Friday, May 28, 2010

Dad's Divorce: Overview of mutual funds

Dan Danford is a regular contributor to Dad's Divorce, a web site for men going through the divorce process. Most of his advice, though, is general enough that everyone can use, particularly this podcast on mutual funds. You can watch it right here.

Thursday, May 27, 2010

Small business week woes

Small businesses absolutely drive our economy. We're glad that government encourages small business start-ups through loans - but this latest news is distressing.

If you're thinking of applying for a small business loan, you need to read this story, which explains the status of small business lending.

We encourage those in power in government to keep this funding going. It's really important, and needed, to stimulate the American economy.

Wednesday, May 26, 2010

Large job fair in North Kansas City this week

By Robyn Davis Sekula

For many who live in St. Joseph, Missouri, (where our principle office is located), a drive to North Kansas City for a job is a fairly easy commute. It's not too far, and it expands your job opportunities, particularly if you've been on the hunt for a while.

On Friday, May 28, a large job fair will be held there at the Northland Cathedral. We read about it on the Dollars & Sense blog by the Kansas City Star, and wanted to pass it along to you.

Read all about it here - and note, free lunch to the first 300 people!

You can register for the job fair here:

Monday, May 24, 2010

Estate planning: reconsider in 2011

We receive questions from readers and our followers on Twitter (@family_finances) often, and we're happy to answer any inquiries. Let us know if you have a question for us. You can post it in the comments section or e-mail

QUESTION: As I understand it, the estate tax doesn’t exist right now. So does someone who is wealthy need to reconsider their estate plan? Should someone change their estate plan, even though we all know Congress will be likely to change the estate tax sometime soon?

ANSWER FROM DAN DANFORD: At the very simplest, estate planning is just figuring out what to do with what you have after you are gone. Each family is different, but most distributions take place after the last spouse dies. Since everyone eventually dies, everyone needs an estate plan of some sort. If nothing is done (no formal will or documentation), each different state has statutes detailing how property is distributed.

As your question suggests, much of high-end estate planning is tax-related. Former tax laws demanded tax on any estates over a certain size, so elaborate schemes (perfectly legal) were created to reduce or avoid those high taxes. As you also note, estate taxes were eliminated beginning in 2010 because Congress let the estate tax lapse, and the waiver is set to expire late this year. So, wealthy families, lawyers, accountants, and all their advisors are waiting to see how Congress changes the rules.

As an editorial aside, estate taxes are essentially a penalty against financial success, and I don't favor them. Any family that accumulates sizable wealth, does so after decades of paying annual income and other taxes. Charging them an "extra" tax because they were successful is ridiculous! But I digress.

The thing is, we don't know what is going to happen, yet. And, even when we do, those laws are subject to future change (as we've just been discussing). Most families with larger estates will need to visit with their attorney early next year. Depending on the actual laws enacted, they may need to adjust their plans to fit the new rules. Also, the entire topic needs to be revisited every few years because Congress makes tax changes - especially estate tax changes - frequently.

Friday, May 21, 2010

Wall Street reform passes Senate

By Robyn Davis Sekula

So the Senate finally passed Wall Street reforms. There was much cheering among those pushing the legislation. On the surface, it seems to be a good thing. I think we can all agree there is too much predatory lending out there.

However, I'm always a bit wary when government gets involved in private business.

Will this be a good thing? It could be. But it could have unintended consequences.

What do you think?

Read up on it and post a comment. We love to hear from our readers.

Thursday, May 20, 2010

A primer on flood insurance

By Robyn Davis Sekula

Your greatest asset is likely to be your home. Protecting it is part of financial responsibility.

Many lenders are now requiring homeowners to get flood insurance - and you need to know about it if your lender does require it. You should consider it even if your lender doesn't. Regular homeowners insurance usually does not cover flooding, and even a few inches of water can cause a lot of damage.

Here's a great article from Investopedia about flood insurance. It's a solid overview, and recommended reading for all homeowners.

Wednesday, May 19, 2010

Dad's Divorce: When should I take Social Security payments?

In this week's edition of Money Made Easy, host Dan Danford answers this question from a viewer: I’ve heard the longer you wait before taking your social security benefits, the bigger your checks are. So when should I retire and take my social security benefits? Why wouldn’t everyone just take it later?

Danford, MBA, CRSP of Family Investment Center, explains what the benefits are at which age, which is the best choice for you, and basic rules of taking your social security benefits.

Tuesday, May 18, 2010

Family Investment Center welcomes FBI for presentation

By Dan Danford
Family Investment Center

We're happy to welcome the FBI to St. Joseph this week. Jim Asher of the Kansas City Federal Bureau of Investigation to present on the topic of identity theft on Thursday, May 20th. The event will be held at the East Hills Public Library in the basement auditorium. Refreshments will be served at 6:30 p.m. and the presentation will begin at 7:00 p.m.

Agent Asher will cover the following topics:

What is identity theft?
Methods thieves use to steal personal information
Actions criminals take after stealing an identity
How at avoid becoming a victim of identity theft
Actions to take if a victim of identity theft

This event is free and open to the public.

For more information, call Family Investment Center at (816) 233-4100. We'd love to have you join us!

Monday, May 17, 2010

It's time to talk to your banker

By Dan Danford
Family Investment Center

So when was the last time you refinanced your home?

If you plan to stay in your home a few more years, and if it's been a while since you refinanced, it's time to talk to your banker. Interest rates are dropping on traditional mortgages and you may find that you can save a significant amount of money or lower your monthly payment by refinancing.

Talk to more than one financial institution and see what they have to offer. Don't get stuck on one bank, either, because many sell their mortgages anyway and it won't make much difference who you originate the loan with.

Here's the latest from Bloomberg News on the interest rate drop.

Wednesday, May 12, 2010

Thermometers and screeching monkeys

By Dan Danford
Family Investment Center

What if you had biological monitors hooked to you all day long? Some gadget that tracked your temperature, blood pressure, heart rate, respiration, and perspiration on a continual basis? All day long, every day.

On some level, that might be good. Especially if there were a moment or moments when intervention could improve your health or life. Perhaps you could cut your workout a bit short to avoid injury, or munch a granola bar when your glucose level dips. Maybe you’d carefully avoid that annoying guy from accounting that raises your blood pressure and gives you a tension headache.

Still, I suspect there’s a downside, as well. Most medical measures are stated in normal ranges because they fluctuate during the day. Our blood pressure and pulse respond to things we think and do. Within a healthy range, there’s nothing to be alarmed about when it jumps ten or fifteen percent. In fact, most people endure a fairly broad range each week.

Minute-by-minute reporting could add a dangerous layer of drama. I say dangerous because it might influence behavior in bad ways. Maybe we don’t really need an extra granola bar every afternoon, or we might stop exercising completely when our heart rate jumps! If emotions create a physiological response, maybe we avoid all emotional situations – even good ones.

Add another piece to this hypothetical puzzle. An expert – a genuine, honest-to-God, doctor, nurse, or hospital administrator – maintains a constant voice diatribe about your vital signs. Calm and reasoned when they look good, but urgent or even frantic when they reach either end of the normal range. Maybe the Surgeon General of the United States, herself, commands the microphone now and then. Constant, relentless, detailed, and (screamingly) boring details about every facet of your numerical footprint.

Ridiculous? I think so. You probably do, too. Why, then, do you watch CNBC every day or load a market app on your iPhone? Why listen to Jim Cramer’s theatrics every evening? Does anyone need market statistics minute-by-minute or hour-by-hour? What purpose do these things serve?

You’re going to say that some of it is entertaining, and I get that. Investing is a hobby for some folks, and I understand that, too. But I worry that there’s a downside to all this market drama. And the downside is, well, drama.

It’s popular among economists and investment professionals to discuss “volatility” in the marketplace. Stocks have always been volatile, but the past several years seem more volatile than most. It just feels like the ride from point A to point B includes steeper peaks and valleys than before. I don’t doubt that this is true.

My guess is that these two themes – constant monitoring and market volatility – are related. My guess is that talking heads stir the volatility by stirring the drama. My guess is that Cramer and Orman and Ramsey and (even) Bernanke open the market floodgates whenever they open their authoritative mouths.

We’ve always had fluctuating markets, and we’ve always had recessions, and we’ve always had political pressures to regulate brokers and markets. None of that is new. What is new is the constant, relentless, detailed, and (screamingly) boring details about every facet of the stock market’s numerical footprint.

Spare me the drama. There’s a well-known adage about not seeing the “forest for the trees.” Really. Too much attention to anything creates more potential harm than good. Let’s all take a step back and enjoy the forest. Put down the microscopes and shut off the screeching monkeys. Breathe.

It’s going to be all right.

Dad's Divorce: How to find a financial planner

In this week's edition of Money Made Easy on Dad's, host Dan Danford answers this question from a viewer: I'm considering hiring a financial planner to help me with my finances and meet my life-long financial goals, but I have no idea where to start or who to choose. What are the right questions I need to ask when choosing a financial planner?

Danford, MBA, CRSP of Family Investment Center, lets you know what to look for when searching for a financial planner and how you should know if a planner is a good fit for you.

Tuesday, May 11, 2010

Bonds explained

By Dr. Jason White
Family Investment Center

One of the bedrock fundamental approaches to successful personal investing is to proper diversify one’s portfolio based on individual factors like age, investment goals and risk tolerance. To diversify means to spread out financial risk by investing in a variety of asset classes including, but not limited to, stocks, bonds and real estate. The focus of today’s column is to provide you with some of the basic terminology from the world of bonds.

A bond represents evidence of a loan made from an investor to government, quasi-governmental agencies or corporations. Bonds are referred to as “fixed-income” securities because they typically pay a fixed rate of interest to the investor. This interest rate is known as the “coupon-rate” of interest.

The face value, known also as the par value of a bond, is paid back to the bondholder at the time of maturity. This is usually $1,000 with many bonds, but it can be just about any amount that the original issuer wished at the time of issuance. At the time of original issue, an indenture contract is put into place specifying the terms of the bond, along with any special provisions the issuer or underwriter think are necessary.

Bonds can be backed by some form of collateral, but many times they are simply debentures, meaning that no specific collateral has been pledged to back that particular bond issue. In the event of default, bondholders who enjoy the protection of specific collateral, such as mortgage bondholders, get paid back before debenture bondholders do. Still, debenture bondholders will be paid before preferred and common stockholders, so their priority claims at least have some chance of recovery.

To assist investors in making informed bond investing decisions, companies like Moody’s Investors Service, Standard and Poor’s Financial Services LLC and Fitch Inc. analyze the financial strength of firms and issue a bond rating for the debt of those companies. The lower the bond rating of a firm is, the higher the risk for the investor. The following chart is a proxy of these rating systems, but I think you’ll get the idea.

Rating Rating Interpretation

AAA Best Quality
AA High Quality
A Upper Medium Grade
BBB Medium Grade
BB Speculative
B Very Speculative
CCC Very Very Speculative
C No Interest being Paid
D Currently in Default

Bonds with a BBB or higher rating are referred to as “investment-grade,” while bonds with a rating below BBB are known as non-investment grade or “junk bonds.” While junk bonds often pay high rates of interest, this is because they are very risky investments and should only make up a very small percentage of your portfolio, at most.

A special feature of some bonds is a call provision. Callable bonds include a provision allowing the issuing company to force early maturity by calling the bonds in. Corporations might issue callable bonds when interest rates are high, hoping to call them in before maturity and refinance the issue if interest rates go down. In the current low interest rate economic environment, I suspect that any bond which can be called already has been, at least where the issuer is financially able to refund debt.

Sunday, May 9, 2010

Unemployment rate is up, and that's good news

By Dr. Jason White
Family Investment Center

The national unemployment rate rose from 9.7% to 9.9%, and I call it "good news" - why?

The unemployment rate is calculated by the Bureau of Labor Statistics by dividing the unemployed by the civilian labor force. Both the numerator and the denominator of this ratio rose - so what does that mean?

It means that the number of people finding jobs was up - excellent! But it also means that a large number of workers who had previously classified themselves as "discouraged workers" re-entered the labor force and began looking for jobs.

So, the labor report is positive for these two reasons: more people finding jobs, and more discouraged workers returning to look for jobs. The reason the unemployment rate rose is because of this large influx of discouraged workers re-entering the ranks of the unemployed.

The Moral: We must look beyond the headline number - what appears as a negative, a rising unemployment rate, is actually a positive as labor grows more confident in their ability to find work.