Tips from the President's Council

So, I’ve been a slacker on adding new articles and after looking at my page counter, I’ve realized 2 things: 1)  You must add new things to keep up interest 2) Short and sweet is the best way to go! Therefore, I’ve decided to reconcile.  To fix #1, I’ll add a tool, idea, technique, etc. at least 3 times a week, and for #2……..it will be short and sweet! 

Since I work in the financial planning/education world everyday, I feel like I have to share the tidbits of information that I receive constantly.  So here it is….all yours and it’s free.  I hope that it helps and you pick up some nugget of information that might help you with your personal finances. 

In 2007, President Bush started “The President’s Advisory Council on Financial Literacy”.  This group is headed by Charles Schwab (yes, as in “Ask Chuck”….The Charles Schwab).  It runs across 2 administrations and unless renewed, expires this year.  They give some great advice.  Here’s just a few: 

 Tips to Managing Your Money in Challenging Times

1. Understand how your bank or credit union account is insured. The Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA) insures all deposits at insured banks and credit unions up to at least $250,000. To check whether your financial institution is insured visit go to FDIC or The National Credit Union Association.

2. Understand how your investments are protected. Brokerage firms are required to be members of the Securities Investor Protection Corporation (SIPC), which insures customer securities accounts up to $500,000, including $100,000 in cash claims, when a brokerage firm fails. To learn more about these protections, visit the Securities and Exchange Commission.

3. Always keep lines of communication open with your mortgage lender. As soon as you know you may have difficulty meeting your mortgage or home equity loan payments, contact a counselor to work out a payment plan at HOPE NOW or by calling 888-995-HOPE (4673).

4. Protect your credit score. Only put on your credit cards what you can afford to pay back. For other hints on improving your credit score, visit the Treasury's interactive website. Also, to protect against identity theft, get a free copy of your credit report at annualcreditreport.com.

5. Make sure you have a rainy day fund. Keep an emergency fund worth three to six months of your monthly expenses in an insured account. If you don’t have an emergency fund, try to start one. Visit the budget calculators on the Treasury's website.

6. Don’t try to cut costs by canceling your insurance. Keep up with your insurance payments, and you’ll keep in place your protection against medical costs or major loss of personal property, like your home or car. Learn more in the Life Events section on MyMoney.gov. 

7. If it sounds too good to be true, it probably is. Watch out for scams trying to take advantage of all of the recent changes in our nation’s financial markets. Educate yourself at FTC.gov.

To learn more about your money, visit MyMoney.gov. For more information on the President’s Advisory Council on Financial Literacy, visit the U.S. Treasury Department’s Office of Financial Education web site at Treas.gov/ofe. 

Labor Statistics from Nov 2008 to Feb 2009

Today I received an email with the total number of layoffs since Nov. 1, 2008, at America's 500 largest public
companies....It totals over 380,000 people.  There is no need to state the stark reality that we are all currently living in.  But I like Zig Ziglar, I too believe there is a silver lining to every cloud.  Sometimes it's just a little harder to see than at other times! 

"Fortunately, problems are an everyday part of our life. Consider this: If
there were no problems, most of us would be unemployed. Realistically, the
more problems we have and the larger they are, the greater our value to our
employer." - Zig Ziglar

From the start of the recession in December 2007 through December 2008, the
total number of mass layoff events (seasonally adjusted) was 23,485, and the
number of initial claims (seasonally adjusted) was 2,394,434. Source: Bureau
of Labor Statistics

Number of layoffs since Nov. 1, 2008, at America's 500 largest public
companies*: 382,691

Date/ Company /Total Laid Off /Industry 
2/6/2009 Weyerhaeuser 300 Materials 
2/5/2009 Estee Lauder 2,000 Personal Products 
2/5/2009 Fortune Brands  136 Consumer Durables 
2/5/2009 News Corp. 25 Media 
2/5/2009 Allergan 460 Pharmaceuticals 
2/4/2009 Time Warner 2,750 Media 
2/4/2009 Cisco Systems  2,000 Technology 
2/3/2009 Bancshares 500 Banking 
2/3/2009 Electronic Arts 1,100 Software 
2/3/2009 PNC Financial Services 5,800 Banking 
2/3/2009 Comcast 50 Media 
2/2/2009 Goodrich 35 Aerospace 
2/2/2009 Macy's 7,000 Retailing 
1/30/2009 Sears Holdings 300 Retailing 
1/30/2009 Caterpillar 22,924 Capital Goods 
1/29/2009 Broadcom 200 Semiconductors 
1/29/2009 International Gaming Technology  200 Leisure 
1/29/2009 Textron 4,665 Conglomerates 
1/29/2009 Ford 3,800 Durables 
1/29/2009 Eastman Kodak 4,500 Household 
1/29/2009 Black and Decker 1,200 Household 
1/29/2009 Walt Disney  1,200 Media 
1/28/2009 Starbucks  6,700 Restaurants 
1/28/2009 Boeing 10,000 Aerospace 
1/27/2009 Target  1,000 Retailing 
1/27/2009 Masco  600 Construction 
1/26/2009 IBM  2,800 Software 
1/26/2009 Texas Instruments 3,400 Semiconductors 
1/26/2009 Lincoln National 540 Insurance 
1/26/2009 General Motors 9,758 Durables 
1/26/2009 Home Depot  7,000 Retailing 
1/26/2009 Pfizer  19,800 Pharmaceuticals 
1/26/2009 Sprint Nextel 8,000 Telecommunications 
1/23/2009 Abercrombie & Fitch 50 Retailing 
1/23/2009 Deere & Company 662 Capital Goods 
1/23/2009 Harley-Davidson 1,100 Consumer Durables 
1/22/2009 Microsoft  5,000 Software 
1/22/2009 Huntsman  1,665 Chemicals 
1/21/2009 Burlington Santa Fe  2,500 Transportation 
1/21/2009 UAL  1,000 Transportation 
1/21/2009 SPX  400 Conglomerates 
1/21/2009 Intel  5,000 Semiconductors 
1/21/2009 Walt Disney 600 Media 
1/21/2009 Wynn Resorts 53 Leisure 
1/21/2009 Eaton 5,609 Capital Goods 
1/20/2009 Clear Channel 1,850 Media 
1/20/2009 Deere & Co.  160 Capital Goods 
1/16/2009 ConocoPhillips 1,300 Oil & Gas 
1/16/2009 Hertz Global Holdings 4,000 Business Services 
1/16/2009 WellPoint 600 Health Care 
1/16/2009 Advanced Micro Devices 1,700 Semiconductors 
1/15/2009 Xerox 275 Business Services 
1/15/2009 MeadWestvaco 2,000 Materials 
1/15/2009 Autodesk  750 Software 
1/15/2009 Marshall & Ilsley 830 Banking 
1/15/2009 General Electric 1,000 Conglomerates 
1/14/2009 Ecolab 1,000 Chemicals 
1/14/2009 Delta Air Lines 2,000 Transportation 
1/14/2009 Motorola  4,000 Technology 
1/14/2009 Google 100 Software 
1/13/2009 KeyCorp 200 Banking 
1/13/2009 Newell Rubbermaid 75 Household 
1/13/2009  Cummins 1,300 Capital Goods 
1/12/2009  Mosaic  1,000  Chemicals  
1/12/2009  Best Buy  500  Retailing  
1/12/2009  Precision Castparts  40  Defense  
1/9/2009 Oracle 500 Software 
1/9/2009 Smithfield Foods 75 Food 
1/9/2009 Freeport-McMoRan Copper & Gold 2,750 Materials 
1/8/2009 Union Pacific  230 Transportation 
1/8/2009 General Dynamics  179 Defense 
1/7/2009 Walgreen 1,000 Retailing 
1/7/2009 EMC 2,400 Technology 
1/6/2009 Alcoa 13,500 Materials 
1/5/2009  Cigna  1,100  Health Care  
1/5/2009  United States Steel 4,225 Materials  
12/31/2008 Mohawk Industries 160 Consumer Durables 
12/31/2008 Tyson Foods  120 Food 
12/31/2008 Target 132 Retailing 
12/30/2008 Allegheny Technologies 323 Materials 
12/30/2008 Motorola  400 Technology 
12/23/2008 ULA (Boeing, Lockheed Martin) 172 Joint Venture 
12/23/2008 Johnson Controls 125 Consumer Durables 
12/23/2008 Las Vegas Sands 11,500 Leisure 
12/22/2008 Parker-Hannifin 405 Capital Goods 
12/19/2008 Genworth Financial 1,000 Insurance 
12/19/2008 Sovereign Bancorp  1,000 Banking 
12/18/2008 Omnicom Group 3,145 Media 
12/17/2008 Ryder System  3,100 Services 
12/17/2008 Western Digital 2,500 Technology 
12/17/2008 Aetna  1,000 Health Care 
12/17/2008 Parker-Hannifin 46 Capital Goods 
12/17/2008 Bristol-Myers Squibb 3,700 Pharmaceuticals 
12/16/2008 CBS  30 Media 
12/15/2008 Merrill Lynch  400 Financials 
12/15/2008  Charles Schwab  100  Financials  
12/13/2008  Berkshire Hathaway  345  Finance  
12/12/2008  International Paper  2,050  Materials  
12/11/2008 Bank of America  35,000 Banking 
12/11/2008 Whirlpool 250 Durables 
12/10/2008 Mohawk Industries 105 Durables 
12/10/2008 Procter & Gamble 320 Household 
12/09/2008 Praxair 1,600 Chemicals 
12/08/2008 Anheuser-Busch Co. 1,400 Food 
12/08/2008 3M  2,300 Conglomerates 
12/08/2008 Wyndham Worldwide 4,000 Leisure 
12/08/2008 Dow Chemical  5,000 Chemicals 
12/05/2008 Legg Mason  200 Financials 
12/05/2008 Cablevision  100 Media 
12/05/2008 Staples  140 Retailing 
12/04/2008 Steel Dynamics  65 Materials 
12/04/2008 Windstream  170 Telecommunications 
12/04/2008 General Electric 500 Conglomerates 
12/04/2008 E.I. du Pont de Nemours 2,500 Chemicals 
12/04/2008 AT&T 12,000 Telecommunications 
12/03/2008 United Technologies 350 Conglomerates 
12/03/2008 Gannett 2,000 Media 
12/03/2008 Adobe Systems 600 Software 
12/03/2008 Jefferies Group 300 Financials 
12/03/2008 Viacom 850 Media 
12/01/2008 JPMorgan Chase  9,200 Banking 
12/01/2008 PepsiCo 87 Food 
11/25/2008 Dana Holding 50 Durables 
11/24/2008 BlackRock 10 Financials 
11/21/2008 Western Union 200 Business Services 
11/20/2008 Bank of New York Mellon 1,800 Banking 
11/20/2008 Boeing 800 Aerospace 
11/17/2008 Citigroup 52,000 Banking 
11/14/2008 Sun Microsystems 6,000 Technology 
11/12/2008 Applied Materials 1,800 Technology 
11/12/2008 Morgan Stanley 2,000 Finance 
11/12/2008 Liberty Media 910 Retailing 
11/11/2008 AK Steel Holding 800 Materials 
11/6/2008 Mattel 1,000 Household 
11/6/2008 MGM Mirage 400 Leisure 
11/4/2008 Hartford Financial Services Group 500 Finance 

*Total announced layoffs at America's 500 largest public companies as
measured by a composite ranking of sales, profits, assets and market value
since Nov. 1 2008. Includes layoffs at subsidiaries, joint ventures, and
majority owned companies. - Compiled by Klaus Kneale, 02.06.09

Identity Theft: Think Like A Spy

Today, at the Fort Belvior Financial Readiness Challenge Event, I heard one of the best financial speakers I've ever heard.  John Sileo.  He is an identity theft expert, and the way he became such, is because his identity was stolen....TWICE! For an excellent read, check out his blog.  More on this topic from me in the near future.... 

SNL Skit: Don't Buy Stuff You Can't Afford

The Circle of Life: Deciphering Between Needs vs. Wants

If you want to save money, an easy way to do it is to not spend money.  The richest man in the world, Warren Buffet, has practiced this principle his whole life.  He has saved 50% of everything he earned since he started throwing newspapers as a young boy.  (Now a lot of intelligence and some luck also played a vital role, but the basis is You Can’t Spend More Than You Have!  (Web Note: For a detailed history of Buffet’s life, go to http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrentimeln.htm)

But wait…how exactly does one define a want versus need? Sure, we all need food, shelter, clothing – but what about a cell phone? A car? A good argument can be made that needs vary depending on a person’s lifestyle choices. 

For example, I live in Washington DC – land of one-way highway exits and road signs labeled by city, rather than direction. I spent a lot of time stuck on one-way roads, digging through an atlas while getting honked at and trying not to sob. Right around Christmas, I conveniently mentioned to my parents that GPS is a need, not a want, in D.C. If you know me and my inability to navigate, you would agree. I don’t exactly think that even my rationale of “wants vs. needs” were spot on in this case, but I know everyone sees some wants as a “need”!

It’s amazing how not only do needs and wants vary by person, but there are also strong cultural influences on our perceptions of need. I recently taught a financial counseling class at a university. I had all the students read the book, “Your Money or Your Life”, by Vicki Robin and Joe Dominguez. The book talks about how to get out of debt, develop savings, and live well for less. The class was discussing the book, but I noticed the nine foreign exchange students from Spain were silent. Towards the end of the discussion, I asked them what they thought. One courageous girl in the back raised her hand.

"Miss Bell, we do not understand your American way of spending,” she said. “We save for everything or we do without.  We have one car for our entire family. We save for vacations, gifts, and any other unneeded or unnecessary expenses.  In fact, usually the only debt someone will go into is for a house.” 

Wow. What a different philosophy!

Needs versus wants is all a matter of perspective. Stephen Covey states that we all view the world through our own “spectacles”, in his book, “The 7 Habits of Highly Effective People”. This means that what we as Americans may view as a basic need, the rest of the world may not see it in the same light. I remember a student in another one of my classes who was amazed to discover not everyone had a TV in their bedroom. He was even more shocked to later find out some people have never even seen a TV – talk about a candidate for study abroad! The point is, go back and reevaluate your needs versus wants.

Here are some quick tips, which may start to put things in perspective:

• If you find something you want to buy and can’t live without, walk away from the purchase. If you still desperately want it 24 hours, and have thought through if you can afford it, if it’s for a good price, etc – then go back and purchase it. But if you’ve already forgotten about it, then you have your answer. This goes for a $2 checkout register purchase, and a $300 clothing purchase.
• Freeze your credit card in a bucket of water. If by the time the credit card is completely and naturally thawed out (no cheating here), then you can get it. This is your “cool-down” period.
• Bring a fiscally conservative family member to help shop. They can tell you the honest truth if that outfit really looks good on you – or if it’s a waste of money.
• Stick to a shopping list, and don’t waste time browsing! And, as my boss currently reminded me, use coupons!
• Limit your exposure to advertising. Scientific studies have shown that the more we’re exposed to advertising – whether it be TV, magazines, etc – the more likely we are to buy.
• Start an internet wish list by saving the URLs of the items that you would love to buy.    If you use the book-marked pages, then you won’t forget the items you desperately want even if it takes you two or four weeks to save up the money for the purchase.  (And quite honestly, if you do forget about the purchase, then I think you’ve already answered your own question on whether you really wanted it…) 
• Collect your spare change or start an electronic savings account that pulls a small amount from your checking every week. Use that money as a “fun” account.  Anything goes, but once the money is gone, you have to start saving again to make that next purchase

With all of this in mind, you can stick to your spending plan. I used to tell me college students, “If you can learn to manage a $500, you can manage $5 million”.   It worked for Warren Buffet and the principle is still true.  Learn to manage what you have now and as more is given to you, you will be have the knowledge and responsibility to manage the larger income. 

(Book Recommendation: Read the Richest Man in Babylon by George S. Clayson) 

The habits you create now, whether you are a struggling college student or a newly minted graduate, will be the habits that remain with you throughout your life    As one of my favorite mentors says, “ “It’s not how much money you make, it’s much money you keep.”

 

 

The New Year’s Resolution that You Will Actually Keep

Every year we all make resolutions. Resolutions are good, noble, and serve to make us better….but if you’re anything like me, your resolutions end in a guilt-ridden Saturday night ice cream binge on the kitchen floor with a pint of Ben and Jerry’s. So, no judgments.

Once we slip up on our resolution, whether it is a diet or a budget, it is hard to regain that idealistic glow and keep going forward. The rationale is always the same – well, guess that was short lived; might as well forget it.

That line of thought may work for a wardrobe with lots of elastic waistbands (no judgments, ok?), but not so much when we’re talking about financial security. Budgets are like diets. Everyone KNOWS they should have one, but no one really wants to do it. Once the budget is blown with, say a retail therapy shopping spree, it is hard get back on track. But a spending plan, well, that’s different from a budget. A spending plan is a way of life. When you’re serious about dieting, you change your eating habits. Same thing applies for a spending plan. The only way to change your spending habits is to have a plan. Now that the word budget is out of your vocabulary, let’s get started.

Here’s what you do. For one week, starting right now, track everything you spend. I mean everything. Pennies in the couch cushions, quarters in the cup holder, credit card charges – everything. Make this easy -  track your purchases on your blackberry or your iPhone. If you’re the pen and paper type, carry a small notebook in your wallet. An index card in your wallet, right next to your cash and credit cards works great! Write down every expenditure and save your receipts. At the end of the day, transfer the information to an excel spreadsheet. It should only take five minutes. Figure out whatever tracking method works for you. Anything goes – just as long as you do it!  Hey, if you want to take personal ownership and know where your money is going, you have to know your spending habits.

Once you’re tracking your money, we can start to develop a spending plan. Spending plans are composed of four basic components:

1. Identifying your income
2. Listing your expenses (this is why you’re tracking what you spend for the week)
3. Comparing income and expenses
4. Setting priorities and making changes

 Doesn’t sound so hard, eh? It really is that easy.

 (Web Note:  The above points came from the spending plan found on http://www.smartaboutmoney.org/nefe/pages/content.asp?page=1309. Another good example of spending plans, especially for college students, is at http://www.orgs.ttu.edu/r2b/money_management.php.)

After the first week, you can start using financial software to help track and monitor your money. The financial software is fantastic, but I really want to emphasize the importance of you taking control of your spending.  The software, bank, credit card company or anyone else is not responsible for your money….you are!  By simply tracking your spending for a week, you will be better able to know where and how you spend your money. 

Once you have tracked your money for at least a week, and have begun to take ownership of your money, it’s time to start the financial plan and get the overview of where your money is going.  I highly recommend using the free, web-based financial software called MINT.COM.  The website allows you to track all of your accounts in one place. It is a secure website that instantly downloads all of your information in a secure webpage.  And yes, that is my favorite part, it’s web-based so you can do it literally anywhere – well, anywhere you have internet reception!  The software uses great visual effects including dashboards, charts and graphs that are easily compared to average Americans.  All expenditures pop up instantly on your transactions page, in a way that’s easy to read (for example - $45.60 at Target). You are able to categorize the spending with a label that works for you.  If you go over your spending plan, the website can send you an email or text message. Also, the website identifies your APR (annual percentage rate) as well as any hidden fees charged by credit card companies.  And if you enter your retirement plans or investment accounts, the website will instantly compare your portfolio against benchmarks so you can see just how much you have lost this year (that is you and Bill Gates, Warren Buffet and the entire market ;) . . . more to come on this topic later).  It literally takes the pain and agony out of the day to day monotony of tracking the pennies.  It syncs your data and gives you the overview of where your money stands on an up to date basis with just the click of a button.…can you tell I’ve fallen in love with this website?

Seriously though, financial software is vital to your long-term financial health. Intelligently tracking your money allows you to make the most of it. Consider the combination of the stand-alone spending plan and the software as a temporary tool to help you track where and what you are spending your money on. Eventually, you will know your financial habits. But until then, use a plan and your financial software to understand where your money is going. Once you know your past, you can plan your future.

…Speaking of plans, I plan on hiring a large body guard, named Sven, for my refrigerator. If I try to get near it, he will tackle me. Then maybe finally I can make good on that diet resolution.

Your Financial Roadmap: Where Do I Begin?

Taking control of your money and financial future can be completely overwhelming. Some would rather clean the bathroom before looking at their finances.  But the important thing is to start somewhere! Take action – even if it’s just entering your information into financial software that does most of the hard “scrubbing” for you.

The key is to start small and start early. Smart financial planning, early on, yields huge dividends later. For example, if instead of buying the latest iPod this year, you invested the $250 into the stock market, with a rate of return of 8-percent, by the time you retire in 30 years, you could have over $370,000! Now, how important is that new yearly iPod to you?

Ok, so we know we have to take control. But where to start?

Well, what makes you happy?

What do you think is going to make you happy in five, ten, and twenty years? Money doesn’t buy happiness, but it is one of the factors that will help you get to where you want to be. When setting a financial plan, you need to figure out the basics – what you are saving for, and why.

To better identify your goals, break down where you envision yourself in the following categories:

• Physical –  Where do you want to be living? What are your physical fitness goals?  What are some luxuries or extra things that would have great meaning for you? 
• Emotional – What will your family life be like? What are your hobbies? What will your social life (friends) look like?
• Spiritual – How important of a role will your spiritual well-being play in your life?  What things have deep meaning for you in life? 
• Mind – What are your career goals?  What do you want to do during retirement?   Is life-long learning important to you? 

You need to know your goals and have them clearly defined in order to progress with your plans.  The more specific you are with your goals, the more you can break them into achievable mini-goals.

(Side Note:  I have always wondered why people set goals to become a millionaire by age X (insert an age).  If you haven’t identified why you are saving, or what makes you happy,  then this one goal is futile.  What is the purpose of becoming a millionaire by that age?  If you know it, then work like crazy for it.  But if you are simply working for the substance of money alone, I’d have to say that 1) it will be hard to stay motivated or 2) you’ll end up like Ebenezer Scrooge.)

I had an accounting professor who earned his millions by his mid-thirties, but after a few years of playing golf everyday, he was bored stiff.  He ended up going back to his alma matter to teach accounting classes and donated his check back to the university.  Point of the story:  Know what the bigger picture is and purpose behind the money..

Once you’ve identified your goals, it’s that much easier to identify what kind of financial decisions you need to make to get you there.

Ok. Now that we have a general idea of your future goals, we can use this as the outline for your financial plan. Don’t panic! Financial plans are not as scary as they sound. It can be as simple as “bring lunch to work to avoid paying takeout prices”. Your financial goals will obviously change as you move throughout your life, so while you should be specific, allow yourself plenty of room in your planning process for change and development.

So, now let’s make a financial plan.