Investor Alert: Securities-Backed Lines of Credit (SBLOC)

SBLOCs are loans that are often marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities.  They do, however, carry a number of risks, among them potential unintended tax consequences and the possibility that you may, in fact have to sell your holdings, which could have a significant impact on your long-term investment goals.

Set up as a revolving line of credit, an SBLOC allows you to borrow money using securities held in your investment accounts as collateral.  You can continue to trade and buy and sell securities in your pledged accounts.  An SBLOC requires you to make monthly interest-only payments, and the loan remains outstanding until you repay it.  You can repay some (or all) of the outstanding principal at any time, then borrow again later.  Some investors like the flexibility of an SBLOC as compared to a term loan, which has a stated maturity date and a fixed repayment schedule.  In some ways, SBLOC are reminiscent of home equity lines of credit, except of course that, among other things, they involve the use of your securities rather than your home as collateral.

The Financial Industry Regulatory Authority (FINRA) and the SEC’s Office of Investor Education and Advocacy (OIEA) have issued an investor alert to provide information about the basics of SBLOC, how they may be marketed to you, and what risks you should consider before posting your investment portfolio as collateral.  SBLOCs may seem like an attractive way to access extra capital when markets are producing positive returns, but market volatility can magnify you potential losses, placing your financial future at greater risks.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of possible advantages and disadvantages of securities-based loans.
  • How might market volatility magnify potential losses placing your financial future at a greater risk?

Discussion Questions

  1. How are securities-backed lines of credit different from home-equity lines of credit?
  2. Why some investors prefer SBLOC to a traditional short term loan?

I’m Young and Healthy–Is an HDHP Right for Me?

“I’ve been told a high deductible health plan (HDHP) is a good choice for my situation and that it might save me some money.  Can you explain this to me.”

This Forbes article provides answers to the questions that many people–especially younger people–have about high deductible health insurance policies.  At the beginning, the author, Christina LeMontagne, points out that high deductible policies are a great option for healthy people, but may not be right for everyone.  She also describes what a high deductible health plan is, who can benefit  from HDHPs, and how they can save you money.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Reinforce what a high deductible health plan (HDHP) is.
  • Stress the fact that while an HDHP may save you money, there are risk involved if you choose this type of policy.

Discussion Questions

  1. What are the advantages of an HDHP plan?
  2. What are the disadvantages of an HDHP plan?
  3. Under what circumstances would you choose an HDHP plan?

Personal Finance Stress Test

To avoid financial disaster, several measurements are available for assessing a person’s personal financial stress:

  1.  The Debt-to-Income Ratio is obtained by dividing your debts by pretax earnings.  Generally this number should be less than 28 percent, without your mortgage, or 36 percent, including your mortgage payment.
  2.  Discretionary Expenses involve spending for items other than fixed obligations and variable nondiscretionary items, such as food and utilities. Purely discretionary expenses may involve recreation and vacations.  An analysis of these categories will allow you to delay, reduce, or eliminate various expenses to avoid financial difficulties.
  3. Emergency Savings should be able to cover three to nine months of living expenses. These funds should be readily available in savings or other easily liquidated accounts. Greater financial greater obligations will require a larger emergency fund.
  1. Additional Income involving wages or tips from a part-time job or selling personal possessions can provide a cushion in times of financial difficulty.
  1. Total Assets, both liquid and non-liquid, will reduce your vulnerability to financial turmoil.

For additional information on the personal finance stress test, click here.

Teaching Suggestions

  • Have students calculate one or more of these measurements for their life situation.
  • Have students prepare a short creative video with a summary of these measurements.

Discussion Questions 

  1. Why is liquidity important for reduced financial stress?
  2. What actions would you recommend to for a person to reduce their personal financial stress?

Saver Survey

Each year, America Saves ( conducts a survey or its program participants to determine the attitudes and behaviors of savers.  The most recent study reports that:

  • People save mainly for their emergency fund, retirement, or repaying debt.
  • People in formal savings programs, such as America Saves, report saving larger amounts.
  • Married respondents saved much more than single respondents.
  • Females and males have different saving purposes; females favored saving for an emergency fund, males favored retirement saving.
  • Savers involved in America Saves are saving more, are more confident in their ability to manage their money, and are managing their debt better while feeling more optimistic about their financial situation.

The complete Savers Survey report is available here.

Teaching Suggestions

  • Have students talk to others about their savings habits and goals.
  • Have students prepare a graph to monitor their savings activities.

Discussion Questions 

  1. What actions can help encourage a person to have more effective savings habits?
  2. Why does being involved in an organized savings program result in more savings and better money management activities?

Financial Flowerpots

Many devices are used for effective money management.  One is called “the financial flowerpot system,” with each imaginary pot representing an account where you “plant” the funds for achieving a financial goal.  When you direct money into this account, it’s like watering and feeding your goal.

To fill up the “financial flowerpots,” start a regular saving and investing plan with the money automatically withdrawn from your paycheck or bank account.  This automatic savings plan may be viewed as an automatic watering system for an actual flowerpot.

Three main flowerpots are recommended:

1.  The Solutions Flowerpot is the emergency fund.  These funds are available to solve problems and have a financial cushion, giving you financial peace of mind.

2. The Retirement Flowerpot is to save for your future financial independence.

3. The College Flowerpot is for those who are saving for their children’s education or for their own advanced studies in the future.

Smaller flowerpots may be used for other financial goals.  For each flowerpot, set aside a savings amount each month that will grow to your desired goal in the timeframe you set.

For additional information on financial flowerpots, click here.

Teaching Suggestions

  • Have students obtain information from others about the methods used to achieve financial goals.
  • Have students propose a method they might use to achieve a financial goal.

Discussion Questions 

1. What are the benefits of thinking of savings goals as financial flowerpots?
2. What are other potential savings goals for various household situations?

Saving Your Tax Refund

The average federal income refund for this year was nearly $2,900, resulting in tens of billions of dollars ready for use. Instead of spending those funds, financial advisors recommend saving for an emergency fund, retirement, or other household goals.  Currently, these refunds represent an amount larger than the average annual personal savings rate of most Americans. Spending the refund on things you don’t need often results in reduced future financial security.

Also, consider reducing your withholding throughout the year.  The refund you receive is only getting back money you lent the government over the past year at zero per cent interest.  Instead, have an automatic withdrawal sent to your savings each month.

For additional information on saving your tax refund, click here.

Teaching Suggestions

  • Have students conduct a survey of people to determine how tax refunds are used..
  • Have students prepare an analysis of lost interest/earnings by taxpayers who received a large refund each year.

Discussion Questions 

  1. What are the benefits of receiving a large tax refund?
  2. What are the drawbacks of receiving a large tax refund?

Newly Married with $52,000 of Debt

My Wife and I Never Discussed Money Before Getting Married–and Ended Up with $52,000 of Debt

Prior to tallying up our debt, we’d talked about traveling internationally, starting a family, and, some day retiring comfortably. There was so much we wanted out of life, but . . .”

This is an excellent article that describes what can happen when a soon-to-be-married couple doesn’t talk about finances.  Fortunately, the two people in this article–Deacon and Kim Hayes–realized they had a problem and then took steps to get their finances back on track.

Specific steps this couple took can make a big difference over time.  Among the suggestions included in this article are:

  • Writing down all your assets, debts, income, and expenses.
  • Prepare a budget and review each item for opportunities to save money.
  • Replacing a newer, expensive car with an older car.
  • Selling unwanted or unneeded items online.
  • Using any extra money to repay debt.
  • Establishing an emergency fund.
  • Saving and investing a specific amount each month.

Consider This:  Deacon Hayes–the author of this article–became a financial planner and now shares his story with his clients.

For more information, Click Here

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss why engaged couples need to discuss their finances before they get married.
  • Stress how easy it is to get in debt and how hard and how much time it takes to get out of debt.

Discussion Questions

  1. Assume you are dating someone who seems to spend more than they make. In this situation, would you continue to date this person?  Explain your answer.
  2. One of the suggestions included in this article is that people write down their assets, debts, income, and expenses. How can this suggestion help a young-married couple plan their financial future?
  3. Assume you have credit card debts and an automobile loan that total $75,000. What specific steps can you take to reduce or eliminate your debt?

52-Week Money Challenge

Do you want to take the 52-Week Money Challenge? 

Before saying no, consider it is a simple way to accumulate $1,378 over the next year.  Before saying yes, realize that while it is easy to save small amounts at the beginning of the year, it becomes increasingly harder to save larger amounts at the end of the year on a weekly basis.   Take a look at the table below to see how your money accumulates each week.


image source


For more information, click here

Teaching Suggestions

You may want to use the information in this blog post and the original article to:

  • Stress that even small amounts of money over time can increase the amount available for savings or investing.
  • Discuss how monitoring your spending habits can “find” the money that can be used for savings and investing.
  • Talk about the need for financial discipline when managing, saving, and investing your money.

Discussion Questions

  1. In the above table, you begin by depositing $1 the first week, then each week, the amount you save increases. Where can you find the money needed to fund this type of savings program–especially toward the end of the year?
  2. Assuming you achieved the 52-week challenge and you now have $1,378 dollars in the bank. Would you leave it in the bank, pay your bills, or invest the money?  Justify your choice.
  3. After completing one 52-week challenge, would you take another money challenge? Why or Why Not?

The Slacker’s Guide to Saving for Retirement

Whether retirement is coming soon or feels far away, it’s something you need to think about.

This article encourages students to make retirement planning a part of their budget and one of their financial goals.   It also points out the benefits of starting early—even if students can contribute only a small amount because of other obligations that include paying off student loans and other debt obligations, paying rent, buying groceries, and establishing an emergency fund.

A very good suggestion included in this article is to start by saving just $25 from each paycheck, and then increase the amount until someone feels they have reached a limit they are comfortable with.

Other suggestions include participating in a 401(k) account at work and using bonuses and salary increases to boost the amount contributed to your retirement account.

For more information, go to

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Encourage students to develop a long-term financial plan that includes retirement goals.
  • Discuss time value of money examples that show how small dollar amounts invested on a regular basis can help achieve long-term financial goals.
  • Launch a discussion about the different types of retirement accounts.

Discussion Questions

1.  Many people never begin saving or investing because there is never anything left over at the end of the month.  How can you find the money needed to begin saving and investing?

2.  Why should you begin to save for retirement now instead of waiting until later in life?