockwatching, there are even services, for example, snipe.com., that will, for a small percentage, do it for you. Snipe bids typically are made within the last two to eight seconds.
Generally, sniping is deemed the most profitable way to go. But you can get caught. Since you are never seeing the actual top price, your snipe bid must ever be a guess. As eBay advises, better to bid early and often. It works for them anyway.
Fear, frenzies & bubbles. "There is very little altruism in eBay auction bidding," says Steiglitz, "but there is a wealth of emotion." Prime among these is fear, which may for the sharp speculator provide a great tool. Following a series of consistent, but small-increment bidding, an individual might plunge in with a high bid. Frequently this will scare other bidders away, assuming that the plunger so desperately wants the item he will ever exceed the low-buyers’ bids. But this can backfire, particularly in the case of collectibles. Seeing a simple Chinese vase suddenly jump from $10.50 to $2,000 sets dealers and collectors on alert. Maybe this thing is a Ming. This may lead to a bidding frenzy.
With a bidding frenzy everybody, even those not interested in collecting, hops the bandwagon and puts in his two cents. This creates a huge bubble in which the price, temporarily, far exceeds the item’s value. In 2004 a partially eaten grilled cheese sandwich supposedly bearing the likeness of the Virgin Mary sold for $28,000. This is scarcely a new phenomenon. Steiglitz likens these eccentrically overpriced eBay transactions to the 17th century Dutch Tulip Mania in which an entire ship would be traded for a single tulip bulb.
Trouble is, bubbles are brief. In the end they collapse. Tulip mania left Holland in a depression from which it took a century to recover. "An additional engine to the bidding bubble is plain old human spite," says Steiglitz. "We just love winning and will often risk a real personal hit just to either get the item for ourselves or drive the competition up onto the stratosphere."
Enter the shills. Typically an agent of the seller, shills are those quiet individuals in sunglasses who drop in a bid at opportune moments to boost real buyers to a higher price. Such characters abound at modern auction houses and sometimes they are not even present. "Taking a bid from the chandelier," is a familiar Sotheby’s term for the seller’s having the auctioneer drop in a prearranged, false bid.
"You can sometimes spot shills on eBay," says Steiglitz. "They have certain behavior patterns." When you see a bidder who has a small number of transactions, all bidding for one seller’s items, and constantly failing to win the bid, you probably have unearthed a shill.
Another shill type, abounding on eBay is the collective shill. In the early 1800s, the five major English antiquarian book sellers would elect an agent who would buy all the valuable books at an auction. He would then arrive at a local tavern where the five major sellers would gather and divvy the spoils with a second auction amongst themselves, keeping their corner on the market.
Such dealer-to-dealer favors are very much part of the eBay game.
Yet one of the wonderful things about eBay is its open invitation. There definitely is room for the sharks and professional collectors to speculate and make their profits. There is room for the Millstone music teacher who wants a low-cost "Fiddler On the Roof" backdrop for his eighth-grade production. And there is plenty of play space for folks to just browse around and see what they want to transfer from your garage to theirs.
With all this data eBay provides on human/economic behavior, one would think we could draw some lessons for our national and global economic picture. But apparently not. "We haven’t yet been able to figure out and predict the twitches in the eBay microcosm," says Steiglitz. "So there is really no way we are going to translate them to the macrocosm of the whole world."
In the meantime, the Steiglitzes will keep hunting for their coins and opera albums, and like so many other millions, having a ball fun doing it. – Bart Jackson
Friday, April 18
Top Of PageThe Art of Selling
Just ask Ed Ras any of the traditional sales techniques and he will reel them off name and number. "Oh, the Ben Franklin," he explains. "That’s an ancient sales closer, named for the way our bespectacled Founding Father used to solve problems. First the seller outlines all the positives for buying, then he lists all the negatives. If positives outweigh negatives, you tell the buyer, any rational person should make the purchase."
Ras has spent nearly 30 years learning all the tricks of the selling trade, and now spends his time passing on this valuable lore. To help people pull seemingly lost sales from the fire, the Small Business Development Center is sponsoring Ras’ talk "Overcoming Sales Objections," on Friday, April 18, at 9 a.m. at the College of New Jersey. Cost: $59. Visit www.sbdc@tcnj or call 609-443-4712.
Much of Ras’ instructive skills he credits to his mother, a teacher of 40 years in his hometown of Wilkes-Barre, Pennsylvania. Graduating from Kings College in 1979 with a bachelor’s in political science, Ras worked briefly in banking, then began selling for a regional tobacco firm. He quickly moved on, joining what is now Faber Castelle selling art and office supplies. Later, as regional sales director for international craft and art supplier Unchida Inc., Ras tripled sales. "I didn’t know a thing about art," says Ras, "but I sat down and listened to each customer and learned their every need."
Early in 2007 Ras decided to add teaching to his selling career, and took a franchise as a Winfree Business Growth Advisor. (www.winfree.org.) He now passes along some of these tactics and many of his own techniques in his new Robbinsville-based consulting firm, Net Impact Sales Consulting (609-443-4712).
Sales objections have been voiced a thousand ways, but the message is always the same: "I do not want to part with my money." It may come with a reference to cash flow, or perhaps loyalty to old suppliers, but whatever the objection raised by the intended buyer, his reluctance is very natural. He has worked darn hard for his money, and any salesperson had better give a darn good reason to make him give it up.
"Yet if it’s the right product at the right time, the customer will need it," says Ras. "From there on, making it happen relies on the seller’s skills. These skills are backed heavily by planning strategy and clever technique."
Qualifying the buyer. Matching your niche and product with the exact right potential client, while sluggish work, saves countless calls in the field. This begins with getting the prospect’s history, learning about the people and the company. "You’ve got to find the customer’s pain – that thing he needs or wants most," says Ras. Once this is defined, the salesperson must ask some very serious questions. Is this prospect really committed to making any real change, and to purchasing? Is he the actual decision maker? In larger organizations there are many who can say no to a sale, but only a few who can say yes. Finally, can the company really afford it?
The goal in this qualifying process is to better the odds on each call, so be as exclusive, not inclusive, as possible. The whole world is not your client, Ras points out. While everyone has at least some money, not everyone needs you as a financial advisor. If you have niched yourself well as the financial advisor for those going through a divorce, you’ll have a slimmer, but much more likely list of prospects.
Message crafting. One of Ras’ recent clients ran an auto repair shop. He performed the basic oil changes, tune ups, etc., that a score of area competitors also offered. In going through his books, Ras noted that the shop owner had two customers who each had a small fleet of trucks.
Ras advised him to niche his service to these particular clients, with the following pitch: The auto service owner outlined the cost of sending two-men trucks, midday, to the shop for each service and repair, while business halted and the employees stood idle. He them promised to complete his servicing before the client’s trucks were due on the road.
A simple postcard campaign with these financial facts and the message "we keep your trucks on the road, not on the lift," has customers flocking in. "The trick here," says Ras, "is to simply quantify the loss for not going with you. It’s a variation on the Ben Franklin."
Get others to boost you. The freshman trying to make varsity stands a better chance of getting the varsity coach’s ear if his freshman coach, rather than the player himself, sings his praises. Get references, make videos, take pictures, record testimonials, and give addresses of those successfully working with your product.
Anti-objection ploys. Battle the cost objection by changing the price structure. Instead of charging $100 a month, present your rate as $300 a quarter. This takes your product’s payment out of the client’s monthly bill pile, and puts it in a time down the road when paying seems easier.
The Columbo technique diffuses the image of you as slick salesperson and shows you merely as a non-threatening, befuddled individual. Like the old television detective, place thumb on forehead, rub it just slightly and say something like, "Forgive me, I seem to be a little confused here. You’ve said you have this and that need, and my product here answers those needs, but you don’t want my product. Could you help me out here?" (Be careful of slipping into too recognizable an impersonation.)
The preemptive objection counter often works well where the sales person senses an initial reluctance. For a bank to buy new software, for example, involves immense changeover hassles. The salesperson who anticipates these buyer problems and meets them up front with a logistical transition already laid out, makes his product more earnestly considered early on.
As a final ploy, Ras suggests the easy exit technique. Don’t beat a dead deal. "You’ve got to be able to see that this sale is not going to work, and tell the buyer quickly `O.K., I can see this is not for you,’" Ras says. By bowing out with a handshake, you’ve still got a favorable business acquaintance who might recommend you to someone who actually needs what you have.
Ras reminds all his trainees of that very natural buyer’s reluctance. In the end, one is selling to people. If the product is good and the selling is done right, you can add up the positives, and give this person some good news about a something that will make things a bit better for him.- Bart Jackson
Top Of PageBanking On Security
Banks today are pretty careful about shielding their data from unwanted eyes. "Financial institutions have learned from breaches the cost of not protecting customer information," says Robert Dunlop, security officer for Commerce Bank in Mount Laurel. "Not just the financial cost but also the reputational risk." Consequently banks usually encrypt their data, scrambling it so that only someone with the correct overrides can see readable data.
Every bank should also have a plan in place in case of a security breach, says Dunlop, ensuring cooperation between information technology, compliance, security, the line of business involved, and the communications people trained to handle customer questions when a breach occurs. And if the worst happens, he says, the bank must identify the scope of the breach and its cause, and take the necessary steps to stop it and ensure that your customers are protected.
But a bank’s biggest security problem is usually not a breach of its own well-protected computers. Rather, it’s when one of the bank’s customers finds their data is at risk (think identity theft) and calls the bank looking for help. Even though businesses and residences are the weakest links, from the security perspective banks are often the ones to suffer financially in closing out old credit cards, issuing new ones, and taking the time to talk customers through their security issues.
Dunlop is one of the speakers at a half-day seminar, "Cyber Security for Bank Security Officers," on Friday, April 18, at 9 a.m. at the Crowne Plaza in Jamesburg. Sponsored by NJBankers and the New Jersey League of Community Bankers, the seminar will provide security officers with a working knowledge of the IT concerns facing the banking industry and the tools, techniques and resources available to address them. Cost: $125. To register, go to www.njbankers.com.
Encrypt any proprietary customer or transaction information on your hard drives. Software is available to encrypt data, and laptops can be particularly vulnerable, says Dunlop. "Say you’re a merchant, and you have sensitive customer information on a laptop. You run into a store, leave your laptop in the car, and someone sees it, and breaks in." Then you’re a goner, because a simple password offers no protection in the face of experts.
Set your computer to time out after a couple minutes of being idle. Once the computer times out, a password is necessary to get back in. This offers some protection, for example, in large buildings where data thieves can walk in during lunch, pretend to be vendors or employees, and milk data from an unattended computer.
Use a security cable to attach a laptop to a desk. A thief can also wander into an unsecured building during lunchtime and just walk off with a laptop. If you can’t take it with you, see that no one else can either.
Challenge people in your building who you don’t know. "It is not uncommon for people to come in and steal," says Dunlop, "but it is very hard for people to challenge someone." People tend to ignore intruders. But thieves are aware of this valuable piece of human psychology, and they also know that people go out at lunchtime and leave their laptops unattended.
Also, keep your desk clean and make sure to never leave confidential information lying around.
Don’t be careless about giving away your passwords. Sometimes people issue a virtual invitation to potential data thieves by putting passwords for different websites inside their computer cases or on their desks beneath the mouse pad. Or they make the mistake of sharing a password with the wrong person. Don’t give away your password without a compelling reason.
Be wary of calls from people who are not who you think they are. Sometimes people will make calls asking for personal information, pretending to be employees of a bank or even of the company where the person works. In the security business, this is called "social engineering."
Shred documents. If you have documents with sensitive data, don’t throw them in the trash, where they can be prey to what the experts call "dumpster diving." Shred them instead.
Don’t put a check in your mailbox with the flag up. This is an invitation to identity thieves who may be trolling your neighborhood. If they get their hands on a check, they will have your signature, the routing number of your bank, and your account number.
Dunlop grew up in Westmont. His father was in the U.S. Navy, and his mother died when he was seven. After serving in Vietnam in the U.S. Army’s 101st Airborne Division, Dunlop went to Richard Stockton College, graduating in 1972 with a degree in law and criminal justice.
After college he joined the New Jersey State Police, retiring six years ago as the executive officer, a lieutenant colonel. In the 1990s he got a master’s degree in education from Seton Hall.
So the word in security matters is – take care. Of course, sometimes there’s little you can do except read your credit card bills carefully each month to make sure all the purchases are yours. When identity thieves get into a store’s computer system and steal credit card numbers, warns Dunlop, it is easy to create bogus credit cards and make purchases. -Michele Alperin
Thursday, April 22
Top Of PageGreen Design Saves Green
Welcome to the cusp, where a movement makes the leap from good idea to no-brainer.
For the green movement getting to the cusp has been a long time coming, but Tom Prol is glad to be on it. Prol, an environmental and land use attorney with Lydhurst-based Scarinci & Hollenbeck, says environmentally sound building and land use are no longer just great ideas to be stashed away for "some day." As once-prohibitively expensive technologies become more affordable they merge with the push to reduce reliance on traditional fuels, and the marriage is making it easier to build green.
Prol will present "Making Green by Building Green" as part of the New Jersey Institute for Continuing Legal Education’s Green Seminar on Thursday, April 22, at 9 a.m. at the New Jersey Law Center in New Brunswick. The seminar also features presentations from New Brunswick accountant George Livanos, state bar association co-chair Harry McLellan, and Darren Molnar-Port of the state Department of Community Affairs. Fee: $119. Call 732-214-8500 or visit www.njicle.com for more information.
Though Prol is partial to green, his background is slightly more colorful. Few lawyers, for example, can recite Dr. Seuss’ "The Lorax" on cue and fewer still cite the reason for that ability as a leftover from his days doing "guerrilla theater" as a student environmentalist in college. A 1991 graduate of Emory University, where he was president of the student environmental committee, Prol openly embraced the philosophy of the Lorax, who spoke for the trees and has become synonymous with efforts to save them. Prol, in fact, once held a funeral for seven acres worth of trees destined to be cleared in favor of a hotel outside the campus. The rite involved a small coffin full of sticks presented to the dean. The display didn’t stop the hotel, but it did spare the area from being entirely clear cut.
The son of a bricklayer and a medical secretary, who grew up – and still lives – in Franklin, Prol spent two years in Nepal with the Peace Corps directing sanitation operations in the Himalayas. He worked as an EPA enforcement officer while attending New York Law School and interned at CNN’s environmental news unit – which shed a lot of light on the student committee’s efforts stop Emory’s plans for building an on-campus incinerator.
These days, slightly older and more practical, Prol says he has lost some of his naivete but none of his zeal for the cause. "Law school changes the way you think," Prol says. "It helps me be a better advocate; it hones the way you have to present your ideas." In his more pragmatic incarnation, Prol says he likes to approach the issue of green construction and renovation with an eye toward environmentalism’s two-edged sword: the right thing to do versus the money with which to do it.
"There’s duty and money," Prol says, "and if you can harness the good intentions along with making it cost effective, then we can get there." And while he is acutely aware that environmental progress has been slow simply because of the cost of Earth-friendly technologies, Prol still uses a basic faith in humanity to underscore his optimism. "Don’t underestimate people’s sense of wanting to do the right thing," he says.
Bottom lines and good ideas. Though budgets still carry more weight than ideas, Prol remains optimistic – largely because technological advances continually lighten the bottom line. Solar panels, for one thing, are far cheaper than they used to be, and an effective rooftop project requires fewer panels to use sunlight more efficiently, and for a longer time. In fact, his law firm is planning to install solar panels on its offices later this year.
Tax credits, too, are easing economic pressures, particularly in environmentally progressive states like this one, Prol says. New Jersey looks very favorably on homeowners who use alternative energy resources. Thick out-of-pocket costs to install solar panels or windmills are shrinking, meaning a better return on investment for anyone who builds with the renewable resources.
However… Much is still to be done, Prol says. Up-front costs for solar panels, windmills, and geothermal units, though shrinking, can be in the thousands. Also, though New Jersey has been a leader in green-friendly policies, Prol would like to see better incentives for developers to build green from the ground up.
The 1987 case of Medici vs. BPR Co. set up the state’s desire to cut developers breaks when they build facilities deemed to have inherently beneficial value, such as a medical center. Prol believes that similar, environmentally flavored legislation would greatly encourage builders to embrace recycled or eco-friendly materials from the beginning of a project.
Imminent legislation. According to Prol, who recently met with Governor Jon Corzine’s policy director, Adam Zellner, New Jersey is about to start "dropping some bombs" in terms of environmental legislation. Though the details are a closely guarded secret, Prol says greener local-level land use laws and building design codes are about to be introduced, to coincide with the DEP’s eagerly awaited state Energy Master Plan revision.
Prol himself says he has no idea what Zellner and Governor Corzine are planning to release, he only knows it will greatly affect how new construction in the state will work. Buildings, particularly commercial ones, Prol says, emit enormous amounts of energy, and the state’s pending policy changes could go a long way toward reversing those emissions.
Talking trash. New Jerseyans rarely find "What exit?" to be a funny joke, but the old chestnut cradles a kernel of truth. New Jersey, though the fourth-smallest state in the union, is strewn with a dense network of heavily trafficked highways. The trouble is, cars, trucks, buses, and vans are all some of the biggest offenders to air quality today. And within this category, one type of vehicle is particularly offensive – garbage trucks.
New Jersey, much to its critics’ delights, does generate and transport an immense amount of waste. Not all of it stays here, but the very process of ridding it requires putting it on wheels. And garbage trucks not only eat up petroleum, they allow solid waste to decay. The by-product? Methane.
A number of landfills reclaim methane for use as fuel. The Burlington County Landfill, in fact, sells its reclaimed methane to neighboring Maguire Air Force Base. Prol represents several landfills that take such a proactive approach, but he says the underlying reality is that transportation of the waste itself poses as much trouble as just letting solid waste rot in the ground. Recent studies into rail-based out-of-state waste transport are encouraging, he says. The results show that carting waste to out-of-state sites by train greatly reduces the amount of fuel used by trucks taking the same journey. "If you’re going to do something, you’ve got to do it with the transportation industry," he says.
The grand gesture. The mechanics of environmentalism are complicated, Prol says, but he insists the promise is vast. Making green design and construction palatable will take creativity and faith, but it will also take laws that guide builders toward a greener future. This is, unsurprisingly, where Prol feels he can help the most, in the nuts-and-bolts world of land use law and in the little steps that convert good ideas into real dollars.
Still, Prol does not dismiss the influence a few major players in the commercial world could have, were they to embrace green design and construction with both arms. Al Gore, he says, has propelled the cause of environmentalism much further than it would have been without him. But significant change could certainly benefit from national hardware stores, major construction companies, and multi-chain retailers embracing eco-friendly practices.
– Scott Morgan
Top Of PageFiscal Responsibility: It’s Never Too Early
There is no shortage of financial gurus. Books, websites, even public television abounds with advisors, planners, and advice-givers hoping to tell you the best way to handle your hard-earned money.
But none of them talk to kids. The plethora of financial advice lays out detailed plans for adults with jobs they hope not to keep forever. Catherine Milone, president of the South Brunswick-based Junior Achievement of New Jersey, thinks it is a mistake to let people grow up first and learn their fiscal lessons through costly trial and error.
Junior Achievement, or JA, is a worldwide nonprofit that preaches from one very practical gospel. Volunteers go into schools as early as kindergarten and through high school to teach kids the right way and wrong way to look at money. JA will bring present "It Pay$ to be Financially Literate," for free, to Hamilton’s Klockner Elementary School on Tuesday, April 22, at 8:30 a.m. A similar course will be offered at Stokes Elementary School in Trenton on Tuesday, April 29, at 8:30 a.m. The programs are part of JA’s designation of April as Financial Literacy Month. For more information about the program or the organization, visit www.ja-nj.org.
The reason for meeting children so young, Milone says, is simple – bad financial planning can lead to a host of troubles, and not just for the person having trouble paying the credit card bills. As a nation, she says we are all hurt by poor fiscal management. Just take a look at the economy right now, a by-product of overextended credit and unsound mortgage practices.
The basis of those giddy shopping sprees and big dreams, Milone says, lies in how we teach kids to look at money. "When people have good financial habits, it’s good for the economy," she says. So JA drives that principle into children as early as it can.
But finance is complicated. How do you convey the right message to first graders, as JA’s volunteers will do at Klockner and Stokes? Rest assured, JA’s volunteers are not Warren Buffett and Suze Ormand, and no one is going to be telling the kids about 401ks, living trusts, and interest yield. Dubbed "Our Families," the first-grade program emphasizes the roles people, from mom and dad to the doctor and the auto mechanic, play in the economy, Milone says. How people earn money and how it is used to buy things will be wrapped in one overarching lesson focusing on the difference between what you want and what you actually need.
Milone, a 1990 business and marketing graduate of Syracuse University, has been with the Junior Achievement all her professional life, and with the New Jersey chapter for about seven years. She has gone into classrooms – largely in the state’s poorer districts, where financial planning and education are seldom, if ever, taught in schools – and preached the understanding of the difference between want and need. But she had not seen it in action until earlier this year.
Last year, Milone says, she visited a first grade class at a school in Camden and taught the children what makes something a need (like shelter) versus a desire (such as a mansion with a pool and a four-car garage). This year she revisited that school and experienced one of her proudest professional moments when a little girl, now in second grade, told of an uncle who dropped by to ask her family for the $200 he needed to buy a pair of sneakers. The little girl’s answer: "You don’t need those sneakers, you want those sneakers. Get a job."
Building good financial habits early, just as building good eating, brushing, and conflict resolution skills early, greatly improves a child’s chances of not being swayed by predatory lenders and hucksters looking to tap into people’s wants, Milone says. And though JA concentrates on poorer school districts, the group does not limit itself to them. Milone says that all children, no matter the economic background, need to understand how money and finances work. Just as poor children need a leg up, she says, rich children need to understand the value of money and not just expect that it will always be there.
Still, JA does like to encourage kids to dream big. "You can succeed, regardless of your circumstances," she says. "But being intelligent about how you spend your money is going to affect your entire life." – Scott Morgan
Top Of PageYour Estate: Keeping Control
There is only so much Shredded Wheat you can eat. Muttered by folks suffering the Great Depression, this barb suggested that those few heirs still inheriting vast fortunes might find a more beneficial use of their funds, beyond the pursuit of excess. Today, many Americans agree. In 2004 U.S. taxpayers, urged by personal largess and allowable deductions of Schedule A, donated $165.5 billion to charities, the IRS reports.
But we Americans want it all. We want to keep on donating to charities, direct our life savings to our children, and most of all we want to keep it out of the taxman’s clutches. In answer, sharper non-profits are showing taxpayers how these three desires can be mutually fulfilled. The Gift Planning Council of New Jersey, in sponsorship with the Princeton Area Community Foundation, is holding its annual conference on Wednesday and Thursday, April 23 and 24, at 7:30 a.m. at the Sheraton at Woodbridge Place in Iselin. Cost: $200. Visit www.giftplanning-nj.org.
Among the many nationwide experts, attorney Charles Schultz, founder of Crescendo Interactive Inc., presents "IRAs: Turning Bad Assets into Good Assets." Schultz claims that a lot of his idealism came from the times of his youth. Growing up in North Dakota, he graduated from North Dakota University in 1970 with an engineering bachelors. He then earned his law degree in Michigan University, and a tax specialization at Washington University.
After a two-year stint working in a bank, Schultz joined his first charitable foundation. Here he discovered the need for a professional planning link between donors and non-profits. Seeing this need Schultz launched Crescendo Interactive in 1984, using the special gift-planning software he and his wife, Ardis, had spent the last 18 months designing. Today Crescendo produces a host of seminar packages and software that allow individuals to plan their giving most advantageously. These tools are available for non-profits, advising tax attorneys, and individual donors. Visit www.crescendointeractive.com. Schultz also publishes the weekly newsletter "Gift Law."
It’s only wise to grab every tax saving measure, and we do. Currently, one quarter of America’s net worth – $4 trillion – is tied up in qualified funds, such as IRAs. This has proved a great asset for parents, allowing them to set aside untaxed funds as part of their life savings. But for the children these savings can quickly turn to ashes when the IRS steps in with its income tax bill.
Although the whole of estate tax is presently under Congressional consideration, with heavy pressure from the administration, estate taxes in 2008 stand as follows: If you die today, the first $2 million passed on to your heirs are tax exempt, the rest is taxed up to a maximum of 45 percent. With home values having soared over the last decade, a substantial number of individuals are exceeding the $2 million exemption. But as Schultz points out, one doesn’t have to just grit one’s teeth and take a 45 percent hit. There are better ways.
Remainder trusts. A popular shield against heavy estate tax assaults, more than 8 million Americans have established some sort of testamentary or remainder trust. Schultz suggests that this method particularly suits individuals with estates ranging from $1 million to $5 million. The remainder trust may be executed during life or afterwards. Basically, the grantor donates certain assets to a charity, while still retaining use of the assets for a set time. The income from these assets can go to his heirs or beneficiaries.
After the set time, the assets’ principal is turned over to the charity. The children have received income. Dad, meanwhile, has avoided any capital gains on the donated assets and even claims a tax deduction for the fair market value of the interest remaining. Doing well by doing good.
Grantors are allowed to give an untaxed maximum of $1 million annually (that’s $2 million for Mom and Dad combined,) with a limit of $12,000 annually to any single benefactor. Schultz notes that there could be some state taxes factored in. Such trusts can also be established through the will as testamentary trusts.
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