Editor's note: This week on Twitter, we're giving out tips on securing summer jobs for teens and college students. You can find us on Twitter @family_finances. Contribute your own thoughts on this in comments or in a separate e-mail to robynsekula@sbcglobal.net.
By Robyn Davis Sekula
I’ve spent most of my working life contemplating the relationship between work and money, and I’ve found out some interesting things about myself that have helped guide my work choices.
I’ve heard people say, “I love this job so much I’d do it for free.” What a naive comment. Of course you wouldn’t. If they stopped paying you, you’d stop showing up. We work because we have to – but it’s a bonus when you love what you do, or these days, if you even like it. We work because we need the money – and often, because it gives us a sense of satisfaction. But that relationship between work and money will always be there.
My first real job involved working at a Chick-Fil-A, that wonderful haven of tasty crispy delicious chicken sandwiches. I discovered a few essential truths: if you eat fried chicken every day, you will get fat. And, if you have a well-run company and treat people with class, chances are, you’ll serve better food and your workers and customers will notice how good it feels to be in your restaurant. They’ll want to come back. I made something close to minimum wage, which is what I deserved with zero experience. But the job had other payments that made it worthwhile. I remember two significant things the owner did to show his appreciation to us: on a Sunday, they took us all to an amusement park, and paid for all of us to enjoy a day together; secondly, the owner took all of the graduating seniors to the nicest restaurant in town for dinner. I thought this was how all fast food franchise owners behaved. It’s not. He was an unusually nice person who cared about us, and to this day, if I saw him in public, I’m sure he would know me. What a guy – and what a company. I’ll eat there faithfully until the day I die of heart disease from eating too much fried chicken (and I’ll have a smile on my face). The employees are courteous, go out of their way to be helpful and talk to my children and I every single time we visit. We all love the place for the food and its kind spirit. Essential lesson: it’s profitable to be nice.
Next in the list of significant jobs was waiting tables at a Shoney’s restaurant. As it turns out, this was the job that taught me the biggest money lesson: act professionally, be nice, work quickly, and make more money. With waiting tables, you’re assigned a group of tables that is your station. I saw that station as my own workplace. I wanted those seated in my station to be happy and enjoy their experience (even if the food kinda sucked). I saw myself in some ways as an entrepreneur – it was up to me to see how much money I could make. I worked really hard and was good at my job and thus, made good money. But, that job also taught me something else: life without college puts you in a mind-numbing job like that for the rest of your life. Essential lesson: it’s profitable to be nice, and even better to be both kind and knowledgeable.
After this, I worked in a series of newspaper jobs. The newspaper industry pays famously low, and I saw it, at the ripe old age of 21, as a sign of my virtue that I made so little money. I believe that first job paid me less than $1,000 per month after taxes. Wow. I can’t imagine living on that now. After about a year at my first newspaper job, I was climbing into mounting credit card debt. I was discussing it with my now-husband who said, “You can’t just keep charging things. You don’t make enough money to survive. You need to get a second job and pay off that debt.” As I saw it, I was a professional, and the demands of being a police reporter meant that I needed to be available in the evenings, weekends, etc., in case there was a newsworthy crime I should cover. He reminded me that they only paid for the time that I worked – they didn’t own me – and had no right to tell me what to do with my time off. He was right. I took the second job, paid off the debt, saved up enough for a vacation, and then, after we got engaged, we jointly saved $10,000 to pay for our own wedding and honeymoon. Essential lesson: it’s not virtuous to work for a pittance, and if you are, likely, someone else is getting rich off of your back. (Exception of course is public service jobs. But note to journalists: newspapers are not strictly public service. They're not a non-profit. If they don't make money, they close, and the profit formula involves editorial side working very cheaply. This is OK to accept - but know that's what you're doing.)
Fast forward a little. I’m 37. I’m now self-employed. I work hard, and I make more money now than I ever have in my life. In my newspaper career, if I worked hard, all I got was tired. Now, if I work hard, I make more money, which really means something to me now. I’m paying off debt, saving for retirement and saving for my three daughters’ college. The money is meaningful to me because I have goals, and that’s one of the biggest lessons I’ve learned. Without a set, monetary goal, your money floats away freely, frittered away on consumer purchases, meals out and meaningless, mundane everyday experiences. I am happier than I’ve ever been, because finally, my skills and knowledge are being put to great use, and I make enough to change our lives if I stick to my plan. Essential lesson: There is great risk in being self-employed, but for those who enjoy marketing themselves and have significant knowledge in their field, there is great reward. But be prepared to work hard.
So tell me what lessons you’ve learned. Post in the comments. How has what you made influenced how you feel about your job?
Saturday, May 30, 2009
Friday, May 29, 2009
UMB Scout presentation on small caps
Jason Votruba of UMB Scout did an excellent job of walking our friends and guests through the process of investing in small caps. We've posted his PowerPoint presentation on SlideShare, and you can view it below. Check out this SlideShare Presentation:
Umb Scout Funds Small Caps
View more Microsoft Word documents from Robyn Sekula.
Thursday, May 28, 2009
Lessons on the job, part 1
Editor's note: This week on Twitter (we're @family_finances), we're giving out tips on summer jobs, money and teens. Several members of our staff and friends will be contributing their thoughts on what they learned during their first job as a teenager. The first to contribute is Jason T. White, ph.D., who is our director of investments. His story is below. If you'd like to contribute, we'd be happy to review your contribution and post it if you learned some things that we think would be helpful to our readers.
By Jason T. White, Ph.D.
I learned a lot about the importance of money on my first job. It seems to be a normal progression for parents to pull back a little on junior's financial support once he or she gets a job. Deals like "I'll pay for the car, but you pay for the insurance" are a typical as a rite of passage.
I had not taken (or been given) much in the way of money responsibilities as a teen. I didn't have a car, a job or a girlfriend (see the big "L" tatooed on my forehead?) My first job taught helped me equate work effort with financial reward. I didn't make much at Worlds of Fun amusement park in Kansas City during the early Reagan years ($3.35/hour). A full-time week in the summer might have netted me more than a hundred dollars!
In those early years, I wasn't a very disciplined saver. I used the "Bank of Mom" for my TARP support whenever my cashflow ran short, and there really wasn't an expectation that it be paid back. I wish I had my 20's to do over again as a saver - I can imagine he nest egg I could have amassed during the last 20 years.
By Jason T. White, Ph.D.
I learned a lot about the importance of money on my first job. It seems to be a normal progression for parents to pull back a little on junior's financial support once he or she gets a job. Deals like "I'll pay for the car, but you pay for the insurance" are a typical as a rite of passage.
I had not taken (or been given) much in the way of money responsibilities as a teen. I didn't have a car, a job or a girlfriend (see the big "L" tatooed on my forehead?) My first job taught helped me equate work effort with financial reward. I didn't make much at Worlds of Fun amusement park in Kansas City during the early Reagan years ($3.35/hour). A full-time week in the summer might have netted me more than a hundred dollars!
In those early years, I wasn't a very disciplined saver. I used the "Bank of Mom" for my TARP support whenever my cashflow ran short, and there really wasn't an expectation that it be paid back. I wish I had my 20's to do over again as a saver - I can imagine he nest egg I could have amassed during the last 20 years.
Wednesday, May 27, 2009
ABC News turns to us for help on explaining 529 plans
ABCnews.com recently contacted us for thoughts on saving for college. As always, we're happy to help members of the media, and by extension, the public, understand the finer points of financial education. Here's a link to the story. Dan Danford is quoted in the last section.
http://a.abcnews.com/m/screen?id=7392258&pid=74
http://a.abcnews.com/m/screen?id=7392258&pid=74
It's time to fix health care
By Dan Danford
Health care reform is high on the president’s agenda. I applaud him for putting it there, although I’m extremely cautious. Government intervention is a perilous thing, with unintended consequences, but there are powerful reasons for someone to do something.
And government is a logical choice. After all, they’re part of the health care problem (more below), so they should be part of the health care solution. The notion that “government should stay out of health care” is both naïve and misleading.
As a small business owner and advocate, I welcome anything with potential to cut employment costs. I’ve wrestled personally with health insurance, and other business owners confirm it’s a leading factor in hiring new help. For smaller companies, the cost of insuring a single new employee family can run over $1,000 per month.
That’s a lot of money and – truthfully - it doesn’t buy much. That’s minimal coverage with high deductibles. In our plan, it includes prescriptions, but with significant co-pays. It also covers preventative tests, which is very good, but there are co-pays for office calls and many emergency room visits. It does cover us for catastrophic injury or disease, but – as most of us know (and welcome) – those don’t occur often.
Employers and families are left to sort these variables and foot the bills. It’s a sad fact that both are so vulnerable, and both are so powerless.
I am a businessman, though, and I do understand insurance company issues, just like, in fact, I understand physician issues, hospital issues, and pharmaceutical company issues. Each provider faces a unique industry segment and some combination of extreme fixed and variable costs. Like any business venture, each seeks to maximize revenues while minimizing costs.
But – and here’s the rub – these combined-but-related industries create a national infrastructure that’s impossible to corral. Despite decades-old political rhetoric, health care is not a free-market economy, and it is not tempered by market pressure. In fact, the infrastructure itself imposes barriers that stymie competition and free-market activity.
Free market? Good luck starting a new hospital. Bringing a new medicine to market is legendarily tough, and patents assure a nice profit margin for years. Becoming a doctor is even tougher, and there aren’t enough digits on your calculator to compute the first year’s expense for starting a health insurance company. The fact is that each of these groups exercises monopoly power in their own segment of the marketplace.
One common characteristic among this unintended cartel is that rising prices benefit almost everyone. As long as prices increase at a moderate pace across the board, everyone is happy except the consumer.
Think about it. The price of meds or a hospital visit goes up by 5 percent. Who complains? Most of us are nearly ecstatic when medical price inflation keeps to a single digit (this is almost a clinical description of the term dysfunction). We’ve been conditioned to expect and fear so much more.
But, seriously, providers can keep almost everyone happy (shareholders, employees, patients, government officials) with modest-sounding increases. Unfortunately, modest annual increases grow into massive amounts in brief time. It’s like the old fable about doubling a penny on each successive spot on a chessboard – it sounds like a little, but it grows into a staggering sum. Quickly. Just like the costs of health care.
It’s a systemic problem. Everyone smiles and cooperates in cost-cutting discussions, while winking and blaming each other. No one is accountable and – again, truthfully – everyone likes it that way. They win. We lose.
Government is dramatically involved, too. Government regulations create some of those monopolies (part of the systemic issues), and Medicare is the single largest buyer of health care services. Actually, government is likely the only entity with enough clout to compel positive change.
Legislators also share some blame for maintaining a legal environment with outsize rewards for medical lawsuits. A big part of systemic cost traces to defensive medicine and malpractice premiums. Reasonable change might bring tremendous improvements.
Traditional approaches simply haven’t worked. Cutting costs by a percent or two isn’t enough to solve these problems. Systemic issues require brash new ideas. Old hierarchies fail and better ones step up. In a genuine free market, efficiency rises from chaos. There’s an ebb and flow that creates better value for consumers. No free markets, no steps forward.
Everyone justifies their own price increases and demonizes others. I’ve listened to physicians complain about hospitals. Hospitals complain about insurance companies. Almost everyone complains against pharmaceuticals. And they all face considerable pressure to raise their own prices while castigating others. It is a never-ending cycle.
It is time to break that costly cycle, and I’m pleased that President Obama wants to do it. I’m cautious, and uncomfortable, and decidedly skeptical. But I’m also convinced that we can’t let the existing infrastructure dictate our future. Left uncontrolled, health care costs will eventually overwhelm all the productivity in our economy.
Fix it now or fix it later, but fix it we must. I’m a cautious optimist that we’re finally stepping forward.
Health care reform is high on the president’s agenda. I applaud him for putting it there, although I’m extremely cautious. Government intervention is a perilous thing, with unintended consequences, but there are powerful reasons for someone to do something.
And government is a logical choice. After all, they’re part of the health care problem (more below), so they should be part of the health care solution. The notion that “government should stay out of health care” is both naïve and misleading.
As a small business owner and advocate, I welcome anything with potential to cut employment costs. I’ve wrestled personally with health insurance, and other business owners confirm it’s a leading factor in hiring new help. For smaller companies, the cost of insuring a single new employee family can run over $1,000 per month.
That’s a lot of money and – truthfully - it doesn’t buy much. That’s minimal coverage with high deductibles. In our plan, it includes prescriptions, but with significant co-pays. It also covers preventative tests, which is very good, but there are co-pays for office calls and many emergency room visits. It does cover us for catastrophic injury or disease, but – as most of us know (and welcome) – those don’t occur often.
Employers and families are left to sort these variables and foot the bills. It’s a sad fact that both are so vulnerable, and both are so powerless.
I am a businessman, though, and I do understand insurance company issues, just like, in fact, I understand physician issues, hospital issues, and pharmaceutical company issues. Each provider faces a unique industry segment and some combination of extreme fixed and variable costs. Like any business venture, each seeks to maximize revenues while minimizing costs.
But – and here’s the rub – these combined-but-related industries create a national infrastructure that’s impossible to corral. Despite decades-old political rhetoric, health care is not a free-market economy, and it is not tempered by market pressure. In fact, the infrastructure itself imposes barriers that stymie competition and free-market activity.
Free market? Good luck starting a new hospital. Bringing a new medicine to market is legendarily tough, and patents assure a nice profit margin for years. Becoming a doctor is even tougher, and there aren’t enough digits on your calculator to compute the first year’s expense for starting a health insurance company. The fact is that each of these groups exercises monopoly power in their own segment of the marketplace.
One common characteristic among this unintended cartel is that rising prices benefit almost everyone. As long as prices increase at a moderate pace across the board, everyone is happy except the consumer.
Think about it. The price of meds or a hospital visit goes up by 5 percent. Who complains? Most of us are nearly ecstatic when medical price inflation keeps to a single digit (this is almost a clinical description of the term dysfunction). We’ve been conditioned to expect and fear so much more.
But, seriously, providers can keep almost everyone happy (shareholders, employees, patients, government officials) with modest-sounding increases. Unfortunately, modest annual increases grow into massive amounts in brief time. It’s like the old fable about doubling a penny on each successive spot on a chessboard – it sounds like a little, but it grows into a staggering sum. Quickly. Just like the costs of health care.
It’s a systemic problem. Everyone smiles and cooperates in cost-cutting discussions, while winking and blaming each other. No one is accountable and – again, truthfully – everyone likes it that way. They win. We lose.
Government is dramatically involved, too. Government regulations create some of those monopolies (part of the systemic issues), and Medicare is the single largest buyer of health care services. Actually, government is likely the only entity with enough clout to compel positive change.
Legislators also share some blame for maintaining a legal environment with outsize rewards for medical lawsuits. A big part of systemic cost traces to defensive medicine and malpractice premiums. Reasonable change might bring tremendous improvements.
Traditional approaches simply haven’t worked. Cutting costs by a percent or two isn’t enough to solve these problems. Systemic issues require brash new ideas. Old hierarchies fail and better ones step up. In a genuine free market, efficiency rises from chaos. There’s an ebb and flow that creates better value for consumers. No free markets, no steps forward.
Everyone justifies their own price increases and demonizes others. I’ve listened to physicians complain about hospitals. Hospitals complain about insurance companies. Almost everyone complains against pharmaceuticals. And they all face considerable pressure to raise their own prices while castigating others. It is a never-ending cycle.
It is time to break that costly cycle, and I’m pleased that President Obama wants to do it. I’m cautious, and uncomfortable, and decidedly skeptical. But I’m also convinced that we can’t let the existing infrastructure dictate our future. Left uncontrolled, health care costs will eventually overwhelm all the productivity in our economy.
Fix it now or fix it later, but fix it we must. I’m a cautious optimist that we’re finally stepping forward.
Tuesday, May 26, 2009
Spend it wisely
On Mondays, we post a question from a reader and a response in this space. Due to the Memorial Day holiday, we delayed this for a day. If you have a question you'd like to see answer here, post it in the comments section.
QUESTION: I'm going to get $250 from the government this year as part of the economic recovery package for those who receive Social Security benefits. It's not that much money - but how could I spend it wisely?
ANSWER: You can bet that more than one person has already charged something on a credit card thinking they’d be able to pay it off when their check comes. This is foolish. First of all, interest will accrue until the check arrives. And let’s be honest. $250 is just not that much money. But still, it’s fun to think about the ways you might use it to improve your life.
When the money comes, there are some great ways to spend it, and some not-so-great ways. I’m going to cover a few of each.
The best way to spend it
The very best way to spend your check is by paying off high-interest debt. Credit card debt should be the first to go, and the money you’re going to get will help you meet this goal. If you have payday or title loans, pay those off first and foremost and get the heck away from them.
The next best way might be to not spend it at all, but use it as the base of an emergency fund. Everyone should have three to six months of expenses tucked away in case of an emergency. A savings account can also help you manage life’s many other challenging surprises.
Another solid option is charitable giving. A church, a non-profit agency or other such entity could really benefit from such a gift. If the gift is to a qualifying non-profit, you can write it off of your 2009 taxes.
Thinking to the future, you might invest in your grandchild’s future education. Use the money to seed a college fund.
Estate planning services could be a way to spend that check that could vastly help your family. This isn’t fun, I know, but you need a will. Everyone does. If you spend your check with a solid attorney who can help you draft a will, it will save your heirs a lot of time and energy in the future. And when you’re done, tell your family. A will that no one knows about can’t do its job. Also think about creating a Power of Attorney document to give a spouse, child or loved one the power to make decisions for you in the event of an emergency. And again, tell someone you’ve done this.
The not-so-great ways to spend your money
Vegas is not really my scene. All I can see at the tables and slots are people carrying around their life savings for what is usually not much return at all, if any. Gambling is about the worst use of the money I could imagine. Same goes with lottery tickets.
I’m also not much for new televisions, or other luxuries, if you are already in debt. It’s just not wise to spend money on things you don’t really need when you’re paying double-digit interest on debt.
$250 isn’t that much. But it can be significant, if it’s used wisely.
QUESTION: I'm going to get $250 from the government this year as part of the economic recovery package for those who receive Social Security benefits. It's not that much money - but how could I spend it wisely?
ANSWER: You can bet that more than one person has already charged something on a credit card thinking they’d be able to pay it off when their check comes. This is foolish. First of all, interest will accrue until the check arrives. And let’s be honest. $250 is just not that much money. But still, it’s fun to think about the ways you might use it to improve your life.
When the money comes, there are some great ways to spend it, and some not-so-great ways. I’m going to cover a few of each.
The best way to spend it
The very best way to spend your check is by paying off high-interest debt. Credit card debt should be the first to go, and the money you’re going to get will help you meet this goal. If you have payday or title loans, pay those off first and foremost and get the heck away from them.
The next best way might be to not spend it at all, but use it as the base of an emergency fund. Everyone should have three to six months of expenses tucked away in case of an emergency. A savings account can also help you manage life’s many other challenging surprises.
Another solid option is charitable giving. A church, a non-profit agency or other such entity could really benefit from such a gift. If the gift is to a qualifying non-profit, you can write it off of your 2009 taxes.
Thinking to the future, you might invest in your grandchild’s future education. Use the money to seed a college fund.
Estate planning services could be a way to spend that check that could vastly help your family. This isn’t fun, I know, but you need a will. Everyone does. If you spend your check with a solid attorney who can help you draft a will, it will save your heirs a lot of time and energy in the future. And when you’re done, tell your family. A will that no one knows about can’t do its job. Also think about creating a Power of Attorney document to give a spouse, child or loved one the power to make decisions for you in the event of an emergency. And again, tell someone you’ve done this.
The not-so-great ways to spend your money
Vegas is not really my scene. All I can see at the tables and slots are people carrying around their life savings for what is usually not much return at all, if any. Gambling is about the worst use of the money I could imagine. Same goes with lottery tickets.
I’m also not much for new televisions, or other luxuries, if you are already in debt. It’s just not wise to spend money on things you don’t really need when you’re paying double-digit interest on debt.
$250 isn’t that much. But it can be significant, if it’s used wisely.
Friday, May 22, 2009
Resources for those getting a divorce
We're delighted that writer Geoff Williams caught our e-newsletter about our affiliation with Dad's Divorce - and happier still that he decided to expand upon it and find more sites that help people through divorce.
Geoff's post on Walletpop.com went live this morning. You can read it here:
http://www.walletpop.com/blog/2009/05/21/breaking-up-is-less-hard-to-do-with-divorce-related-websites/
Geoff's post on Walletpop.com went live this morning. You can read it here:
http://www.walletpop.com/blog/2009/05/21/breaking-up-is-less-hard-to-do-with-divorce-related-websites/
Thursday, May 21, 2009
Investing won't make you rich
Family Investment Center and Dan Danford have a strong commitment to financial education. That takes many forms and you've likely encountered some of our educational materials in the past. A newer affiliation is with a website called Dad's Divorce. It's a site maintained primarily for men going through divorce and it contains a wealth of solid information about all aspects of that situation. We have developed (and are developing) an ongoing series of free investment and financial podcasts called Money Made Easy. The one posted this week is "How to Get Rich."
Click the link below to watch the entire show:
http://www.dadsdivorce.com/blog/Money-Made-Easy-How-To-Get-Rich.html
Click the link below to watch the entire show:
http://www.dadsdivorce.com/blog/Money-Made-Easy-How-To-Get-Rich.html
Wednesday, May 20, 2009
Come learn more about investing in small caps
By Dan Danford
At the Family Investment Center, we believe strongly in investor education. We hold periodic free events for our clients, friends and members of the public. Next Thursday, May 28, we will host Jason Votruba, CFA, who will present “A Winning Strategy for Investing in Smaller Capitalization Equities.” Jason has served as a Portfolio Manager for the UMB Scout Small Cap Fund since 2002 and has more than 10 years of investment management experience.
The presentation will be held in the East Hills Library's basement auditorium in St. Joseph, Mo., beginning with refreshments at 6:30 p.m. and the presentation at 7 p.m.
At FIC, we believe that a properly diversified portfolio should own a variety of asset classes and sizes. UMB Scout Small Cap is one of the funds we've been using for client portfolios. This is a great opportunity to meet the fund manager, and get a face-to-face report on the strategies and stocks that make them so successful.
At the Family Investment Center, we believe strongly in investor education. We hold periodic free events for our clients, friends and members of the public. Next Thursday, May 28, we will host Jason Votruba, CFA, who will present “A Winning Strategy for Investing in Smaller Capitalization Equities.” Jason has served as a Portfolio Manager for the UMB Scout Small Cap Fund since 2002 and has more than 10 years of investment management experience.
The presentation will be held in the East Hills Library's basement auditorium in St. Joseph, Mo., beginning with refreshments at 6:30 p.m. and the presentation at 7 p.m.
At FIC, we believe that a properly diversified portfolio should own a variety of asset classes and sizes. UMB Scout Small Cap is one of the funds we've been using for client portfolios. This is a great opportunity to meet the fund manager, and get a face-to-face report on the strategies and stocks that make them so successful.
Tuesday, May 19, 2009
Warren Buffet gets bullish
By Dan Danford
Warren Buffet hit the news this week when his first quarter buys of stock in banks Wells Fargo and US Bancorp. Buffet also changed his position on the S&P Index to take a more bullish stance. His new position means that the market will have to increase 15 percent over the next 10 years.
It's hard to bet against the Oracle, and it's equally hard to bet against the long-term market trend. What Buffett says about the stock market is almost "common sensical." He's a guy of remarkable success, partly because he focuses on long-term investing rather than short-term swings in the market. Individual stock choices are long-term and he suggests index funds for "most" investors. This is a long-term play on the stock market's rise from here. How is that different from other things he says and does? It isn't. He's a remarkably consistent person, and it works.
Read more about Buffet's changing position here:
Betting on America Buffett Doubles Down on Derivatives Ups Stakes in Wells US Bancorp: Tech Ticker, Yahoo! Finance
http://tinyurl.com/qa7bjv
Warren Buffet hit the news this week when his first quarter buys of stock in banks Wells Fargo and US Bancorp. Buffet also changed his position on the S&P Index to take a more bullish stance. His new position means that the market will have to increase 15 percent over the next 10 years.
It's hard to bet against the Oracle, and it's equally hard to bet against the long-term market trend. What Buffett says about the stock market is almost "common sensical." He's a guy of remarkable success, partly because he focuses on long-term investing rather than short-term swings in the market. Individual stock choices are long-term and he suggests index funds for "most" investors. This is a long-term play on the stock market's rise from here. How is that different from other things he says and does? It isn't. He's a remarkably consistent person, and it works.
Read more about Buffet's changing position here:
Betting on America Buffett Doubles Down on Derivatives Ups Stakes in Wells US Bancorp: Tech Ticker, Yahoo! Finance
http://tinyurl.com/qa7bjv
Monday, May 18, 2009
Credit card reforms could help consumers
On Mondays, we post a question and answer from a reader in this space. If you have a question you'd like to see answer, please post in the comments section.
QUESTION: There’s been a lot of talk about reforming the credit card industry. What do you think of this? Are the reforms meaningful? Is reform needed?
ANSWER: I attended a recent speech by Susan Keating who is the President and CEO of the National Foundation for Credit Counseling, likely the only national nonprofit group focused on helping consumers overcome debt problems. They have a lot of insight into various credit card issues, and have a seat at the national table addressing such things.
I see two prongs to this issue. The first is a kind of predatory activity on the part of some lending institutions. It looks a bit like loan sharking when interest rates exceed 30 percent and they truly prefer when people don't pay off their cards. If you can keep someone paying astronomical interest on a static debt, that's awfully easy money. Over time, the collective interest offsets the default rate, so those institutions keep making money without regard to their customer's misery or instability. That's evil.
The other - every bit as important - is people making really bad spending choices. A dumb choice is even dumber when it takes two years at 30 percent interest to pay for it. Especially electronic gear or other stuff that has little value on the secondary market. Check Craig's List or garage sales for a used television or game console. You paid $300 for it new, with another $50 in interest and fees, and it's worth $50 or $75 used. That's just dumb, dumb, dumb. (In fact, it might be okay with cash, but certainly not on credit.)
The worst thing is that people who make bad spending choices tend to make multiple bad spending choices. So it tends to be a combined $5,000 for new stuff, with $1,000 in interest and fees, and it's worth $250 or $500 used. It's the bad gift that keeps on giving.
It's not all bad, though. Credit cards sometimes allow us to capture good value. If your washing machine is on it's last legs and Nebraska Furniture Mart has a sale where you can save $200, then buying it now and paying for it over the next few months could be a terrific use of credit. The card saves you money and adds convenience to your life. That's the highest and best use of credit.
So, credit card reform might be a good thing if it wrings some excesses out of the marketplace. And I think it will. But the best results will happen when people start thinking before they buy, and I'm still a bit skeptical about this. But we can always hope!
QUESTION: There’s been a lot of talk about reforming the credit card industry. What do you think of this? Are the reforms meaningful? Is reform needed?
ANSWER: I attended a recent speech by Susan Keating who is the President and CEO of the National Foundation for Credit Counseling, likely the only national nonprofit group focused on helping consumers overcome debt problems. They have a lot of insight into various credit card issues, and have a seat at the national table addressing such things.
I see two prongs to this issue. The first is a kind of predatory activity on the part of some lending institutions. It looks a bit like loan sharking when interest rates exceed 30 percent and they truly prefer when people don't pay off their cards. If you can keep someone paying astronomical interest on a static debt, that's awfully easy money. Over time, the collective interest offsets the default rate, so those institutions keep making money without regard to their customer's misery or instability. That's evil.
The other - every bit as important - is people making really bad spending choices. A dumb choice is even dumber when it takes two years at 30 percent interest to pay for it. Especially electronic gear or other stuff that has little value on the secondary market. Check Craig's List or garage sales for a used television or game console. You paid $300 for it new, with another $50 in interest and fees, and it's worth $50 or $75 used. That's just dumb, dumb, dumb. (In fact, it might be okay with cash, but certainly not on credit.)
The worst thing is that people who make bad spending choices tend to make multiple bad spending choices. So it tends to be a combined $5,000 for new stuff, with $1,000 in interest and fees, and it's worth $250 or $500 used. It's the bad gift that keeps on giving.
It's not all bad, though. Credit cards sometimes allow us to capture good value. If your washing machine is on it's last legs and Nebraska Furniture Mart has a sale where you can save $200, then buying it now and paying for it over the next few months could be a terrific use of credit. The card saves you money and adds convenience to your life. That's the highest and best use of credit.
So, credit card reform might be a good thing if it wrings some excesses out of the marketplace. And I think it will. But the best results will happen when people start thinking before they buy, and I'm still a bit skeptical about this. But we can always hope!
Friday, May 15, 2009
Money tips for the elderly, and their children
We give out a daily financial tip on Twitter @family_finances, and sometimes, concentrate the tips around a theme. Here's our tips on managing money and the elderly, given out during the last two weeks.
- Take some time to sit with elderly parents and go over their finances with them. Make sure you know where all of their money goes.
- Encourage older parents to explore long term care insurance. Those in good health may find it’s not too expensive.
- Review a few rules with elderly parents. No bank or credit card numbers over the phone, ever.
- Rule 2 for elderly parents: Don’t reveal your age or personal situation. No one should know that you live alone.
- Rule 3 for elderly parents: if you aren’t sure about something you’re asked for, ask for help from you. Refuse until you can get help.
- Rule 4 for elderly parents: don’t allow anyone going door-to-door who you don’t know to do work on your home.
- Rule 5 for elderly parents: Create a will. It will save your children from arguing over how the estate is to be divided.
- Rule 6 for elderly parents: Tell your children when you’ve made a major change, such as switching banks or phone companies.
- Rule 7 for elderly parents: If you drive when you shouldn’t, you can end up in a very costly accident and even hurt someone else.
- Rule 8 for elderly parents: Reverse mortgages sound good, but often, the fees are high. Let an expert review before you commit.
- Rule 9 for elderly parents: Keep healthy. Take your medicine, get checkups. It may save you time, money and your life.
- Rule 10 for elderly parents: Stay out of the casinos. Stay away from lottery tickets. It’s the worst use of money possible. Find another hobby.
- Take some time to sit with elderly parents and go over their finances with them. Make sure you know where all of their money goes.
- Encourage older parents to explore long term care insurance. Those in good health may find it’s not too expensive.
- Review a few rules with elderly parents. No bank or credit card numbers over the phone, ever.
- Rule 2 for elderly parents: Don’t reveal your age or personal situation. No one should know that you live alone.
- Rule 3 for elderly parents: if you aren’t sure about something you’re asked for, ask for help from you. Refuse until you can get help.
- Rule 4 for elderly parents: don’t allow anyone going door-to-door who you don’t know to do work on your home.
- Rule 5 for elderly parents: Create a will. It will save your children from arguing over how the estate is to be divided.
- Rule 6 for elderly parents: Tell your children when you’ve made a major change, such as switching banks or phone companies.
- Rule 7 for elderly parents: If you drive when you shouldn’t, you can end up in a very costly accident and even hurt someone else.
- Rule 8 for elderly parents: Reverse mortgages sound good, but often, the fees are high. Let an expert review before you commit.
- Rule 9 for elderly parents: Keep healthy. Take your medicine, get checkups. It may save you time, money and your life.
- Rule 10 for elderly parents: Stay out of the casinos. Stay away from lottery tickets. It’s the worst use of money possible. Find another hobby.
Tuesday, May 12, 2009
Let it out
By Dan Danford
Every have one of those days when you're just really fed-up? Well, I have, and here's my thoughts on everything that's bugging me. Feels good to put fingers to keyboard and let it all out. Post what's bugging you in the comments section! It's cathartic.
POLITICAL ISSUES
I'm tired of scavengers and do-gooders who make a living off the misery of others.
I'm tired of liberals who bash businesses, then tax the hell out of them.
I'm tired of conservatives who praise entrepreneurs, then tax the hell out of them.
I'm tired of political parties and grandiose agendas.
I'm tired of pharmaceutical manufacturers who use advertising as a competitive weapon.
I'm tired of wealthy movie stars speaking out for the working class.
I'm tired of teachers, preachers, and creatures of every sort that demand more money.
I'm tired of celebrity talk shows.
I'm tired of self-important people who hide their true agenda behind lofty-sounding community service.
I'm tired of quasi-leaders who advocate collaboration as a manipulative technique.
I'm tired of media types who create headlines or stories without true depth or understanding.
I'm tired of public servants who despise the public.
I'm tired of anyone advocating charitable spending, who wouldn't in a million years spend their own money.
PROFESSIONAL ISSUES
I'm tired of ignorance about personal investing and finance.
I'm tired of working hard for anybody who doesn't appreciate it.
I'm tired of CNBC and sensational business journalism.
I'm tired of anyone who can't learn some simple and fundamental rules of economics.
I'm tired of offering quality, value-oriented services to a broad marketplace of folks who choose not to understand.
I'm tired of amateur investors, who lavish (often) bad advice on co-workers, friends, and relatives.
PEOPLE ISSUES
I'm tired of anyone who does the easy thing instead of the right thing.
I'm tired of socially adept, but morally-challenged people.
I'm tired of wealthy or privileged people who have massive entitlement issues.
I'm tired of egocentric personalities who focus totally on themselves or their children.
I'm tired of people who can't read the newspaper or converse intelligently about current events.
I'm tired of manipulation.
I'm tired of arrogance.
I'm tired of users.
Every have one of those days when you're just really fed-up? Well, I have, and here's my thoughts on everything that's bugging me. Feels good to put fingers to keyboard and let it all out. Post what's bugging you in the comments section! It's cathartic.
POLITICAL ISSUES
I'm tired of scavengers and do-gooders who make a living off the misery of others.
I'm tired of liberals who bash businesses, then tax the hell out of them.
I'm tired of conservatives who praise entrepreneurs, then tax the hell out of them.
I'm tired of political parties and grandiose agendas.
I'm tired of pharmaceutical manufacturers who use advertising as a competitive weapon.
I'm tired of wealthy movie stars speaking out for the working class.
I'm tired of teachers, preachers, and creatures of every sort that demand more money.
I'm tired of celebrity talk shows.
I'm tired of self-important people who hide their true agenda behind lofty-sounding community service.
I'm tired of quasi-leaders who advocate collaboration as a manipulative technique.
I'm tired of media types who create headlines or stories without true depth or understanding.
I'm tired of public servants who despise the public.
I'm tired of anyone advocating charitable spending, who wouldn't in a million years spend their own money.
PROFESSIONAL ISSUES
I'm tired of ignorance about personal investing and finance.
I'm tired of working hard for anybody who doesn't appreciate it.
I'm tired of CNBC and sensational business journalism.
I'm tired of anyone who can't learn some simple and fundamental rules of economics.
I'm tired of offering quality, value-oriented services to a broad marketplace of folks who choose not to understand.
I'm tired of amateur investors, who lavish (often) bad advice on co-workers, friends, and relatives.
PEOPLE ISSUES
I'm tired of anyone who does the easy thing instead of the right thing.
I'm tired of socially adept, but morally-challenged people.
I'm tired of wealthy or privileged people who have massive entitlement issues.
I'm tired of egocentric personalities who focus totally on themselves or their children.
I'm tired of people who can't read the newspaper or converse intelligently about current events.
I'm tired of manipulation.
I'm tired of arrogance.
I'm tired of users.
Monday, May 11, 2009
Pay attention to your credit score
Credit scores are a crucial factor that helps determine many things in the world of finances. This story, written by Janene Mascarella and posted on the AOL site Walletpop.com today, explains how what you do contributes toward boosting your credit score - or drags it down. Nice piece, and I'm happy to be quoted in it.
http://www.walletpop.com/credit/experian/make-or-break-your-credit-score
http://www.walletpop.com/credit/experian/make-or-break-your-credit-score
Giving house to children isn't a wise move
On Mondays, we post a question from a reader and answer in this space. If you have a question you'd like to see us answer, please post it in the comments.
QUESTION: I am in my 70s, and I’d like to put my house in the name of my children so that, if I ever have to go into a nursing home, I won’t be forced to sell it to pay for my care. I have friends who have done this. Does this work? Are there any drawbacks to it?
ANSWER FROM DAN DANFORD: I'm always distrustful about advice from friends in this realm. I hear this stuff all the time and it's the absolute worst place to get information. The times I've tried to confirm this type of stuff have always ended with disappointing results.
Here's the thing. The "nursing home" payment plan is Medicaid, a state-operated plan that provides medical services to indigent people. It kicks in and pays when you've "depleted" your other assets. There are rules about what qualifies as an asset and when the program starts paying. There are "look back" periods for precisely this reason; Medicaid wants to be sure you are really indigent before starting to pay. And they want to be sure that you didn't give everything away just to qualify. So they look at your financial history and may demand assets that were given away to family and friends (or delay paying).
Medicaid is administered on a state-by-state basis, so there are slight variations depending on where you live. Also, amounts allowed to a spouse or the length of look back periods might differ also. Last, and this is a huge factor in my experience, the Medicaid caseworker has some "interpretive" leeway for each situation. So, even within a state, the answers may be different when the circumstances are different.
So, the best thing to do is to establish a "regular pattern of giving" to your family. That way, there are no one-oime massive gifts to raise a red flag for the caseworker. Also, remember that the reason you worked hard and saved all these years is precisely to take care of you when you need it. Another way of saying this is that you likely need the money (or house) more then you children.
Which brings up one last caution. What if you give the house to your kids and they become embroiled in a lawsuit or - heaven forbid - a nasty divorce? Under this "worst case scenario" the house or other asset could end up being unavailable to either you or your children! Careful, careful, careful.
Really, don't listen to your friends for this. Consult a reputable estate planning attorney in your city. A few hundred dollars in fees could accomplish what you want without the guesswork.
QUESTION: I am in my 70s, and I’d like to put my house in the name of my children so that, if I ever have to go into a nursing home, I won’t be forced to sell it to pay for my care. I have friends who have done this. Does this work? Are there any drawbacks to it?
ANSWER FROM DAN DANFORD: I'm always distrustful about advice from friends in this realm. I hear this stuff all the time and it's the absolute worst place to get information. The times I've tried to confirm this type of stuff have always ended with disappointing results.
Here's the thing. The "nursing home" payment plan is Medicaid, a state-operated plan that provides medical services to indigent people. It kicks in and pays when you've "depleted" your other assets. There are rules about what qualifies as an asset and when the program starts paying. There are "look back" periods for precisely this reason; Medicaid wants to be sure you are really indigent before starting to pay. And they want to be sure that you didn't give everything away just to qualify. So they look at your financial history and may demand assets that were given away to family and friends (or delay paying).
Medicaid is administered on a state-by-state basis, so there are slight variations depending on where you live. Also, amounts allowed to a spouse or the length of look back periods might differ also. Last, and this is a huge factor in my experience, the Medicaid caseworker has some "interpretive" leeway for each situation. So, even within a state, the answers may be different when the circumstances are different.
So, the best thing to do is to establish a "regular pattern of giving" to your family. That way, there are no one-oime massive gifts to raise a red flag for the caseworker. Also, remember that the reason you worked hard and saved all these years is precisely to take care of you when you need it. Another way of saying this is that you likely need the money (or house) more then you children.
Which brings up one last caution. What if you give the house to your kids and they become embroiled in a lawsuit or - heaven forbid - a nasty divorce? Under this "worst case scenario" the house or other asset could end up being unavailable to either you or your children! Careful, careful, careful.
Really, don't listen to your friends for this. Consult a reputable estate planning attorney in your city. A few hundred dollars in fees could accomplish what you want without the guesswork.
Saturday, May 9, 2009
Near the bottom?
By Jason T. White, ph.D.
On Friday, May 8th, the Labor Department announced that the United States lost another 539,000 jobs in April, with the national unemployment rate rising to 8.9 percent. Certainly, this is a concern for another half-million families adversely affected by job loss in this recession. But, from an economic perspective, I can see some "green shoots" appearing in the labor market.
Unemployment is considered a lagging economic indicator. The typical recessionary pattern is that the general economy, as measured by Gross Domestic Product (GDP) and other indicators like the stock market, improve before unemployment reacts positively. I believe we are seeing the beginnings of a recessionary bottom based on the following unemployment data.
The goods news is the trend; 741,000 jobs were lost in January, another 681,000 in February, and 699,000 in March. While losing 539,000 jobs in April is bad, the trend appears to be thatjob loss is slowing - a bullish sign!
The link below is a very interesting visual look at the loss of jobs since the beginning of the recession. While the map looks a little like a "war zone" of unemployment explosion, I can see improvement and growth on the horizon. I hope you find this information educational and useful. We continue to monitor economic and investment activity on a daily basis and will provide relevant data whenever possible. Enjoy!
http://www.slate.com/id/2216238/
On Friday, May 8th, the Labor Department announced that the United States lost another 539,000 jobs in April, with the national unemployment rate rising to 8.9 percent. Certainly, this is a concern for another half-million families adversely affected by job loss in this recession. But, from an economic perspective, I can see some "green shoots" appearing in the labor market.
Unemployment is considered a lagging economic indicator. The typical recessionary pattern is that the general economy, as measured by Gross Domestic Product (GDP) and other indicators like the stock market, improve before unemployment reacts positively. I believe we are seeing the beginnings of a recessionary bottom based on the following unemployment data.
The goods news is the trend; 741,000 jobs were lost in January, another 681,000 in February, and 699,000 in March. While losing 539,000 jobs in April is bad, the trend appears to be thatjob loss is slowing - a bullish sign!
The link below is a very interesting visual look at the loss of jobs since the beginning of the recession. While the map looks a little like a "war zone" of unemployment explosion, I can see improvement and growth on the horizon. I hope you find this information educational and useful. We continue to monitor economic and investment activity on a daily basis and will provide relevant data whenever possible. Enjoy!
http://www.slate.com/id/2216238/
Thursday, May 7, 2009
Twenty questions to ask the elderly
Robyn Davis Sekula is a public relations and marketing consultant who assists us with many things here at the Family Investment Center. She offered to write about her own experience gathering information from her elderly parents and her thoughts are posted below. Tell us about your own experiences with managing the finances of elderly parents in the comments section.
By Robyn Davis Sekula
During December 2005, I was home in Virginia visiting my parents when my Uncle Bob died unexpectedly. Bob was only a year older than my father, and it sent a bit of a chill through the house. Dad looked at me that afternoon and gave me a wonderful gift. He said, “Let’s go downstairs.” We went into an area that he had used as an office, and he began to tell me everything.
Having spent most of my life as a reporter, I took notes. I’m an only child, and my parents are in their 70s and live nine hours away. My mother knew very little about the finances of the home at that time, and I’m very much the practical soul of the family, so I knew I would have to be the one to have the information. He started with the basics: where the original of his will was located, who has power of attorney (mom) and life insurance. Then, I worked my way into a series of questions on everything I could think of since he seemed receptive to answering questions.
I’ve accumulated this list here for you to use with your own elderly relatives. If you live far away, all of these questions are especially crucial and things you need to know. They may sound small, but every piece of information that you have handy will save you a step or two in the future.
Don’t assume that you know everything, either. Your parents may have inherited something that they never mentioned to you or have purchased something that they’ve never discussed. Ask it all. You will no doubt find a surprise or two.
Here’s the list of questions I’d use in such a conversation:
1. Where is your will? Not a copy, but the original. My grandfather's estate could not be settled until his original will could be located. Guess who had it? His ex-wife, who could have easily destroyed it, since it was not in her favor and she was not friendly with the rest of the family. That could have been a disaster.
2. Who prepared your will? Be sure to get contact information, too.
3. Who is your life insurance policy with? What is the payout? Is it term or whole life? Where is the policy paperwork?
4. Do you have a financial advisor who you work with?
5. Where do you have money? Need names of banks, credit unions and investments.
6. Where are your safe deposit boxes? Need names of banks, address of branch and location of keys.
7. Do you have a safe? Where is it? What is the combination?
8. Are there any other secure places where you store important paperwork and documents?
9. Where do you receive income from? Cover both retirement and investments.
10. What do you own? Go over house, car, land, and location of titles and paperwork of each.
11. What debt do you have and who owns that debt? Cover mortgage (first, second, reverse, lines of credit), car loans, credit cards, consumer goods, old student loans.
12. What do you believe are your most valuable assets and what do you believe these items are worth? Use this question for significant antiques, works of art, and other items not covered anywhere else on this list.
13. What bills do you pay each month? Get the names of each utility paid and how much the bills typically are so you’ll know if there is a sudden jump.
14. Are there any issues with your home or any property that you own that need to be addressed? Does the roof or basement leak? Are there plumbing problems or electrical issues?
15. Who holds the policy for your homeowners and car insurance?
16. Do you own a burial plot or have thoughts on where you would like to be buried?
17. Do you feel you have adequate income for your situation?
18. Does anything financial keep you up at night? Are you worried about anything that I can help you with?
19. Who has power of attorney in the event you are incapacitated? What about the spouse?
20. What else do I need to know? What did I forget to ask you?
Believe me, these aren’t easy questions to ask. But turn your mind off of the emotional part of this conversation, if you can, and just put yourself in the mindset of someone who needs information. Take good notes. Store them where you know you can find them. Make a copy and place it in your safe deposit box. Even leave a copy at your relatives' home should you be called there in an emergency. And whatever you do, don’t put this off. Time sometimes steals someone far ahead of when you anticipate, and the more information you have on hand, the better off you’ll be.
By Robyn Davis Sekula
During December 2005, I was home in Virginia visiting my parents when my Uncle Bob died unexpectedly. Bob was only a year older than my father, and it sent a bit of a chill through the house. Dad looked at me that afternoon and gave me a wonderful gift. He said, “Let’s go downstairs.” We went into an area that he had used as an office, and he began to tell me everything.
Having spent most of my life as a reporter, I took notes. I’m an only child, and my parents are in their 70s and live nine hours away. My mother knew very little about the finances of the home at that time, and I’m very much the practical soul of the family, so I knew I would have to be the one to have the information. He started with the basics: where the original of his will was located, who has power of attorney (mom) and life insurance. Then, I worked my way into a series of questions on everything I could think of since he seemed receptive to answering questions.
I’ve accumulated this list here for you to use with your own elderly relatives. If you live far away, all of these questions are especially crucial and things you need to know. They may sound small, but every piece of information that you have handy will save you a step or two in the future.
Don’t assume that you know everything, either. Your parents may have inherited something that they never mentioned to you or have purchased something that they’ve never discussed. Ask it all. You will no doubt find a surprise or two.
Here’s the list of questions I’d use in such a conversation:
1. Where is your will? Not a copy, but the original. My grandfather's estate could not be settled until his original will could be located. Guess who had it? His ex-wife, who could have easily destroyed it, since it was not in her favor and she was not friendly with the rest of the family. That could have been a disaster.
2. Who prepared your will? Be sure to get contact information, too.
3. Who is your life insurance policy with? What is the payout? Is it term or whole life? Where is the policy paperwork?
4. Do you have a financial advisor who you work with?
5. Where do you have money? Need names of banks, credit unions and investments.
6. Where are your safe deposit boxes? Need names of banks, address of branch and location of keys.
7. Do you have a safe? Where is it? What is the combination?
8. Are there any other secure places where you store important paperwork and documents?
9. Where do you receive income from? Cover both retirement and investments.
10. What do you own? Go over house, car, land, and location of titles and paperwork of each.
11. What debt do you have and who owns that debt? Cover mortgage (first, second, reverse, lines of credit), car loans, credit cards, consumer goods, old student loans.
12. What do you believe are your most valuable assets and what do you believe these items are worth? Use this question for significant antiques, works of art, and other items not covered anywhere else on this list.
13. What bills do you pay each month? Get the names of each utility paid and how much the bills typically are so you’ll know if there is a sudden jump.
14. Are there any issues with your home or any property that you own that need to be addressed? Does the roof or basement leak? Are there plumbing problems or electrical issues?
15. Who holds the policy for your homeowners and car insurance?
16. Do you own a burial plot or have thoughts on where you would like to be buried?
17. Do you feel you have adequate income for your situation?
18. Does anything financial keep you up at night? Are you worried about anything that I can help you with?
19. Who has power of attorney in the event you are incapacitated? What about the spouse?
20. What else do I need to know? What did I forget to ask you?
Believe me, these aren’t easy questions to ask. But turn your mind off of the emotional part of this conversation, if you can, and just put yourself in the mindset of someone who needs information. Take good notes. Store them where you know you can find them. Make a copy and place it in your safe deposit box. Even leave a copy at your relatives' home should you be called there in an emergency. And whatever you do, don’t put this off. Time sometimes steals someone far ahead of when you anticipate, and the more information you have on hand, the better off you’ll be.
Monday, May 4, 2009
Find a way to talk finances with elderly parents
This week on Twitter, we're posting financial tips on how to handle finances concerning elderly parents @family_finances. We got a question from Matt_SF about how to start the conversation on finances. This is a terrific question, and I'm happy to answer it here. Twitter doesn't provide quite enough space. If you have thoughts on this, please share in the comments section.
One of the toughest conversations you'll ever have with your parents will likely be about finances. Most of us value our independence, and that's a real issue with aging parents. The taboo isn't money so much as it is death or disability. Those are the great big elephant in the room that no one wants to acknowledge! But he can't be ignored forever and - like it or not - children are left dealing with a crisis when it comes along. So, truthfully, it's in everybody's best interest to have this conversation.
The key issues, as I see it, are information and preferences. First, where can we find the things we'll need when something happens? Checkbook, bank accounts, insurance policies (health and life), and deeds to property or investments? These are things we'll need to take care of you. Also, your estate plans, trust documents, powers of attorney, or living will documents. If we are to help you, we need to know in advance what you have and what you want. Take notes, and put them in a safe place. You can't rely on memory in times of crisis.
If you just can't bring it up out of the blue and it doesn't seem critical, let something else raise the issue. When they mention a friend or relative who is sick or having trouble, ask what they'd want you to do in similar circumstances. Bring them an article or send them a link to this post. It doesn't have to be heavy or sad, just an acknowledgement that you need information to help them when the time comes. Hopefully, many years from now!
One of the toughest conversations you'll ever have with your parents will likely be about finances. Most of us value our independence, and that's a real issue with aging parents. The taboo isn't money so much as it is death or disability. Those are the great big elephant in the room that no one wants to acknowledge! But he can't be ignored forever and - like it or not - children are left dealing with a crisis when it comes along. So, truthfully, it's in everybody's best interest to have this conversation.
The key issues, as I see it, are information and preferences. First, where can we find the things we'll need when something happens? Checkbook, bank accounts, insurance policies (health and life), and deeds to property or investments? These are things we'll need to take care of you. Also, your estate plans, trust documents, powers of attorney, or living will documents. If we are to help you, we need to know in advance what you have and what you want. Take notes, and put them in a safe place. You can't rely on memory in times of crisis.
If you just can't bring it up out of the blue and it doesn't seem critical, let something else raise the issue. When they mention a friend or relative who is sick or having trouble, ask what they'd want you to do in similar circumstances. Bring them an article or send them a link to this post. It doesn't have to be heavy or sad, just an acknowledgement that you need information to help them when the time comes. Hopefully, many years from now!
Diversify your retirement investments
On Mondays, we answer a question from a reader on the blog. If you have a question for us, post it in the comments section or e-mail us.
QUESTION: I work at a company that is not doing well. Our stock is suffering. Most of my retirement is in company stock. What do I do with it? Should I sell now and do something else? I’m 52 years old. Thanks.
ANSWER FROM DAN DANFORD: This is one of the most frustrating issues I encounter. It seems that everyone understands the value of diversification except with company stock in their retirement plans. I've been working with retirement plans for almost 30 years and this is a recurring problem over and over again. In fact, my first job was with a bank trust department, and that bank failed. Many of my colleagues at the time lost most of their retirement savings because they owned bank stock - exclusively - in their accounts.
Sadly, the time to fix this is two years ago. Who knows what the next two years hold for your company? I pray that our economy has seen the worst from this horrific cycle, but even that's a hopeful guess. Every industry faces certain perils, and how yours will fare in the future is anybody's guess. Whether to hold or sell it too hard to call for me, and I don't carry emotional baggage from working there.
Certainly, put new retirement contributions into other things. I'd suggest an S&P 500index fund and/or a good international stock fund. Put diversification to work for you now, and remember this lesson for the last decades of your work life. And - urgently important - share the lesson you learned with colleagues, family, and friends. Especially your family. Teach your children to diversify so they won't face the same crisis when they are 52. Good luck.
QUESTION: I work at a company that is not doing well. Our stock is suffering. Most of my retirement is in company stock. What do I do with it? Should I sell now and do something else? I’m 52 years old. Thanks.
ANSWER FROM DAN DANFORD: This is one of the most frustrating issues I encounter. It seems that everyone understands the value of diversification except with company stock in their retirement plans. I've been working with retirement plans for almost 30 years and this is a recurring problem over and over again. In fact, my first job was with a bank trust department, and that bank failed. Many of my colleagues at the time lost most of their retirement savings because they owned bank stock - exclusively - in their accounts.
Sadly, the time to fix this is two years ago. Who knows what the next two years hold for your company? I pray that our economy has seen the worst from this horrific cycle, but even that's a hopeful guess. Every industry faces certain perils, and how yours will fare in the future is anybody's guess. Whether to hold or sell it too hard to call for me, and I don't carry emotional baggage from working there.
Certainly, put new retirement contributions into other things. I'd suggest an S&P 500index fund and/or a good international stock fund. Put diversification to work for you now, and remember this lesson for the last decades of your work life. And - urgently important - share the lesson you learned with colleagues, family, and friends. Especially your family. Teach your children to diversify so they won't face the same crisis when they are 52. Good luck.
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