2009's top foreclosure cities

CNNMoney.com is reporting today that foreclosures in 2009 were tied more to the economy than banking failures and bad mortgages. So, the foreclosures are spreading to cities previously unaffected. Top of the list? A surprising choice: Boise, Idaho. There are a few large cities on the list, but for the most part, it's smaller cities spread across the country, with several in the South.

You can read the full story below - keeping in mind that one person's crisis is another person's opportunity.

http://money.cnn.com/galleries/2010/real_estate/1001/gallery.New_foreclosure_hot_spots/index.html

Cash for clunkers turns to appliances

By Robyn Davis Sekula

We've mentioned before that a Cash for Clunkers deal may be coming for household appliances. Well, it's here now, in some states, including Kansas. It's complicated, as most things involving the federal government usually are. The official site for information is here: http://www.applianceclunkerrebates.com/

We ran across a great article today on walletpop.com that explains the Cash for Clunkers program, and who can participate. First thing you need to know is that states are being phased in gradually. People in Kansas (nearby us) can participate already. Other states will be added in February, March and April, and some states will even get a second chance later this year.

Most important point: if you do not need a new major appliance, don't buy it. Americans get very confused when choosing needs and wants. If it works well, but you don't like the color, you do not need a new one. Period. I have a broken freezer shelf and a broken drawer in my refrigerator. I'm thinking it might be time for a new one, if I can find a good enough deal and pay cash. That's the second important note: don't finance this stuff. Once you pay a little interest, you've wiped out any savings from the Cash for Clunkers deal. And watch the delivery fees - use that as a negotiation point when purchasing.

Read more about the program here:

http://www.walletpop.com/blog/2010/01/26/cash-for-appliance-clunker-rebates-the-when-where-how-and-bes/?utm_source=twitterfeed&utm_medium=twitter

Confirm Ben Bernanke now

Editor's note: Dr. Jason White, our director of investments, writes a weekly column for the Maryville Daily Forum. We've posted this week's column, which focuses on why he thinks Ben Bernacke is a rock star, here. Disagree? Tell us why in the comments. We love a good discussion.

By Dr. Jason White

The Senate is scheduled to vote on the nomination of Ben Bernanke as Federal Reserve Board Chairman today. Like so many things in Washington, Bernanke’s confirmation has been bungled by both Republicans and Democrats who appear more interested in grandstanding to build their own political capital than in ensuring swift and deserved reappointment of the Chairman.

Bernanke has been the perfect leader of monetary policy initiatives designed to combat the financial meltdown and subsequent Great Recession which still plagues many parts of the economy.

It is well known that Bernanke is the preeminent living scholar of the Great Depression and the policy missteps that kept the United States, and the world, mired in economic misery from 1929 until the beginning of World War II. As an aside, the field of economics is oft referred to as the “dismal science” because those of us who practice it sometimes reach dark conclusions like war is a wonderful economic stimulus and jobs program, provided the conflict is not fought on our own soil. Twisted.

Sure, we’ve got problems in our economy – big ones! Some fear a double-dip recession. Others are concerned about the unemployment rate. A few are sniping about inflation risks. Still more are worried about the relative value of the dollar and the tsunami of Federal spending. Most of us are concerned about all these economic issues and more.

I support Ben Bernanke and call on the U.S. Senate to unite and confirm this worthy leader now!

Senators are the worst when it comes to Monday morning quarterbacking. Everyone now knows that Brett Favre should have run to set up a Minnesota last-minute field goal attempt in the NFC Championship game, but instead he threw an interception. If Congress were asked to confirm Favre as next year’s “Chairman” of the Vikings, you bet your last nickel that hearings would be held and that the focus would not be on the accomplishments of the team.

Similarly, Bernanke has endured grilling, belittling and second-guessing that has been unfair and ignored many of the game-winning plays he has called. In the fall of 2008, we were literally staring directly into a financial abyss that almost swallowed us whole. Bernanke pulled the economy back from the edge using extraordinary play-making ability, finesse and quiet confidence.

Markets have become understandably nervous as the Bernanke vote nears. The Dow fell about 4 percent just last week as political criticism of the Fed Chieftain roiled. As a student of Federal Reserve policy actions, it is clear to me that Bernanke’s economic policy calls have been mostly correct and mostly helpful. Apply the “but-for” test to the situation. But for the leadership of Ben Bernanke during the Great Recession, we would find our economy in much worse shape than it currently stands. We are on the right road, and we have the right driver behind the wheel.

Dr. Bernanke’s confirmation should be a slam-dunk. If there was a medal of honor for financial economics, he would have my vote.

Don't count on inheritance

Editor's note: Every week, we post a question and answer from a reader. This week's question deals with inheritance. If you have a question, please e-mail it to the blog administrator, Robyn Davis Sekula, at robynsekula@sbcglobal.net, or post it in the comments section.

QUESTION FROM A READER: My father recently expressed that he wants his savings to go to my children for their college education. But he’s in a nursing home, and has no long-term care insurance. Since he’s suffering from dementia and my mother will likely survive him and need their money, I’ve chosen not to really talk about this with him but just nod and agree. I have been saving for years on my own for my kids’ college, and I think we will be able to afford it anyway. Do you think that anyone the next generation down should ever count on getting an inheritance to pay for necessary things, such as college or retirement? That seems foolhardy to me.

ANSWER FROM DAN DANFORD: There used to be a saying about "counting on chickens before they hatch." It's always dangerous to assume things before they happen. There are just a lot of variables that are beyond our control and almost anything can happen. One of the ironies of life today is that people are often elderly themselves when they inherit money. In an earlier age, heirs might expect to inherit their fortune during middle age. Now, with people living long into their 90s (with hundreds of thousands over 100!), the "kids" might be 75 before they lose their parents and inherit money. That's not much help for college, or travel, or retirement.

My suggestion is to help the grandkids along the way, when they really need it and when you can watch them enjoy it. Everyone wins, and it's a good thing to do anyway.

Last, the notion of an inheritance is another form of entitlement for many people. Fact is, we're only "entitled" to the fruit of our own efforts. It's nice to land a windfall occasionally, but if we didn't earn it, we shouldn't count on it.

Haiti gifts may be tax deductible for 2009 tax year

Every now and then, Congress does something really simple that makes sense. It's rare, so we like to highlight it. This week, the House of Representatives passed legislation that will allow anyone who makes a gift to Haiti relief efforts by the end of February to deduct it on their 2009 taxes. It's a great idea, as many have been moved to give, and it may encourage more gifts.

However, this is just the House bill - for this to become law, it has to make its way through the U.S. Senate, and then be signed by President Obama. So, don't count on it just yet.

Either way, this is a worthwhile cause. Give - but only to organizations that are well-established and in ways that are familiar to you. If you ask us, texting to give from your cell phone isn't a good idea - it's too easy for that to be fraud.

If you want to give, click here:

http://arc3.convio.net/site/PageServer?pagename=ntld_main&s_src=RSG000000000&s_subsrc=RCO_FrontPagePanel


Read more about the House of Representatives action in The Washington Post:

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/20/AR2010012002092.html

The American Dream is not dead

Is the American Dream dead? No - says our own Dan Danford. He recently presented his thoughts on that topic on his regular podcast on Dad'sDivorce.com.

Watch now:

Principles trump predictions

By Dr. Jason T. White
Director of Investments
Family Investment Center

January is a popular time of year for knowledgeable finance folks to take to the airwaves and print media making prognostications about where the economy may be headed over the next 12-months and at what level the Dow or S&P 500 might end the year. The more outlandish these short-term forecasts, the more attention these traders garner for themselves and the media outlets distributing their projections.

As exciting as it may be to engage in such frivolity, basing one’s investment goals and plan on educated speculation is a fool’s game. If you want to place a bet on the foresight of these handicappers, you might have a much more enjoyable time throwing dice at the craps table on a weekend trip to Vegas or an area floating casino.

While traders may salivate over the latest tip from a screeching ex-hedge fund manager on the tube, true investors tune in to such rants more for the entertainment value of the host than for financial strategy advice.

Were any of these pros even close to presaging the market nadir last February, or the bull market run that followed and continues into the beginning of this new decade? Not even close.

Recognizing the incentive the media pros have for personal financial gain from attracting and retaining audience, I believe that most of these guys have a greater interest in maximizing their book royalties and Nielson ratings than ensuring your financial success. Trying to base a prudent family investment strategy on the minute-by-minute meanderings of the financial press is a sucker’s game. Not only will this inevitably result in the need for acid-reduction potions and the occasional antidepressant prescription, it simply does not work to try and outfox the market. I can’t. You can’t. No one can.

Professional gambler/traders may hit a hot streak from time-to-time, perhaps even lasting a few years, but the only certainty from such short-lived success is that a cold streak is bound to follow. Trading stars may temporarily soar brightly in the evening sky, but the simple law of gravity invariably drives them into meteoric craters sooner or later. Statisticians refer to this as reversion to the mean. In finance, we like to talk about efficient pricing in markets. The long-term results are the same.

So, how does one avoid the heartburn and despair of the trader’s game? Don’t play! Choose principle over prediction.

Investors, stubbornly and properly focused on the long-term, practice their craft with resolute calm and steadfast commitment. Investors recognize that markets are consistently unpredictable over short periods of time, focusing their strategy on decades rather than days, months or even years.

Investors don’t wake up in a cold sweat in the middle of the night wondering how Asian markets opened or worried about the depreciating euro. Investors are plugged in to the events of the day, but investors process economic and political developments with a forest versus trees perspective. Investors have goals and an investment plan they believe in – and they stick to it knowing that market downturn, recessions, currency fluctuations and the like are transitory events. Investors allocate their assets consistent with financial targets: retirement, college education, or income production. Investors diversify to their holdings to reduce risk. Investors are rocks in the hurricane. Investors feel fear and greed but understand that contrarian financial behavior is proven to outperform running with the herd.

Principles trump predictions – always.

Straight stock not a good idea for most investors

One day each week, we post a question and answer on the blog. Got a question for us? Post it in the comments section or e-mail it to robynsekula@sbcglobal.net.

QUESTION: I have about $420,000 put away so far for retirement. I’m 45 years old. I’d like to put some of that in stocks to diversify. Right now, it’s divided between four mutual funds. Are there any guidelines for how much money I should invest in straight stocks and how much in some type of secure investment?

ANSWER FROM DAN DANFORD: You may be asking the wrong guy. We manage a number of million-dollar IRA portfolios, and almost always use mutual funds. The key is to use funds with different investment strategies and market sectors to achieve diversification. Done properly, you get the benefits of owning stocks but without the "company-related" risk associated with a particular corporation.

The problem with individual stocks is that each company carries risk that can't be erased. No matter how good the company is - and we can all name dozens of good companies - there's a chance that some event might doom the company. A massive lawsuit, maybe, or some competitive or natural disaster. In brief order, the company can go from stable to bankruptcy. Shareholders can lose it all. Not likely, perhaps, but possible. The only way to reduce this risk is to buy other company stocks. Each additional stock in the portfolio reduces this company-specific risk.

That's where mutual funds come in. Most funds have a rule that no individual stock can comprise over five percent of the portfolio. Hence, they've already achieved a level of diversification beyond what's necessary to reduce the company-specific risk. Picking stocks requires a lot of time and effort, and watching a portfolio of 20 is ridiculous for most amateurs!

It's important to note that other types of risk don't go away with mutual funds. Market risk and Inflation risk and Political risk can still move markets up and down, and mutual funds will move up and down with them (so would individual stocks, for that matter). To reduce (but not eliminate) those risks, carefully choose funds with different investment strategies and market sectors. That should temper some of the fluctuations while preserving the performance potential of stocks.

Mutual fund critics point to the cost as a shortfall of this strategy. And I agree that it can be. Another key part of the strategy is to focus on funds with low internal management fees. There is a direct reverse correlation between the rate of mutual funds fees and their performance for shareholders. Do like we do; choose known funds, with good performance, and low fees. Diversify across sectors and management styles. Watch the mangers you select with care, but not too closely. Over time, your nest egg will grow nicely. At your age, and with this amount of capital, you should have a very nice retirement. If you ever want professional attention, give us a call!

CDs are not a good bet for most investors

We're always happy to talk to local media and share our perspectives on finances. With this story in the St. Joseph News-Press by Ryan Davis, we were able to offer our contrarian point of view that CDs are not a good investment, due to the fact that rates are incredibly low and the money that's in them is tied up. You're sacrificing flexibility, and lots of it, for security. We don't advise this in most situations. Notice that the folks who are SELLING CDs are still advising people to buy them. It's a conflict of interest, and exactly what we avoid by being fee-only investment advisors.

Read the story here and offer your comments.

http://www.stjoenews.net/news/2010/jan/18/cds-still-good-bet/

Change your ideas about how to earn money

By Robyn Davis Sekula

As I've written before, I'm a regular listener of Dave Ramsey's radio show, and it irks me when he suggests that the male in the household get a second job, or even a third, before he will suggest the woman explore her work opportunities. Women sometimes have more education than their husbands and more earning power - and I really wish folks like Dave would consider that. Don't assume the dude in the house is the only one who can pull in the dough. Plus, having one person do all the earning and one person do all the child care makes for an uneven house, with one person burned out entirely on spending every waking moment with little ones and the other burned out from working allllllll the time.

I'm cheering as I read the story below, which says that more women are working while dads stay home. Our ideas about work are changing, and I say great. With the technology advances in the past decade, you can work full-time or part-time from home, at night, on weekends, or during regular weekdays. You can make your own job, as I have done during the past six years. I've surpassed my husband in terms of income, and I have the most to gain by the risks I've taken. In fact, in our household, I'm the one who is the most comfortable with risk and has the greatest income potential. I'm the more natural entrepreneur. I really didn't know this until I took that leap.

What I want people to do is explore their options a little more. If you're a teacher who is not teaching but you'd like to earn a little money, consider tutoring, which is far more lucrative than substitute teaching. Consider picking up some jobs cleaning homes, if you like to do that, while your kids are in school - and this could apply to a man or woman.

Whenever you hear yourself say, "I can't do that" ask yourself why. You may not have an answer, and if you don't, you're looking at an opportunity.


http://www.cbsnews.com/stories/2010/01/15/national/main6101166.shtml

The Psyche of Post-Recessionary Wealth

Editor's note: Dr. Jason White is writing a new column for the Maryville Daily Forum in Maryville, Missouri. Dr. White is a professor of economics at Northwest Missouri State University, and we're proud to also have him as our director of investments. Congratulations on your new gig, Jason!

By Dr. Jason White
Director of Investments
Family Investment Center

I am so pleased to be back in the pages of the Maryville Daily Forum. I hope to make this column a weekly resource for you and your family as you build your wealth through proven best practices and by preventing avoidable mistakes.

The fallout from the 2007 to present economic and financial Great Recession has scared many from their financial plans and savings goals. Risk, even diversifiable risk, has driven many from the stock market and other reliable long-term investments in a flight to perceived extreme principal security.

Gold, treasuries, CD and bank savings accounts have enjoyed huge asset inflow during this deep economic downturn, and I suppose that is not altogether surprising, giving the herd mentality of many investors. Too often we zig when we should zag; buy when we should sell; or be fearful when it is appropriate to be greedy.

The fact of the matter is that the big money is made in times just like this, not when the stock market and economy are frothy and booming.

The year just ended had many saying “good riddance," and I certainly understand that sentiment. Unemployment is as bad as 1982. Government has become an increasingly intrusive force into American business and entrepreneurship, rather than supportive partner it should be. International tensions are high. Healthcare… well, you get the idea.

Despite all of this craziness, the S&P 500 gained 26 percent in 2009. The reported gains from the panic low point in February 2009 are more than 60 percent for the year, as the media breathlessly reports far too often.

CNBC and Fox Business are great sources of information, entertainment, real-time data and interviews from the titans of industry, finance, economics and politics. I love them both, but I also find they can suck hours out of my week and leave me more uncertain about the immediate future than before I tuned in. Capturing viewers 24/7 requires a certain degree of audience manipulation and engagement. Producers understand the seductive lure of fear and greed to the human mind. We are treated to tips on making fast money, followed by warnings that capitalism is an endangered species. It’s dizzying.

As I advise families about long-term investment management, I find some are paralyzed by understandable but irrational fear. The market was too dangerous a year ago, so they wait for improving conditions. The market is overvalued now, so they wait for a pullback.

This is not the formula for successful family wealth building.

I am the most reliable long-run bull you can find in the world finance and economics, because the market always wins in the long run. This time is never different. The market is not “too high” right now. The Dow is still 4,000 points below its previous cyclical peak. The market was not too low last February. It was a great time to invest.

Successful builders of family wealth are comforted and rewarded by this investment fact: the market is always right in the long-run and will always reward those who stay the course.

Are you ready for professional financial help?

If you've made it to this blog, you're interested in solid personal finance advice. You may even be ready to work with a financial advisor. But how do you know if it's time to seek that professional wisdom? What will happen during that process?

If you're considering hiring a professional financial advisor, first, make sure you're hiring a fee-only advisor, not someone paid on commission. Second, watch this podcast. Dan Danford shares his thoughts on how professional financial help can help you. This is borrowed from Dad's Divorce.com, where Dan does a weekly podcast on financial matters and other related topics.

College deals

By Robyn Davis Sekula

A few months ago, we did a post on the most expensive colleges in the U.S. It seems only fair to now post a link to what the Princeton Review is calling the best value colleges for 2010.

I'd like to say as a native Virginian, I'm proud to see University of Virginia topping the public schools list, and Virginia Tech also making the top 10. Why isn't my alma mater, James Madison University, on that same list? No idea.

Here's what the story says about the criteria:

The selection process took into account a wide range of data that included more than 30 factors in three areas: academics, cost of attendance, and financial aid. Academic factors included the quality of students the schools attract as measured by admissions credentials as well as how students rated their academic experiences. Cost of attendance factors included tuition, room and board and required fees. Financial aid factors included the average gift aid (grants and scholarships, or free money) awarded to students, the percentage of graduating students who took out loans to pay for school, and the average debt of those students. Also included was survey data on how satisfied students were with the financial aid packages they received.

Have a look through the list and see what you think.

http://today.msnbc.msn.com/id/34810203/ns/today-today_technology_and_money/?GT1=43001

Pre-paid tuition may not be best deal

Editor's note: On Mondays, we answer a financial question from a reader. If you have a financial question you'd like addressed in this space, e-mail robynsekula@sbcglobal.net, or post it in the comments below. You can also DM us on Twitter @family_finances.

QUESTION: I think that the pre-paid tuition plans that many states offer are probably a good deal – pay college tuition now, at today’s rates, for your child’s future education. But I hesitate to do this. My children are very young, 5 and 3, respectively, and I wonder if the plans will still be in tact when they’re ready for college, or if there are any other possible pitfalls to consider. What do you think, in general, of these plans? Or is there another way to save for college

ANSWER from Dan Danford: I think anything you can do to prepare your family for the expenses of college is a good thing. My only hesitation about "pre-paid tuition" is that the plans are usually tied to a specific institution. Sometimes, they are tied to institutions in a specific state. That worries me because it reduces flexibility, and if you follow anything I write, you know flexibility is key to financial success.

I have three daughters. All three graduated from college, and two of the three have already finished grad school. My youngest is in grad school today. As I sit and think about this, we've paid tuition and fees to Columbia College, Missouri Western State University, Texas Christian University, Emporia State University, Chicago Portfolio School, University of Missouri (Columbia), Southwest Baptist University, and the University of Missouri (Kansas City). That's three (very successful) daughters over nine years, and my simple point is this: it's hard to predict what your child will want or need a decade or more in advance. Any investment plan that ties benefits to a particular school or state could be a problem later.

My suggestion is to use a 529 plan for education-specific savings. These plans don't impose limits on where your child or grandchild might attend. Virtually any accredited college, university, or trade school will qualify. Also, for maximum flexibility, I recommend a family investment account (in parents' joint name) to augment the 529 plan. That way, there's a cushion for expenses that might not be direct education costs. Help with a car, for instance, or travel to and from school.
Higher education is extremely important today and will simply get in importance over coming years. It's important to plan ahead and set aside money to help your children or grandchildren. Keep in mind, though, that the longer the time horizon, the more need for financial flexibility. Keep as many options open as possible.

Pick the right tax form

We know that you don't want to think about it.

Neither do we.

But April 15 will be here in a few short months - and also, that 4th quarter estimated tax payment is due next week (January 15) for those who are self-employed.

It's time to start looking for statements in the mail or online, and also to begin thinking about what else you'll need to pull together for tax time.

We ran across this great piece on the Dollars and Sense blog by the Kansas City Star. It refers readers to this piece on Bankrate.com, which is worthwhile. As it turns out, choosing the 1040EZ form can cost you.

http://www.bankrate.com/finance/taxes/picking-the-proper-1040-tax-return-form-1.aspx?ic_id=nwsltr_taxtip_20100107

Curing a debt hangover

Today, we found this helpful story on Yahoo! about how to cure a debt hangover. During the holidays, many folks buy more than they can afford, caught up in the lure of deals and wanting to make someone else's holiday special. Here's a guide to handling the debt.

The best thing you can do NOW to prevent next year's debt hangover? Start saving through a Christmas Club. If your bank still offers it, go ahead and join if this is a perpetual problem for you. If your bank doesn't offer it - and many don't - just put away money in savings every week for the next holiday splurge. The key to responsible spending is saving and budgeting.

http://finance.yahoo.com/banking-budgeting/article/104239/The-Cure-for-Your-Debt-Hangover?mod=oneclick

Financial planning: what's involved?

Our friends at Dad's Divorce.com publish a podcast by Dan Danford every week on their web site that addresses financial issues, particularly geared towards men going through the divorce process. The advice, though, often applies outside of that group. This week, Dan discusses what happens in the financial planning process. What is good financial planning and how does it work? If you've ever been curious, this is the podcast that will help you learn more.

Good news: economy expected to recover strong

So, are you ready for some good news? If you ask me, that's the best way to start off a new year. I ran across this story on CNBC this morning quoting Jim O'Neill, head of global economic research at Goldman Sachs. He predicts things will be looking up this year. If you're ready for some good news, read on!

http://www.cnbc.com/id/34700307

Untangle home ownership during divorce

Each week, Dan Danford answer a question from a reader. We'd love to have a question from you. Please post it in the comments section.

QUESTION: I am going through the divorce process. We’re trying to separate our finances. I’m staying in the marital home, and my husband is leaving. What is the best way to make the house mine and remove his name from the mortgage? Do we have to refinance? Is there anything else we need to do to make sure the house is only in my name?

ANSWER FROM DAN DANFORD: Your lawyer should be able to help you with this. \The divorce decree should detail who owns what, then it's just a question of changing registration to match the decree. Home ownership is shown by a deed filed with the county recorder (could be slightly different in your state). In any case, a new deed should be filed removing your spouse, and changing registration to the way you want it. The lender needs to be aware of this change, too.

All these divorce-related registration issues are very important. That's why you should rely on your attorney to help. The worst-case scenario is that you don't make the changes, and then get brought into an ex-spouse's future lawsuit or credit problems. Don't forget to change beneficiary designation on life insurance or retirement accounts, either. Several years back, I saw a sad situation where a man was killed in a motorcycle accident. He'd never changed his life insurance beneficiary, and the proceeds went to his ex-wife, although he had remarried. There's no need for a mistake like that. Just go through the various statements, accounts, and records to assure that necessary changes get made. And, of course, the easiest time to do that is when the divorce is fresh. This is much several years later when both parties have moved on.

Annual financial review moves you forward

Happy New Year! With the fresh calendar page comes opportunity. This is your clean slate. To create 2010 goals, you'll also need to review 2009. What did you accomplish last year? What didn't you get done that still matters? Put those goals at the top of your list.

A great tool for getting this process started is an annual financial review. Dan Danford goes into detail on how to do this in this podcast on Dad's Divorce, a web site for men going through the divorce process..