Saturday, 19 July 2014
Graduation is the theme all around my neighborhood. It is a time of excitement and big dreams. Unfortunately in most cases, personal financial sense is not a taught at college.
Once out of college, going from living broke to a big paycheck every month can easily encourage lifestyle inflation and a downward spiral of bad financial habits. Hence, it is essential to establish a good personal finance foundation to avoid getting trapped in a lifetime of debt. Here is a checklist I would hand over to a new graduate to make sure they start on the right path.
Learn to network efficiently: Invest time in networking. Learn about your colleagues. Find a mentor and build relationships at every level, both above and below yours.
Start a case study file: By "case study file," I mean make a list of all your accomplishments rather than a list of projects you worked on. For example: Cut 20 percent of production costs while maintaining the same product quality. Include information on which project and what you did to achieve that. This will be of great use in many situations like an annual review, a salary negotiation or a new job search. In addition, keep your resume updated at all times.
Promote your personal brand: As a job candidate, 86 percent of potential employers will look at your social profiles, so spend some time cleaning up all your social media profiles.
Create a budget: You might feel like you are flush with cash going from a student's pay to a full-time-job's pay. Create a budget even before you get your first paycheck. Continue as much as possible to live like a student and set money aside for your future goals.
Pay yourself first: The first bill you should pay each month should be to you. Before you pay for your groceries, before you pay your mortgage, before you do anything else, put money aside in your savings. Most people will wait to pay all the bills and save the money left over. It is fine in theory, but the problem is there is almost never anything left over. If you pay yourself first, even if it seems impossible initially, you will learn to live with what is left over. This way you will always spend less than you earn.
Borrow a book or two on finances: Knowledge is power. Arm yourself with as much personal finance knowledge as possible. I recommend "I Will Teach You to be Rich" by Ramit Sethi, if you are just starting out.
Start an emergency fund: Establish a rainy day fund as soon as possible. Start with $1,000 to cover small emergencies, then move on to saving 'X' number of months' expenses to make sure a sudden job loss or illness won't put you in debt.
Think five and ten years ahead: Right now your 20-year-old self might say that you are never going to get married or you will always be renting. But in five or ten years, it is very likely you would have changed your mind completely. Do yourself a favor and start saving for standard goals anyway -- a wedding, down payment for a house, or your dream vacation. If you don't end up spending money on a wedding, you can always reallocate it to another goal.
Get started today: Time is the most powerful ally when it comes to investing. Many people keep waiting to learn everything about investing to start. Don't get stuck on debate minutiae. Get started with some basic, low expense, index funds -- total stock market or life-cycle funds. As you learn more about investing, you can adjust them accordingly.
Don't pass up free money: If your company offers a 401(k) plan, especially with matching funds, take full advantage of it. Sign up to contribute the maximum. That way you will never see the money in your wallet, you won't miss the money, and you won't be tempted to spend it.
Manage your debt: If you have student loans or credit card debt, pay them off aggressively, starting with the highest interest rate loan.
Avoid consumer debt: I do not believe credit cards are evil, but they are not for everyone. Understand the pros and cons of credit cards. Do not buy things you cannot afford. If you want something, save for it.
Build your credit: Unless you are determined to pay everything in cash, you need decent credit to get a good interest rate on your loan, whether a car loan or a mortgage. Even if you are in the cash camp, it is still a good idea to maintain a great credit score as it is now used by utility and insurance companies to give you preferred rates.
Insure adequately: When you are in your 20s, you might feel invincible and be tempted to skip health insurance to save money. Don't! Accidents happen, and so do sudden illnesses. If your company offers health insurance, that is most likely the cheapest option. If you are under 26, you can also check the cost of insurance as a dependent on your parents' plan. If you are single with no dependents, you probably don't need life insurance, unless you have a loan that someone else co-signed for, if that is the case, insure yourself at least to cover that loan amount.
Nobody cares more about your money than you do. By setting up a good financial foundation, you are setting yourself up for success.
Wednesday, 16 July 2014
Saving Money: Tips everyone in their 20s should know by Financial Tips Corliss Group Online Magazine
Financial advisers stress that there are several money lessons everyone in their 20s should know. For example, start saving at least 10 percent of your monthly income.
Changing your financial state requires a kind of time travel to commune with your future self. Where do you want to be in 10, 20 years? Are you on the right path, or heading in the wrong direction?
The time value of money—that is, how savings, investments and debt levels compound with the passing of years—means that money habits, good or bad, created when we start to earn cash echo into the decades that follow. And a whispered bit of wisdom up front can keep you from howling over your mistakes later in life.
We polled our NerdWallet network of Ask an Advisor certified financial planners about the greatest regrets and lessons you should learn in your 20s, 30s and 40s. Taken together, these could be considered 12 steps toward securing your financial future. And they all hinge on two keys skills we must learn—and often relearn—in our money lives: prepare and stick to a budget, and establish good savings habits.
We’ll address the 30s and 40s later this week, but first: your 20s.
“Understand that the world has changed. You will be more responsible for your financial future in regard to earning a living, retirement planning, funding and investing, health insurance coverage and costs and less coverage through government programs,” says Jerome Deutsch, managing director of U.S. Institutional Markets for Index Strategy Advisors in Decatur, Georgia.
“Learn, plan and live mindfully and with a long-term perspective. It may not sound like fun, but you have a long life ahead of you.”
Pay yourself first
Save at least 10 percent of your monthly income. “The earlier you start this, the easier it becomes,” says Michael Keeler, president of GFS & Association in Las Vegas. “If you can learn to live without 10 percent of your income, you’ll do great in retirement.”
Use the savings to set aside the equivalent of six months’ gross income. “This money shouldn’t be subject to market whims and shouldn’t have the goal of making a lot of interest,” says Larry R. Frank Sr. of Better Financial Education. “The objective is to develop the war chest for unexpected expenses and to develop the habit of keeping your standard of living within your means”—to spend less than you earn.
After you’ve built your emergency fund, focus on paying down debts or begin to invest.
“Student loan debt comes next,” says Sara I. Seasholtz, president of Preferred Financial Strategies in Mooresville, North Carolina. “Then they should participate in the 401(k) where they work and contribute whatever is necessary to get the match from their employer. This figure seems to be 6 percent in most cases.”
Don’t go crazy with credit
Live within your means and resist the new spending power that comes with having income and a few credit cards. Otherwise you will spend your 30s paying for your 20s—and your future self will hate you for it.
“My number one piece of advice for those in their 20s is—beware of debt and credit! So many of us have made the mistake of bankrolling our 20s with credit cards, and spent our 30s digging ourselves out,” says Carrie Houchins-Witt, owner of Carrie Houchins-Witt Tax and Financial Services.
“As tempting as going out and buying that new car may be, I would advise against it. Now is the time to start building up emergency funds and a strong foundation to invest in assets that appreciate,” says Jeremy S. Office, principal of Maclendon Wealth Management in Delray Beach, Florida. “The pleasure of not having debt or paying it down will last much longer than that new car or luxury item.”
Marriage? Think again
The heart rules, but if the head were in charge you wouldn’t think of marrying in your 20s. Why? Roughly half of all Americans get divorced in their lifetime, true, but those who marry before the age of 30 are especially likely to.
In 2012, 80.6 percent of all American women who had a divorce and 72.8 percent of all men were below the age of 30 when they married. “I started family before settling in on long-term career plans [and that] made it difficult to transition back to career later after 10 years and divorce,” says Jean Schwarz, managing director of Lumina Financial Consultants in Vienna, Virginia.
“Experience shows [that] all of us change so much between 20 and 30. Looking back, we wouldn’t recognize or want to be ourselves at 23-to-25 when we are 30,” adds Seasholtz. “To be a good mate and partner one needs to know themselves well. They need to be established and have some successes in life.”
Maybe settle for a long engagement.
Know and build your FICO score
Your FICO score is a measure of your creditworthiness, and is based on your payment history, credit utilization and length of credit history, with scores ranging from 300 to 850.
Tracy Becker, president of North Shore Advisory Inc., a national credit repair company, cites an example when suggesting how to building a strong credit rating in your 20s: First, have your parents add you as an authorized user to one of their credit cards. Then open a secured credit card, which usually requires a cash deposit roughly equivalent to your credit line. Six months later, the woman in the example had a FICO score of 660.
“The reason her score was this high without much credit is due to her Mom’s old Visa card being reported. The Visa card aged her average age of credit substantially, giving her extra points,” Becker says.
This opens the door for future credit lines and securing bank loans when you want to buy a house. Key, of course, is keeping your balance low and paying on time.
Ultimately, you are young and you have time to make mistakes and recover. But you’ll be far better off if you get off to a good start now.
“I never considered the impact that waiting to build savings and investments would have on my long-term financial security,” Schwarz says. “I didn’t think about time value of money until my mid-30s.”
Sunday, 13 July 2014
Financial Tips Corliss Group online magazine: Here’s How to Navigate the Noise and Find the Best Market Tips
There’s a whole lot of noise out there in financial media these days. Investing blogs are everywhere, CNBC and Fox Business Network broadcast investing advice 24 hours a day, and even when the U.S. market is closed there’s some issue in an emerging market that threatens to affect stocks at the next opening bell.
So how can you make sense of this, tuning out the noise and tuning into the information that matters?
Jeff Macke — the current host of Breakout on Yahoo Finance and one of the founding fathers of CNBC’s Fast Money — recently penned a book to help you do just that.
His book, Clash of the Financial Pundits (available here on Amazon and co-written by fellow pundit Josh Brown), is an exploration of how pundits make calls and sometimes even move markets.
But it’s also a guide into how financial media works, what makes pundits tick and how individual investors can better use the information at their disposal to make more money.
The book’s most valuable section, in my opinion, includes these tips on examining pundits, offered by Jeff Macke and Josh Brown:
1. Who is this expert, and what firm or organization does he represent?
2. What does her professional affiliation mean in terms of the opinions she’s sharing?
3. Does he have the same time frame or investment objectives that I do?
4. How many ideas is she generating each day or week? How much thought is going into each one?
5. What are the consequences for him if he is wrong? Will we ever hear more about this idea in a follow-up?
6. How does the opinion I’ve just heart relate to my own portfolio or investing goals? Is there any real relevance?
7. Why am I reading or listening to this in the first place? Intellectual curiosity? Entertainment? Or do I have an actual need to employ this sort of information?
8. Is there a publicly available archive of this person’s previous opinions and forecasts? Have they been mostly accurate or mostly wrong? What were the driving factors behind the accuracies or the great calls? Luck? Skill? Good timing? Strong research? Some combination of these elements?
I love this list. And the only thing I would add to it is:
Buy Clash of the Financial Pundits, both to improve your media literacy and to have a better understanding of just how the financial advisory business works.
A Conversation With the Author
Author Jeff Macke has a lot of great advice on how to navigate both the markets and financial media. But mostly, his advice centers around embracing personal responsibility and the imperfection that is inherent with investing.
“Your goal is not to really become a master of investing or trading, it’s to be able to become at least up to the level where you know what you don’t know and you don’t get yourself in trouble,” Macke told me last week via telephone. “Don’t do things like day trade the hot IPOs, or pay more commissions than you should, or stay uninvested because you’re just going to sit on the sidelines with 50% cash and wait for a pullback, or start thinking things like the market should do something or else.
“You have to be an informed investor and ask the right questions, but it doesn’t mean answering everything yourself.”
Asking the right questions doesn’t just involve searching for the best big investment opportunity, either, but also searching for the right place to get your financial news.
“‘Consider the source’ is rule No. 1, whether you’re on the playground or watching television or whatever you’re doing,” Macke said. “For some reason there’s this void in understanding of financial media that it’s a product. That, when people would criticize CNBC on the up days for being a bunch of cheerleaders … that’s a ludicrous criticism; It’s a television network. It’s being run by people who are not finance majors who are not even necessarily CFAs, and it’s being produced like a television show is produced like MSNBC, like Fox News, like all of them are produced — by generally younger people who are getting on the phone and calling folks who can articulate their ideas in friendly soundbites and look good doing it.”
In other words, Macke said, if you’re blaming the pundits for leading you astray … you should probably look in the mirror instead.
“The people who are harshest on pundits usually have a problem with their own level of accountability,” he said.
The trick is to understand that being personally accountable does not mean being perfect. You will be wrong sometimes, but that’s OK. After all, even the greatest investors get it wrong — and in the book, Macke has some great conversations with pundits from Jim Cramer to Jim Rogers to Ben Stein about their mistakes and how they learned from them.
In fact, making mistakes gracefully — and honestly — is actually a more important quality than most think.
“The commonality, the theme that runs through each of the conversations is that these people have been wrong, they’ve made mistakes and they’ve learned something from it,” Macke said. “If you’re in the business of judging the pundits, look at the ones who have handled mistakes and how they’ve gone about their process and how it has changed them — to be wrong or right in public. That will tell you a lot about whether or not you want to listen to them.”
So if you’re willing to make some mistakes, how should you invest right now?
“If you’re in this game, you’re just going to have to concede the fact you’re going to want to take a couple flyers in there. Well, put 10% of your portfolio away and do that, knock yourself out,” Macke said. “If you truly believe and feel like you understand two or three companies, then create your own little portfolio.
“But your staples, your main food, you’re kind of bread and water should be index funds. That should be your core position — long the S&P 500 — because man, it is tough to beat.”
Wednesday, 9 July 2014
Financial Tips Corliss Group Online Magazine - Top 7 Financial Tips From Nancy J. Lapointe, Navigate Financial
I was asked at a social wine event, “What are the most important tips you have learned that people typically don’t know, but need to know?” That is a loaded question and very subjective. Basically, you are asking me what I think people need to know and giving me permission to get on my high horse. That sounds like fun!
1. At age 70 ½, Required Minimum Distributions are not an option on some IRAs. You have to take the distribution. However, you do not have to spend the money.
2. Credit cards are loans and could have very high interest rates. Avoid paying credit card interest.
3. Income is income and money is money, so leaving money in a low interest account, while paying a high interest credit card seldom makes sense, even if the money in the low interest account came from your Grandmother. Pay yourself back at zero interest and get rid of the credit card interest.
4. A Home Equity Line of Credit is not an emergency fund. It is an open loan with interest and it must be paid back. It is a good stop gap measure as you build up a proper emergency fund for you situation. An emergency fund needs to be accessible and be cash or cash equivalent. An emergency is an event out of your control such as accidents, illness, etc.
5. An emergency is not paying your property taxes or getting new tires. Those are expenses of living and you should plan for these types of costs.
6. A car is a mode of transportation and not a reflection on your self esteem. Be reasonable in buying depreciating assets.
7. A CERTIFIED FINANCIAL PLANNER™ (CFP®) Professional and a Broker are not interchangeable. If the CFP® Professional is practicing according to the CFP Board of Standards, he or she is consistently striving to integrate the client’s plans with the client’s activities. A broker is trained to manage investments and to focus on performance and investment related opportunities.
Nancy LaPointe is a financial advisor located at Navigate Financial, 4520 Intelco Loop SE, Suite 1D, Lacey WA 98503. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 360-628-8175. This communication is strictly intended for individual residing in the states of AZ, CA, GA, IA, MT, NM, OH, OR, WA. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.
Saturday, 14 June 2014
McAfee report paints grim picture of lucrative industry, despite incomplete data.
Cybercrime could be costing the global economy as much as $575 billion annually, according to a new report from McAfee.
The Intel-owned security company based its estimate on a range of sources, from government agencies to NGOs and academic institutions, counting both direct and indirect costs.
The report, Estimating the Global Cost of Cybercrime explained the methodology as follows:
“This study assumes that the cost of cybercrime is a constant share of national income, adjusted for levels of development. We calculated the likely global cost by looking at publically available data from individual countries, buttressed by interviews with government officials and experts. We looked for confirming evidence for these numbers by looking at data on IP theft, fraud, or recovery costs. In addition to a mass of anecdotes, we ultimately found aggregate data for 51 countries in all regions of the world who account for 80% of global income. We used this data to estimate the global cost, adjusting for differences among regions.”
However, the vendor cautioned that “differences in the thoroughness of national accounting”, as well as underreporting of incidents and the difficulty of valuing IP all make calculations an imprecise art.
High income countries lost more as a percentage of GDP, which could be because they have better accounting systems in place and/or that their IP is more valuable and therefore a bigger target for criminals.
The $575bn figure therefore comes from extrapolating a global total from high loss countries. It could be as low as $375bn if McAfee had extrapolated from “all countries where we could find open source data”.
On the other hand, the figure would be $445bn if the firm aggregated costs as a share of regional incomes, it said.
Whatever the final figure, it’s clear that richer countries in Europe, North America and Asia lost the most, because they are bigger targets and provide a better return on investment for the hacker. For example, G20 countries are said to have lost $200bn to cybercrime.
The UK, at 0.16%, had one of the lowest losses to cybercrime as a percentage of GDP, while the US (0.64%), came just ahead of China (0.63%) but trailed the most affected G20 nation: Germany (1.6%).
McAfee warned that as more businesses and consumers move online and more devices connect to the internet of things, cybercrime will continue to grow. IP theft, a “tax on innovation” will also increase as those countries which acquire it become more adept at building a competitive advantage.
Aside from calling for improvements to technology and defences, the report urged governments to work harder on creating best practice cybersecurity standards and cross-border law enforcement agreements.
It added that they must do a better job on accounting for cybercrime losses to provide a more comprehensive picture on where deficiencies lie.
For the record, McAfee's report last year estimated cybercrime losses of $100-500bn annually.
Friday, 13 June 2014
By Maria Gallucci - Global economic growth is expected to dip this year, following the fiercely cold winter that plagued the United States and turbulence in Ukraine and the world’s financial markets.
The World Bank on Tuesday said it reduced its global growth forecast to 2.8 percent this year, down from a January projection of 3.2 percent, Bloomberg News reported.
The U.S. forecast was cut to 2.1 percent from 2.8 percent, and outlooks for Brazil, Russia, India and China also fell -- a sign that emerging economies aren’t moving fast enough or investing sufficiently in domestic structural reforms, which are needed to accelerate economic expansion, according to the Washington-based institution. It recommended smaller budget deficits, higher interest rates and productivity-boosting measures to stave off future financial unrest, Bloomberg said.
The growth setbacks, however, might be short-lived. The 2015 projection for global economic growth held steady at 3.4 percent, Bloomberg noted, and growth is expected to regain speed this year despite earlier weaknesses, the World Bank said in its Global Economic Prospects report.
"The financial health of economies has improved. ... But we are not totally out of the woods yet," Kaushik Basu, the lender's chief economist, said. "A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis. In brief, now is the time to prepare for the next crisis."
Thursday, 12 June 2014
The World Bank's most recent Global Economic Prospects (GEP) report, released this week, says a global economic recovery is underway, underpinned by strengthening output and demand in high-income countries.
Global GDP growth in 2014 will be 2.8 percent and it is expected to rise to about 4.2 percent by 2016, according to the report, which the World Bank publishes twice a year.
Average GDP growth in developing countries has reached 4.8 percent in 2014, faster than in high-income countries but slower than in the boom period before the global financial and economic crisis of 2008.
Demand side stimulus or supply side reforms?
The global economic slowdown that struck in 2008 was caused by a financial crisis that resulted in large part from the bursting of an enormous, fraud-ridden mortgage lending bubble in the US.
The crisis led to varying responses in different countries. The GEP report's authors said that in general, developing countries privileged demand stimulus policies over structural reforms during the past several years.
For example, in 2008 to 2009, China implemented a four trillion-renminbi ($586 billion) stimulus program as a direct response to the slowdown in global trade caused by the global financial crisis.
Critics pointed to over-investment in China as a risk to continued fast growth. The country is now struggling to contain a real estate bubble of its own.
The World Bank wants China and other emerging countries to refocus on structural reforms.
"A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis," the bank's chief economist, Kaushik Basu, has said. "In brief, now is the time to prepare for the next crisis."
The World Bank's mantra: Fiscal discipline and structural reforms
Yet the World Bank is well known for nearly always prescribing fiscal "tightening" - or cutbacks to government expenditures - and "structural reforms."
What is the rationale for public expenditure cutbacks? And what does the World Bank mean by "structural reforms?"
The World Bank consistently urges policymakers to prevent annual deficits from growing faster than the rate of GDP growth. Rising debt-to-GDP ratios mean that an increasing share of the public budget is devoted to servicing debt, leaving proportionately less money available to pay for government-provided infrastructure and services.
However, sometimes countries fall into recession when households, in aggregate, attempt to pay back previously incurred debt faster than they take up new debt. In the jargon of economists, this is called "deleveraging."