Archive for May, 2012
This is a follow-up to an earlier article about an excellent series from The Columbus Dispatch about significant errors of credit agencies combining the credit history of other people, usually family members or others with similar names, that have bad credit. Some of the stories really blew my mind- click to read the full articles:
- Part 1: Credit Scars
- Part 2: Mixed and Marred
- Part 3: Youngest Victims
- Part 4: Thief Stole Her Dreams
- Part 5: Bad Judgements
- Letter to the editor, a possible cause to some bad credit reports: Obama Care regarding reporting of delinquent medical bills
Bad credit and other bad information on the reports prevents people from obtaining all sorts of loans, such as for cars or from their home equity. Bad credit rating can also effect employment, and cause auto and homeowner’s insurance rates to raise dramatically.
Credit reporting agencies are responsible for tracking our payment history on obligations like utility bills, mortgages, credit cards, and other debt, as well as using this information to compile a credit ratings for consumers. The reports also contain information about felony criminal records and addresses.
Normal problems are easy to corrected, such as small errors about late payments, or debt that has long since been repaid, by writing letters to the main credit reporting agencies. Often consumers have to make follow-up phone calls and send additional letters, but I understand that things usually get cleared up. It is just a pain to do so.
Everyone should check their credit history, usually for free through annualcreditreport.com and NOT freecreditreport.com. There you can get reports from Equifax, Trans Union, and Experian. If you find that your information is incorrect, quickly find out what you need to do to fix it, and then constantly followup until done so. This may turn into a part-time job for some, but is important. To know your rights and procedure you should follow, there are many excellent articles at www.ftc.gov:, start with Credit and your consumer rights.
John 15:13 Greater love has no one than this: to lay down one’s life for one’s friends.
Today we remember and are thankful for those in American history who have defended our country home and abroad in war.
Listed here is a partial list of the wars and conflicts. No one is able to list the thousands of operations members of our intelligence and special forces have been involved in.
- The American Revolution 1775-1783
- The War of 1812 1812-1815
- United States Civil War 1861-1865
- World War I 1917-1918 (American involvement)
- World War II 1941-1945 (American involvement)
- The Cold War 1945-1991
- The Korean War 1950-1953
- The Second Indochina War “Vietnam War” 1956-1975
- U.S. Intervention in Lebanon 1982-1984
- U.S. Invasion of Grenada 1983
- U.S. Invasion of Panama 1989
- Second Persian Gulf War “Operation Desert Storm” 1991
- U.S. Intervention in Somalia 1992-1994
- NATO Intervention in Bosnia 1994-1995
- Kosovo War 1999
- Attack on the World Trade Center and the Pentagon September 11, 2001 Terrorist Conflict
- Afghanistan War (Operation Enduring Freedom) October 7, 2001-Present
- Third Persian Gulf War “Operation Iraqi Freedom” March 19, 2003-Present
Cooking is a lost art it seems these days. People today are very busy, working longer hours or multiple jobs, running children to events. Convenience and less hassle of fast food, and packaged meals are very tempting. Many people have gotten out of the habit, or never acquired skills in the kitchen. Family life suffers, as well as our diets. Restaurant and prepared foods are less healthy full of salt, fat and sugar. I know when I eat out I make bad decisions too, since I am in celebratory frame of mind.
Everyone is trying to save money, and eating out and packaged foods cost much more than cooking. When I counsel people in or near financial crisis, eating out and groceries usually consumes a large percentage of budgets. I can tell them to just ‘quit eating out!’ but sometimes that is too simple if knowledge and skills are missing; when they try to shop and cook more efficiently and don’t know how. Basic food items like oats, rice, beans, eggs, and fresh vegetables and fruit can be purchased for pennies per serving. Throw in more expensive but modestly priced items like frozen chicken breasts, ground meats used sparingly with rice, beans, and vegetables, meals will be more nutritious and less expensive. But unless someone is proficient in the kitchen, those foods will just sit in the pantry, refrigerator and never get used.
To help overcome this, there are several really cool books and websites to help. A few come to mind- the first one is E-mealz, it is a great service that helps to plan recipes and grocery shopping together, providing economical and tasty meals. For those wanting a little more pizzaz using basic lower cost ingredients, check out http://www.webcookingclasses.com/. Chef Todd Mohr can easily teach you over the web many cooking skills, sometimes using just whatever you have on hand, and have fun while you do it. Both of these services have a fee, but may just equate to one family’s meal out at moderately priced restaurant. Not only will you have more fun with your family, you will eat more delicious food, since most restaurant food and prepared foods aren’t very tasty!
The much followed initial public offering (IPO) of Facebook failed to be a runaway opening day success, by the way I warned you to be very cautious about IPOs like this on my February 1 2012 post. The first day of trading Friday May 18th, shares opened up at $42.50 about 11% higher than the initial public offering price of $38, closing today at $31, representing almost a 30% drop in value within a few days. This is a failed IPO, not a good start for this new public company, but one they will recover from.
Why did it fail to meet the wild expectations? Here are a few of my guesses…
- Technology where the stock was being sold, the National Association of Securities Dealers Automated Quotations or NASDAQ, was unable to handle the demand
- A few days before the IPO a few large companies announced that they thought the advertising value of Facebook was overrated
- The expectations were set too high by the media and investment talking heads
- Too many shares were issued
This IPO is looking to be controversial from the start…
- Two top regulators said the IPO should be reviewed (source Reuters)
- Regulators looking into Morgan Stanley’s sharing of analyst’s negative reports with some institutional investors but not others (think retail buyers)
- There could be lawsuits involving Facebook, NASDAQ and shareholders involving the fumbled IPO, considering the 30 billion dollar loss in shareholder equity
- Today the Securities and Exchange Commission Chairman said they will examine “issues”
What can we learn from this, so that our personal financial management is wise?
- Stay away from most IPOs, especially hyped ones
- Be extra careful about industries that don’t have a proven track record of profitability
- Media investment people are often wrong, so we should take their advice with many grains of salt
What can Facebook and other new hot up-and-coming social media companies learn from this? Perhaps they are not as smart as it seems they are perceived to be. Be wary of the advice of investment bankers and market makers involved in your IPO and get many second opinions. Maybe do a better job of employing social media to help you assess value, plan and market your IPO.
It is not easy for the novice grocery store shopper to find ways that each chain has it for you to save money. In Columbus Ohio where we live, the biggest chain grocery stores are Kroger, Giant Eagle and Meijer, and each one has tricky ways to sign up for or find special savings. We have outlined a few things that might help you.
- First go to their website
- Sign in to your account, look for the Kroger Plus card in the upper menu bar, or
- In the center of the screen you will see a SAVE MORE WITH DIGITAL COUPONS, click the get started button
- Sort your special digital coupons by using the drop down menu, choosing either expiration, popularity, value or most recent
- ‘Clip’ the coupons that you intend to use when you shop
- When checking out at the cashier, be sure to use your Kroger Plus card for her to scan, they will appear when you checkout at the register
- When clipping you can click on ‘more info’ and a screen will appear with more information about that coupon
- You can also print them out and take them with you, however that will cost you money for printer ink and paper, not eco-friendly and some people’s computers don’t always print coupons easily
- Get a Giant Eagle Advantage card
- Set up for an account at their website by clicking Register in the upper right hand corner
- On the Giant Eagle home page, go to the button with ‘Clip’ in it, in the lower right corner click >start clipping
- ‘Clip’ the coupons you want to use
- When checking out at the cashier, be sure to use your Giant Eagle advantage card for him to scan, they will appear when you checkout on the register
- You can also print them out and take them with you, however that will cost you money for printer ink and paper, not eco-friendly and some people’s computers don’t always print coupons easily
- In the upper menu bar, click the Save button to learn more about fuelperks, etc.
MEIJER has two programs outlined here, you can use both and stack them as well as use manufacturers coupons too, even better if something is on sale for 4 times the savings, Giant Eagle and Kroger discontinued this
- Go to their website
- Scroll down and click on Meijer Mealbox
- Click on ‘Specials’ tab
- To choose your coupons click on ‘Ad to Shopping List’ for each coupon you want – then click okay
- Click the next button to view more pages of coupons
- Click on the ‘Shopping List’ tab
- Click ‘Print List’
- Un-select the ‘Shopping List’ √ (unless you want to use the shopping list features)
- Click on ‘Print’
MEIJER for cell phone ‘mPerks’
- Sign up and sign in for mPerks with your cell phone number and personal identification number – PIN
- Redeem coupons at checkout using your Cell number and PIN
- Print or email yourself the shopping list, click the ‘Print Coupon List’ or ‘Email Coupon List’
There has been constant chatter about JP Morgan Chase’s $2 billion loss on the news, but what does it really mean to you with your personal finances? How will it affect you?
If you own their stock, you have experienced at 12% reduction in value, but it will probably recover in time. If you bank at Chase, will your savings rates go down, or borrowing rates go up? Probably not. Is your money still secure? Yes reports say the bank is financially secure, and has been one of the stronger banks throughout the great recession. If Chase is your investment manager, should you be concerned? Probably not, unless you are an institutional investor and Chase helps to manage your multi-million dollar portfolio, you may want to have some long conversations to make sure they are not applying the same investment methodology. So in my estimation, JP Morgan Chase’s loss means very little to the average person’s personal finances. Perhaps the only take away for us is for their loss to serve as a reminder that “If you don’t understand it, don’t invest in it.” It seems that the derivatives employed by Chase were too complex even at their level of sophistication to use wisely.
A few years ago, researchers discovered that most people driving on highways in blinding fog, drive much faster than they can see ahead, and even some people actually drive faster. When it comes to debt some exhibit the same behavior: debt is increasing, but we don’t slow down life, somehow like the fog, we think we will eventually drive through it.
California is the perfect local example of this. Governor Jerry Brown announced over the weekend that California’s debt of $16 billion is double what they thought is was going to be. Going back 10 years in California’s governorship Governor Gary Davis nearly bankrupted the state through over promising and overspending.
The United States and many other countries continue to increase spending and borrowing, driving faster through the fog, instead of taking the painful path of austerity that I wrote about previously of cutting back. This path would be difficult in the short run, but is the only solution that in the end will revive economies the world over. There is simply not other way, and the longer we delay the harder the path back.
Voters though aren’t convinced. We elect leaders that promise to provide the things we want, and most of us are not willing to have cuts to their particular project or program.
It is interesting to watch what is developing in other countries. France recently elected the socialist Francois Hollande because he promised to tax the rich and take care of everyone. He stood opposed to any austerity programs. We are seeing the same battle in Greece. Is our Fall presidential election going to be about social or economic issues? Is it going to be about taking care of entitlements programs and no cut backs for anyone and higher taxes, or austerity, business growth and employment?
What ever happens it will be great political theater, but more importantly, what are we doing with our own personal budgets, have we looked at our balance sheets lately? It might be good to do from time to time, to see if we are driving in the fog and need our own austerity program.
Life Insurance Defined
Insurance providing for payment of a sum of money to a named beneficiary upon the death of the policyholder. In other words, it is insurance of a risk (death) to replace the financial loss suffered by those dependent on the deceased.
History of Life Insurance
Life insurance is nothing new, its history spans back several hundred years. The original policies were simple term insurance policies. The contract was for the term of one year. Each year it renewed, with an increased premium because the person was a year older, and presumably closer to death.
To address this increasing premium dilemma—the older you became the more difficult it was to pay the premiums. About 100 years ago, insurance companies issued policies that insured for entire lifetimes (hence the term “whole-life”) with a level premium, which means the premium payments did not change. These whole-life policies have a cash value that provides the ability to borrow or access cash values.
Historically, life insurance existed to pay the cost of the funeral and last expenses, such as debt. Most people could not afford to purchase a policy that provided for much more. Neighbors and relatives pitched in to help after a death. Churches, Widow and Orphan Societies, and Fraternal Organizations were social service organizations that also helped.
The later part of the last century witnessed an explosive evolution in the life insurance industry. The reason is simple: The rapidly evolving post WWII society. Life insurance rode the wave of the biggest population growth ever seen. Our society has changed from agricultural to industrial and white-collar. People are living longer with vastly larger incomes and savings. Life insurance has evolved to keep pace with the ever-changing needs driven by all of this change.
The Special Treatment of Life Insurance
Life insurance is not only unique because it provides a sum of money when you die; it receives special treatment by the tax code and regulatory agencies. This has provided opportunities for insurance companies to provide a wide array of options. These diverse options confuse many consumers.
Tax Code: Life insurance has historically been an “insurance” product. Meaning it existed for safety and security. Therefore, the insurance industry has always been successful at maintaining favorable tax status, meaning they could lobby for continued favorable tax treatment. They have found it easy to appeal to legislators in Washington DC to keep life insurance from being threatened by tax law changes.
Life Insurance’s favorable tax status includes a tax-free death benefit, tax-deferred cash value accumulation, and tax-free borrowing of cash value (as long as the policy is not a modified endowment contract that remains in force until death).
Regulatory Agencies: The insurance and securities regulatory agencies provide life insurance companies an advantage over providers of other investments: Insurance companies can provide sales literature with futuristic computer illustrations of cash values.
Types of Life Insurance: An Overview
The simplest way to illustrate the different types of life insurance is to compare them on a grid.
|Term||Lowest initial premium. Most financial experts and commentators recommend term as the best alternative for most people.||Low initial cost leaves more cash flow available for other financial planning needs.||No cash value buildup. If someone wants to continue it for a long period of time, the cost will be high.||Premium can go up annually or be guaranteed level for 5, 10, 15 and 20 years or longer to match the length of time you need the protection.|
|Universal Life||Can provide protection for a longer period of time than term, and build up cash value.||Not as expensive as variable universal and whole life, but may provide life insurance for a longer period of time than term and provide cash value for borrowing (or if surrendered).||Higher initial cost than term insurance. Cash value accumulation may not be a good investment.||There are many variations of universal life available today. For example, some have a low premium for a long period of time but with little cash value, while others are designed for cash value growth.|
|Variable Universal Life||Same as universal life except that it allows for the cash value to accumulate in separate sub-accounts.||In addition to the features mentioned for regular universal life, it also allows for accumulation of cash value growth potentially higher due to sub-account options.||Cash value may have fewer guarantees than universal life and whole life. The policy’s internal charges can be quite high.||Some proponents of this insurance promote the tax advantage opportunities for growth and income.|
|Whole Life||Highest premium life insurance available, most types provide guaranteed protection for lifetime and cash value buildup.||Maximum guarantees.||High premium not affordable to many.||High net-worth people sometimes utilize whole life insurance to help pay for their estate taxes. Universal and Variable universal are also used for this purpose.|
|This is a very brief synopsis to aid in your insurance education. There may be exceptions to some of these generalizations due to state regulations and insurance company policy design.|
- Evaluate Life Insurance Needs: Only purchase additional life insurance if you have a need for it. First examine the amount of life insurance that you need to provide for those financially dependent on you. A later blog will discuss various means for calculating your needs, younger families often use the rule of thumb of the death benefit should equal 10 times income, but you should talk to a financial planner, use planning software like eFinPLAN or use an insurance professional to help you arrive at the right amount for you.
- Purchase Life Insurance for Protection: The first priority for purchasing insurance should be for protection. It is most important that people, who need insurance purchase it and start their coverage without delay. At the very least, procure term life insurance with an appropriate death benefit, and term period, at a competitive premium. Term insurance provides the most economical decision for most middle-income people today. Most financial experts and commentators recommend term insurance for most people since it provides the most amount of protection at the lowest cost, enabling you to save and invest.
- Purchasing Cash Value Life Insurance: The decision to purchase cash value life insurance should be made in tandem with the outcome of your financial plan. Most people’s first priorities are the proper funding of their retirement and other plans. After people have implemented the proper action steps in their financial plan, they may want to consider cash value life insurance for longer term needs. Seek advice from a trusted financial professional to help evaluate the appropriate options. A close examination of a contract should include not only attractive illustrations and sales literature, but a thorough analysis of their prospectuses and fully disclosed information. Insurance agents should provide best, good and worst case illustrations. Remember insurance agents are paid vastly more commission for permanent cash value insurance, so some may feel pressure to sell this.
- Life Insurance as an Estate Planning Vehicle: People with large net worth may want to consider life insurance as a viable legacy planning tool to aid in liquidity and estate and tax planning. They should consult their estate planning attorneys and financial planners for direction.
A few days ago the Wall Street Journal had a very interesting and thought provoking article “Renting Prosperity.”
This fascinating article may interest you if you:
- Are renting and considering buying
- Used to own a home, but are renting now
- Wonder about the effect of the housing crisis on people’s buying and renting trends
According to a study by Fidelity Investments a couple retiring this year will incur $250,000 in costs not covered by Medicare Parts A and B. Those with medi-gap or employer based retiree health insurance will have less expenses. Many companies today either do not provide or are cutting back on retiree health care, so they probably should include high estimates when calculating their financial needs during retirement.