Be Resolute in Your Resolutions

It may be cliché to write a New Year’s Resolution blog in the waning days of the decade, but that’s exactly what I intend to do. The reason is simple. Every year we set resolutions in the sincere hope of this being the year we start (fill in the blank) or quit (fill in the blank) or make sure we always, always (fill in the blank.) It’s like a bad game of Mad Libs that never works out as planned.

None of the five tips below are groundbreaking or wholly original. But, practice makes perfect and if reading these tips just one more time helps any of our readers meet their goals, be it related to their financial well being, emotional or physical health or any other facet of their lives, then it will be time well spent. Worst case scenario, I’ve provided myself with that little extra oomph needed to make my own resolutions really stick in 2010.

So, join me in making these five “pre-resolutions” as we wait for the ball to drop on Friday.

1. I Resolve to Make no More Than One or Two Resolutions
All too often when we set goals for the upcoming year, there is a tendency to get motivated. Really motivated. All of the sudden, instead of making a few measured adjustments to our day, there is a 20 item list of ways to completely revolutionize who we are as a person. This is entirely too much to take on at one time, especially under the pressure of a New Year’s resolution. Resolve, instead, to make one or two reasonable changes to improve whatever area of your life needs a little work.

2. I Resolve to Educate & Evaluate the Changes I Plan to Make
You’re at the dinner table on New Year’s Day. If you’re in Cincinnati, you’re likely eating pork roast and sauerkraut. Someone leads off the dinner conversation with going around the table and announcing your resolutions for the New Year. You blurt yours out without really thinking, work on it for a few days or weeks before the motivation is gone. Make this the year you take some time to really sit down and evaluate your goals. The internet can be a great source of information and support from others who have blazed this trail before you. Learn why you’re making the change you’re making, why it has been so difficult to break habits in the past and evaluate the steps you need to take to be successful this time around.

3. I Resolve to Plan, Plan, Plan
Now that you’ve set a couple reasonable goals and researched how to go about achieving them, put a firm plan into place. Make sure the plan includes actionable goals with results that can be measured over time. Keep a journal or calendar or whatever it is that you feel will best help you stick to the task at hand. Put it on paper, post the plan at home, in your office, wherever you will see it every day and work it into your daily schedule.

4. I Resolve to Ask for Help
It’s not enough to just share your intentions at the dinner table. Ask your family, friends and coworkers to help you with your plan, support you in your efforts, even join in following your plan with you, when appropriate. You’ll feel more accountable for your actions, and having someone join you will make any habit breaking seem much more bearable.

5. I Resolve Not to Manage My Time Wisely
If your resolution will take up more of your already extremely precious time, make fitting it into your schedule part of your plan. We all have 24 hours each day and can choose to prioritize what gets done and what doesn’t however we choose. More importantly, if your resolution actually frees up some time, by giving up an activity, for example, it is just as important to fill up your calendar with something positive in its place in advance. Leaving gaps in your schedule will just remind you that it’s time to return to the bad behavior.

Keep these goals in mind ahead of setting your goals for 2010 and you’ll be just a few steps closer from really embracing the change you wish to see in yourself.

Have a very safe and Happy New Year from all of us at The Asset Advisory Group.

By Chip Workman, CFP®
cworkman@taaginc.com
www.taaginc.com

Be Thankful

Did you know that today, December 21st, is the shortest day of the year? It is the winter solstice and marks the beginning of winter. The sun will not rise today at the North Pole. Our northern hemisphere begins to lose more heat than it gains, and this will continue until late in winter. It looks like winter today in Cincinnati. The sky is grey and it is cold, although thankfully we aren't buried under a few feet of snow.

While we are experiencing our shortest day, the southern hemisphere is basking in sunshine and enjoying their first day of summer. The Centers for Disease Control and Prevention recently released the results of a study showing that the happiest people live in sunny states. Topping the list were Louisiana, Hawaii, and Florida. Ohio did not place well. We came in 43rd. Does that mean we are doomed to depression? I don’t think so, but Seasonal Affective Disorder is not unheard of around here.

While the days may be getting shorter and colder, I can still think of an awful lot that I am thankful for. I hope that you have a lot to be thankful for, too. Take a few minutes and write it down. Keep this list in a drawer and when you're having an awful day and need some perspective, pull it out.

As you sit down with your family and friends this coming week, why not share with them? It can be a very touching experience to go around the table just before dinner, having each person share one thing that you're thankful for.

By Amanda Bashore, CFP
arbashore@taaginc.com
www.taaginc.com

Home for the Holidays

Many people will be traveling to spend time with their families this month. When you gather with your loved ones over the holidays, the last topic you are likely to be thinking about is legacy planning. But maybe it shouldn’t be. This is the perfect opportunity to discuss with your children the plans you have put in place in the event of your incapacity or death and the legacy you would like to leave for your family. If your parents are still living and have not offered this information to you, inquire as to the plans they have made and what is important for you to remember about their lives.

I have seen many clients hurriedly create their estate plan as they struggle to cope with an unanticipated accident or illness. It is a topic that we all would like to avoid, but dealing with it before a crisis will benefit you and your family members. To most boomers, estate planning is more than simply having the proper documents such as wills, trusts, and powers of attorney in place. As Carl Rapp, CEO of Executor’s Resource, a leader in estate management and legacy planning states, “a legacy must be viewed in its broadest context; as a combination of values and accomplishments, wishes and instructions, together with heirlooms, memorabilia and finally, financial assets.”

We now have so many ways to keep in touch with far away relatives that it is easy to communicate only with short sound bites and lose the stories that have been passed down through the generations. Some of my fondest family memories are of my grandparents talking about all that they have seen and experienced and what their dreams are for future generations of our family. We need to use the technology we have been given to record these stories – through audio or videotape or by writing letters to future generations.

Make it a point for this year’s family gathering to be different. By discussing your history and hopes for the future, your family can share one of the greatest gifts this holiday season – a family legacy.

By Chris Carleton, CFP ®
clcarleton@taaginc.com
http://www.taaginc.com/

The Sales Pitch Goes Like This...

“You’re a financially sophisticated and well-to-do executive (business owner, etc.) and you shouldn’t be in the same investment vehicles as the average investor. You deserve better. We’ll give you access to exclusive investments with above average returns that only we can provide."

We all know that Bernie Madoff used financial sophistication and exclusivity to attract wealthy and famous investors to his ill-fated Ponzi scheme, but I have become increasingly furious about the same sales approach being used by national brokerage firms, with horrible financial results.

Over the past year we have had people referred to us that were invested with well known companies like Merrill Lynch, Smith Barney and UBS Financial Services. These companies tout their size, financial sophistication and exclusive investment products as client benefits. Based on our review of portfolios they managed, their products have done nothing but separate clients from their wealth, while racking up profits for themselves.

One example is auction rate securities. According to SEC documents, these were sold by UBS, Citigroup, Morgan Stanley, Merrill Lynch and others as “cash equivalents” that could be liquidated in as little as 7 days, while paying higher interest rates than money market instruments and CDs. In February of 2008, the auction market used to reset the interest rates on these products failed, and clients learned how risky their investments actually were. A February 15, 2008 New York Times article said “some well-heeled investors got a big jolt from Goldman Sachs this week: Goldman, the most celebrated bank on Wall Street, refused to let them withdraw their money from investments they had considered as safe as cash.” Many people are still locked out of their investments, and the SEC has settled charges against several firms. One of our clients was finally able to recover 90% of his investment from his prior advisor, but only after several months of fighting and many sleepless nights.

Another example is structured investments. I couldn’t describe them any better than the May 28, 2009 Wall Street Journal article entitled Twice Shy on Structured Products?
“Wall Street burned thousands of investors with so-called structured products that were supposed to provide healthy profits and limit losses. Brokers, hoping investors' memories are short, are pushing these high-fee products again with safety as the big selling point. Brokers are eager to sell these structured products because commissions are high, but they face explaining why many of these products didn't perform as advertised. They also must convince clients that the firms behind these products are solid. Investors who bought products backed by firms that failed, such as Lehman Brothers, have big losses.”

The article goes on to tell the story of people who lost all their investment in these products. At The Asset Advisory Group, we have seen structured investments in portfolios we’ve been asked to review. In a UBS marketing piece, they describe a UBS structured investment product as an “integral part of a modern portfolio that provides enhanced return potential." But the same investment described in the brochure was held in a portfolio we reviewed, and it had created significant losses.

Every investor should understand the investments they hold. If your advisor can’t explain it to you clearly, then his cloud of complexity is probably covering up layers of risk and fees. Why in the world would you want to own it?

Jeannette Jones, CPA, CFP ®
jjones@taaginc.com
http://www.taaginc.com/

What a Year It's Been

As we enter the last month of the last year of the first decade of the first century of the new millennium (got all that?), I’ll spare you a recap of the entire decade and simply reflect on what has been an eventful year for investors to say the least. While a lot of this has been covered in the media and even in this blog, I think it’s a good time to take one more walk through 2009 and how it might relate to the future.

We entered the year feeling battered and bruised by what was one of the most horrific quarters of a generation to end 2008. A little blip in December provided a glimmer of hope that the worst was behind us. That blip was met by what can only be described as roughly 10 weeks of pain and some of the worst months on record in January and February. In early March, there was a true feeling of desperation in the air when it came to investing and the world economy in general.

Since then, we have enjoyed what has been a fairly historic recovery, despite a lot of mixed messages in the media and the day to day lives of our friends and family. International markets and real estate, which led the way down, have performed exceptionally well as would be expected in leading the world back out of the recession. The US market has followed steadily behind, but still providing impressive returns. While unemployment and other economic indicators continue to depress, they certainly seem to have leveled off. As they are lagging indicators, it only makes sense that they would struggle to keep up with a historically forward looking market.

So what does all this mean? In terms of changing how you invest or what you invest in, not much in my opinion. Remember all of the so called experts back in early March telling everyone to get back in as the tides were about to rise again? I don’t either. Remember those who yelled from the mountaintops in late February that it was time to pull out of the market? Have they gotten back in yet? Have they already missed the bulk of the recovery? It simply proves that we are rarely able to predict what is coming around the bend and that anyone who claims they can is just another salesperson selling expertise they simply do not have.

The smart money will continue to thoughtfully plan their financial future over the long term, allocate investment choices accordingly and then stick to that plan to the best of their ability. Despite short term success and failure, this is the only method that time and time again has proven the most effective way to enjoy a successful investment experience. Chasing returns at the cost of meeting your goals continues to be a losing battle.

A columnist in the Cincinnati Business Courier recently used a quote from John F. Kennedy that seems appropriate for the times in which we live. Kennedy said, “Change is the law of life, and those who look only to the past or present are certain to miss the future.”

Nothing is certain about the current recovery or what lies ahead in 2010 and beyond. The climb back to prosperity may be slow, job growth may move at a snails’ pace, and challenges at home and abroad will continue to play their role as wild cards to any planned path. But how different are these challenges to those that the world has faced in one form or another for generations?

It has never been more challenging to pick who the winners and losers might be going forward. Knowing that you don’t have to in order to invest successfully is an empowering feeling. All you need is a belief in the continued growth of the overall world market in the long term. So long as entrepreneurs and businesses continue to use their ingenuity and scarce resources to produce value for an ever increasing amount of consumers; and so long as you have the ability as an investor to provide those entrepreneurs capital in trade for a fair return on your investment, you can still proceed into 2010 encouraged that the 21st century, while off to a slow start, will be another step forward for the world.

By Chip Workman, CFP®
cworkman@taaginc.com
www.taaginc.com

Avoid Thanksgiving Stress

As we start this week, so too begins the holiday season. While it is wonderful to spend time with friends and family over the holidays, it can also be very stressful, especially if you’re the host.

I had the unfortunate experience recently of witnessing a mother-in-law meltdown; she just became overwhelmed at the thought of fixing Thanksgiving dinner, hosting out of town relatives overnight, and deciding how to handle the family gift exchange. I fear the added stress of knowing her youngest son is getting married in just 100 days kicked her over the edge.

To help her hold it together, we decided to eliminate as much Thanksgiving related stress as we could by working together. Hopefully you can help lighten the holiday load by incorporating some of these tips into your family get togethers:

· Ask for help! If you’re kind enough to host, that doesn’t mean that you have to cook everything, too. When people ask “What can I bring?” take them up on the offer. Delegate! Ask someone to cover desert and another person to bring an appetizer. If Cousin Katie isn’t such a good cook, ask her to bring a bottle of wine or perhaps a store-bought veggie tray.

· Call in a prep crew. Six members of my family committed to spending Saturday afternoon at my in-laws home helping them prep for the festivities. The guys helped dad in the yard rake leaves and mow, while the ladies tackled cleaning the indoors.

· Prep as much as you can. We went ahead and set up the tables for Thursday’s dinner. Bringing in extra linens, tables, chairs, plates, and silver is a lot of work, so ask your crew to help you set it up. Lay all glassware on its side and cover the set table with clean sheets.

Don’t feel as if you shouldn’t ask others for their help. It was actually fun for all of us to chip in and help with the setup. Not only was our work truly appreciated, but it was great spending time with family and getting to talk before the holiday.

As we start this holiday season, keep the big picture in mind. Be thankful for the people who have chosen to spend Thanksgiving with you. Even if your house isn’t picture perfect, the only person who will probably notice is you.

By Amanda Bashore, CFP®
arbashore@taaginc.com
http://www.taaginc.com/

False Prophets, Big Bucks

This blog post was written by Dan Solin
Posted November 17, 2009 on www.huffingtonpost.com

Jeremy Siegel Ph.D. has very impressive credentials. He is the Russell E. Palmer Professor of Finance at The Wharton School of the University of Pennsylvania. He is the author of a number of financial books, including Stocks for the Long Run.

Professor Siegel has become a cottage industry. His web site refers to him as the "Wizard of Wharton" and offers subscriptions so that readers can benefit from his market newsletter and "investment strategies."

His stock market skills are extolled by no less an expert than Jim Cramer, who wrote that "Jeremy Siegel is one of the great ones. [His article at the market top was] one of the most stark and prescient calls I have ever seen."

Of course, Cramer said the same thing about Lenny Dykstra, who he also called "one of the great ones in this business". Dykstra recently filed for bankruptcy, declaring assets of $50,000 and debts of $30 million. But I digress.

Professor Siegel makes end of the year predictions about the performance of the stock markets. When he did so at the end of 2007, with his predictions for 2008, I wrote a blog warning investors not to rely on his predictions. I noted that we all wish there was a guru out there who could see the future but that these claims were "... a disservice to investors when those who should know better foster this false hope."

How accurate were Professor Siegel's 2008 predictions?

Professor Siegel predicted that "...the economy will avoid a recession" in 2008. His crystal ball also revealed that "the stock market will have another winning year in 2008" and that "financial stocks, which have plummeted 18% so far this year, will outperform the S&P 500 index next year [2008] as the credit crises fades."

The recession of 2008 was the worst since the Great Depression.
The S&P 500 lost 38.49% in 2008. It was its worst year since 1937. Financials underperformed all market sectors, losing 56.95%.

I am not picking on Professor Siegel. His predictions are no better or worse than many others.
The securities industry and the financial media inundate investors with market predictions. The reality is that they have no value, whether they are delivered by a carnival barker like Cramer or a well credentialed academic like Professor Siegel.

Dan Solin is the author of The Smartest Retirement Book You'll Ever Read.

Does Your Financial Advisor Work for You?

As the market recovery continues, we have been receiving many phone calls from individuals looking for a new financial advisor. Most inquiries are from people who have been working with a brokerage firm such as Merrill Lynch or Smith Barney. Last year’s market rout has exposed the fact that their portfolios were not diversified, and their broker isn’t interested in proactively communicating with them. As if this is not enough, when we prepare an analysis of their current portfolio, they are often shocked to find out the true cost of this advice.

Bob Veres, author of a monthly newsletter for financial advisors explains:

A brokerage firm representative is employed by, and owes a duty to, the firm, rather than the client.

The brokerage firm representative is PAID by the brokerage firm, rather than the client.
People follow the directions of whoever is paying their income.

And (here's the biggest distinction) the brokerage firm representatives inevitably recommend investment products with a lot of buried, hidden, obscure costs that trickle out of the customer's investment portfolio into those enormous multi-billion-dollar bonus pools. By the rough estimate of one advisor, a client with a $1 million portfolio will pay at least $20,000 more in various hidden costs to a broker than he or she to a financial advisor, even if both the broker and advisor are charging the same fee amount for the planning and investment work.

This is not just an issue of finding the cheapest advisor. This is the brokerage firm putting one over on its customers, draining the portfolio in ways that are never quite visible.It's a trust issue. The brokerage person posing as a real professional is helping the firm take money which, if the consumer knew about it, the consumer would object. The difference between professionals and salespeople is the professionals disclose all costs and compensation clearly and visibly, and you know what you're paying for.

At The Asset Advisory Group, the only compensation we receive is from our clients. Period. We are never paid by an investment company or any other firm. It is important for everyone to understand how the person giving them investment advice is compensated so they can be assured their advisor is working for them and not on behalf of their employer.

By Chris Carleton, CFP®
clcarleton@taaginc.com
www.taaginc.com

Alice Came to the Fork in the Road

Alice came to the fork in the road.
“Which road do I take?” she asked.
“Where do you want to go?” responded the Cheshire cat.
“I don’t know,” Alice answered.
“Then,” said the cat, “it doesn’t matter.

I came across this quote from Alice in Wonderland last week as I was working on our company’s business plan. I think it does a great job of illustrating a problem we all have from time to time. When we try to make decisions about what to do next in our business, our personal or financial lives, we lose sight of how important our goals are in determining our next steps.

The past 24 months have emphasized how critical it is to have financial goals and a plan in place to reach them. People who set goals and monitor their progress against those goals have been much calmer and able to handle the day-to-day market volatility we’ve experienced.

People who are reluctant to set goals and establish plans are more battered by their emotions and vulnerable to the daily investment noise that encourages you to “Do something!” During the early part of this year the urge to bail out of stocks was strong. With the recovery we’ve experienced since March, some are now thinking they should be more aggressive while others are worried about another drop after the Dow Jones Industrial average reached 10,000. The answer is the market movements don’t matter. What is important is your own specific financial situation, you personal goals, and your plans to reach them.

There are tools available to help you establish goals if you don’t know where to begin. If you enjoy reading I recommend The Magic Lamp: Goal Setting for People Who Hate Setting Goals, by Keith Ellis; What are Your Goals: Powerful Questions to Discover What You Want Out of Life or Goal Setting 101: How to Set and Achieve a Goal, both by Gary Blair. At The Asset Advisory Group, we have tools available to help you set personal and financial goals as well, and can work with you to design a plan to meet them.

The happiest and most successful people I’ve met throughout my life have been people who have goals and work to achieve them. Goals give us direction and provide a positive focus when everything seems uncertain. If you aren’t setting goals for yourself, you are missing out on a great opportunity to lead a happier life.

By Jeannette Jones, CPA, CFP(r)
jjones@taaginc.com

www.taaginc.com

And Down the Stretch They Come

On a recent trip down the Historic Kentucky Bourbon Trail, I attended a brunch at Woodford Reserve Distillery in Versailles, Kentucky. The featured speaker at the event was Ellis Starr, one of the worlds’ premier horseracing handicappers. The distillery had brought Mr. Starr in to discuss the finer points of wagering at the track for the many attendees planning on spending the day at Keeneland.

Being a horseracing novice, I was intrigued by what Mr. Starr did for a living. In short, people interested in betting on horseracing will actually pay for Mr. Starr’s advice. Race tracks will also hire him to pick winners and losers for their in-house television networks that are broadcast to track patrons, off-track betting facilities and home satellite services.

As he talked about how to read a program and analyze each horse, the overall conditions of the track, the quality of the jockey and past performance of the horse, it dawned on me how similar these methods were to actively managing an investment portfolio. Was there really a method I could use to beat the odds at the track and expect better than average returns on a regular basis? There must be some hidden piece of data lurking in the race program that only I could see the right way.

Analyzing all the statistics surrounding various horses, much like investments, feels like the right thing to do. Unfortunately, the truth is whether at the track or on the trading floor, countless variables are at work that cannot possibly be interpreted with any regularity. Horses, like stocks, are going to behave however they choose to once they get out of the gate and are free to run.

My trip did not take me to Keeneland that day, but I did go back to review that day’s results as compared to the expert analysis. Much like the stock picking program offers that fill my inbox each day, a broker’s hot tip, or even my good friends on CNBC, I was left disappointed. In not one instance was the winner selected with any degree of certainty. There were a few picks that, if wagered properly, could’ve been winners, but knowing when and how to place that well timed wager would have been a gamble all its own.

What’s more, I got to hear this analysis for free. Most folks, just like in the investing examples mentioned above, pay for expert advice. This is not to disparage horse handicapping in any way, but rather to revisit that tried and true ideal that if something seems too good to be true, it probably is. No investment strategy, whether betting on the ponies or the stock market, is a guaranteed winner. It doesn’t make financial sense to bet on every horse, but, fortunately, you can bet on virtually every company in the world market and ensure that, over time, you’ll have more winners than losers.

As we come down the stretch of the investing year, now is a great time to evaluate how you choose to invest. Is it a thoughtful plan based on your appetite for risk and meeting your needs in retirement? Is it being carried out by professionals with no conflicts and only your best interests in mind? Or, are you simply spending day after day at the race track that is Wall Street, leaving your money in the hands of folks that continue to sell you products and advice based on a promised level of expertise that they simply do not have?

Wagering on a race here and there can be a lot of fun, but I wouldn’t bet my retirement on it.

By Chip Workman

cworkman@taaginc.com

Charitably Inclined? Keep this in mind

There are many ways to give to charity, and perhaps the most basic is writing a check. Americans can be incredibly generous in their giving, and nearly three quarters of us give to charity every year. We each have our own reasons to give, and I would argue that the main motivator is not the tax break.

There are more than 1.4 million charities in the United States, but we typically have one charity that sits closest to our heart. For me, it’s the Ronald McDonald House of Cincinnati. The Asset Advisory Group sponsors a room in the house and I consider myself a cheerleader of the wonderful things that happen there. The house is something to be seen – it’s just magical.

This post is not to petition for donations for the house, however that wouldn't be such a bad consequence. Instead, I want to point out two things that you should keep in mind when you are giving to charity, whichever one it is:

· Focus your giving
Charities spend a lot of money trying to find new donors. It is much more cost-effective for a charity to receive from a donor who is already in their database. The Cincinnati Ronald McDonald House spent nearly $350,000 on fundraising in 2007. While that spending generated over 3 million in support, every dollar that a charity doesn’t have to spend trying to find new donors helps. Your money can do more good by being focused on just a few repeat charities every year instead of sending out small donations to many organizations.

· If your gift is a one-time thing, say so
Again, this has to do with cost. If you write a $100 check to a charity and you are confident that you will not donate to the same organization in the future, ask them to not add your name to their database. You’re actually doing them a favor, because in the years that follow your donation, they will end up spending more than the $100 that you gave trying to elicit future donations from you. Don’t feel like you’re being rude, either; it’s the right thing to do.

By Amanda Bashore, CFP(r)
arbashore@taaginc.com

The Brown Bag Check-Up

You may start off taking a couple of prescription medications and then add to your daily regimen an over-the-counter drug such as an allergy pill, a multi-vitamin and an herbal supplement without informing your doctor or pharmacist. I recently heard on the Dr. Oz Show that if you are taking a combination of more than 6 drugs (including prescription, non-prescription and supplements), you have a 94% chance of a drug interaction.

A 2004 report from the CDC found that deaths from accidental drug interactions rose 68% between 1999 and 2004. Unintentional drug poisonings accounted for nearly 20,000 in 2004, said the CDC, making it the second leading cause of accidental death in the U.S. next to automobile accidents.

As I helped my mother-in-law apply for Medicare last year, I became aware of great service offered by pharmacists and doctors. It’s called a Brown Bag Check-Up. It’s a great way to avoid medication mistakes and cut down on unnecessary medications. You simply gather all of your prescriptions, vitamins, herbal supplements and over-the-counter medications in their original packaging, put them in a bag and take them to your primary care doctor or pharmacist. He/she will:

-Review all of the medications to see if they are the same as those listed on your medical record.
-Double-check the correct dosage strength and how often you take them.
-Make sure you're not taking anything that is outdated or discontinued.
-Assess whether you are taking more than one drug for the same thing.
-Make sure you're not taking drugs that cancel each other out or give you too many side effects.

It is very important to have one doctor aware of all of the medications that you take. At the very least, you should have a list of all of the medications and over the counter drugs that you take and share it with each of your health care providers. It is also helpful to fill your prescriptions at a single pharmacy so that the pharmacist can look for drug interactions and duplications.

While it is essential to be in charge of your health care, look for ways in which you can enlist help from others as well.

By Chris Carleton, CFP(r)
clcarleton@taaginc.com

The Power of Purpose

Over the last few weeks I have been surrounded by friends and family members dealing with the challenges of an aging relative. Their specific situations and circumstances are different, but in each case I have been amazed by how much the attitude of each individual impacts their ability to cope with the issues they’re facing.

The woman who helped care for me before I started elementary school is now in her mid-80’s and has no living relatives, so my parents have adopted her as family. They make meals for her, take her to church, clean her apartment and repair what needs fixed. They are with her nearly every day, but she does not know what to do with her time when they’re not around. She has no significant health problems, but her health is failing and she is becoming very frail because she has no enthusiasm for living.

My great aunt is 101 years old and legally blind. She has lived alone in a small, three story house since her husband died over 25 years ago. A retired English teacher, she loves listening to books on tape, Marshall University basketball games and the news. She tends her small garden in the back of her house and looks forward to trips to Captain D’s for lunch with young friends. She shows no signs of slowing down.

As a financial advisor, I am able to learn from the collective experience of the people I serve. People who are happy and healthy in their 70’s, 80’s and beyond have one thing in common – they have not lost their love of life. They all have a purpose, a reason for living.

As a society we race from one task to the next, and spend very little time in quiet reflection. We need to stop and ask ourselves:
What makes me happy?
What’s missing in my life?
What will keep me going when everything isn’t perfect?

If we take time now to understand ourselves, and know what gives our lives purpose, then we can live fuller lives today and better lives beyond 100.

By Jeannette Jones, CPA, CFP(r)
Jjones@taaginc.com

5 Ways to Dodge Debit Card Disaster

Ensure Your Debit Card is a Smart Alternative to Credit or Cash

Whether it’s to avoid carrying a lot of cash or a response to the dramatic changes in the credit card industry of late, people are turning in ever increasing numbers to debit cards as a primary source of spending money. In 2010 alone, an estimated 40 billion debit card transactions will be completed. This can be advantageous to consumers in many ways, provided the potential pitfalls of debit cards are fully understood and avoided.

1. Be Your Own Overdraft Protection
Overdraft protection provides piece of mind, but often not for the consumer. A recent New York Times article mentioned that banks are looking to pocket $27 billion in overdraft fees this year alone. This protection, after all, is really just another form of credit, allowing customers to dip below the cash they actually have in their accounts to avoid potential embarrassment of having misbalanced their checkbook.
If overdraft protection is truly needed, it is just as easy to leave a set amount of money in an account, but omit it from the checkbook journal and forget it is there. This will provide a cushion of real cash to protect the account holder from an overdraft without going into debt or paying a fee.

2. Know Your True Balance
One of the ways that debit cards can confuse is in the way banks report the current versus the available balance either online or on an ATM receipt. Here, it is best to assume that the available balance is the most accurate, as it may include charges made to a debit card within that business day.
That said, care should be taken in determining what a bank includes in the available balance, as some include the amount of overdraft protection in the available balance, even if that means a customer would pay handsomely for using what’s technically “available”, not to mention being out of money and in debt to boot.

3. Don’t Try To Time Your Deposit
Banks are winning when customers play the game of running multiple transactions the same day they expect a deposit to hit. Banks not only hold deposits for several days before allowing them to clear, some are also changing the chronological order of transactions each day so that the most expensive transactions run first, often causing multiple overdraft transactions. For example, if a customer has $500 in an account and transactions that day in the order of $35, $100, and $550, they could be reordered as $550, $100, $35, causing the customer three overdraft fees rather than just one.

4. Be Secure
Debit cards are linked directly to a customer’s account and extra care should be taken when these cards are used. When withdrawing cash, use an ATM located at a bank, rather than free standing machines at convenience stores or other locations. Bank ATMs are much less prone to skimming devices used by crooks to swipe your account information.
Wherever a card is used, debit card purchases should be processed as a “credit” transaction, not a “debit” transaction where a PIN is required.
Most importantly, check accounts often for accuracy. Most banks offer some level of fraud protection, but how quickly they are notified of the fraud dictates how protected a customer truly is.

5. Don’t Lock Up Your Money
Avoid using debit cards when on the road, especially when paying for a hotel room or rental car. These businesses will insure their property is safe by selecting an amount to block on the customer’s account in case of damage. This can be as much as twice the expected transaction amount. So, if a hotel room is to cost $500 for a two-night stay, the hotel may block the customer from using as much as $1,000 in available cash. When in doubt, communicate in advance and find out what the policy is for debit card transactions.

Stay Tuned – Congress in Session

With the overwhelming popularity of the recent legislation involving the credit card industry, politicians will likely be sure to continue that momentum when it comes to the debit card industry. While this is likely to positively impact the consumer, attention should be paid to what the changes are, how they affect the consumer specifically, and what changes the banks make to counteract the legislation to make up any lost income.

By Chip Workman
cworkman@taaginc.com

Concerned about privacy? You should be

You can hear horror stories involving privacy anywhere. There are constant issues over privacy at Facebook. Look, for example, at 10 Solid Tips to Safeguard Your Facebook Privacy and at Could I have my stuff back, please?

We hear repeated warnings about things that just won’t go away or be undone once they are on the Internet. The Digital Guidebook wrote Something to Think About: Your Digital Identity is the New Chastity.

Consider this example from the Electronic Frontier Foundation (EFF), What Information is “Personally Identifiable”?:
Mr. X lives in ZIP code 02138 and was born July 31, 1945.
These facts about him were included in an anonymous medical record released to the public. Sounds like Mr. X is pretty anonymous, right?

Not if you’re Latanya Sweeney, a Carnegie Mellon University computer science professor who showed in 1997 that this information was enough to pin down Mr. X’s more familiar identity — William Weld, the governor of Massachusetts throughout the 1990s.

Gender, ZIP code, and birth date feel anonymous, but Prof. Sweeney was able to identify Governor Weld through them for two reasons. First, each of these facts about an individual (or other kinds of facts we might not usually think of as identifying) independently narrows down the population, so much so that the combination of (gender, ZIP code, birthdates) was unique for about 87% of the U.S. population.

The EFF report went on to say:
But research by Prof. Sweeney and other experts has demonstrated that surprisingly many facts, including those that seem quite innocuous, neutral, or “common”, could potentially identify an individual. Privacy law, mainly clinging to a traditional intuitive notion of identifiability, has largely not kept up with the technical reality.

CNet picked up on the story and wrote How 10 digits will end privacy as we know it. These 10 digits are the five-digit ZIP code, gender, and date of birth. CNet said,
Knowing just a little about a subscriber–say, six to eight movie preferences, the type of thing you might post on a social-networking site–the researchers found that they could pick out your anonymous Netflix profile, if you had one in the set. The Netflix study shows that those 10 de-anonymizing digits can hide in surprising places.

Our physical belongings also betray our anonymity by silently calling out identity-betraying digits. Small wireless microchips–often called radio frequency identification, or RFID, tags–reside in car keys, credit cards, passports, building entrance badges, and transit passes. They emit unique serial numbers. Once linked to our names–when we make credit card purchases, for instance–these microchips enable us to be tracked without our realizing it.

Ask yourself the following
· In what category do you fall? Worried, confident, concerned or unfazed about your privacy?
· Are you thinking about, developing, building, monitoring, and protecting YOUR digital footprint?
· Are you thinking about your footprint when (or not) posting or commenting on blogs, uploading material, or participating on social networking sites?
· Do you keep your personal and professional digital footprint separate?
· Do you just assume that no one will bother to try to find a trail to and about you?

If you aren’t paying attention to privacy yet, now is the time to get your head in the game and take a look at how you live your online life.

Some information in this blog thanks to the blog cross-posted at BlogHer, originally posted Tuesday, September 22, 2009

The Secret to Investment Success

We all want to pick a winner. It doesn’t matter if we’re at the racetrack, casino, or investing our IRA. However, investors who spend most of their time trying to pick winners often end up losing more times than not. The number one determinant of your portfolio’s return is your asset allocation – the percentage of your investments in stocks and bonds – and not your superior stock picking ability or market timing. Once you have your asset allocation in place, your behavior will determine your long term success.

It’s easy to look back after a huge market run-up or downturn and think that it was obvious. It then becomes even easier to base our future decisions on recent events, by supporting our gut feeling by selectively looking at information that supports our opinion. We are constantly barraged with headlines that play to our emotions. The media loves to use current events to forecast the future. They want to create headlines that sell magazines or attract viewers, not create successful investors.

Steve Forbes said in a 2003 presentation to The Anderson School of Business, “You make more money selling advice than following it. It’s one of the things we count on in the magazine business – along with the short memory of our readers.”

And just how do investors do with all of the information available about how to pick the winners? Dalbar does an annual study of investor performance versus the indexes. Last year the average equity investor underperformed the S&P 500 by almost 4%. They were down 41.63% vs. a loss of 37.72% for the S&P. For the past 20 years (January, 1989- December, 2008) the average equity investor earned an annual return of 1.87% vs. the S&P 500 average annual return of 8.35%. On a $10,000 investment, this meant a difference of $35,240!

We cannot control the short term direction of the markets. However, if we focus on what we can control - our reaction to the market- our chance of success will be much greater. Author Nick Murray does a great job summing it up: “At the end of our investing lifetime, it won’t matter what your funds did, it’ll matter what you did. And what you did will be a pure function of the quality of advice you got – from one caring, competent (advisor), and not from any number of magazines.”

By Chris Carleton, CFP(r)

Top 3 Ways to Guard Your Cards; Crunching the Numbers on Credit Card Legislation

The Credit Card Accountability Responsibility and Disclosure Act of 2009 goes into effect February 2010, but changes are being made by card companies that might impact you today, even if you have great credit. Here’s what you should do to protect yourself:

1. Keep total charges below 20% of available credit. For example, if you have one card with a $5,000 limit and you charge over $2,500 each month to take advantage of the rewards points, it will negatively impact your credit score, even if you pay your bills in full each month. This factor makes up 30% of your credit or FICO score. To prevent this, consider using more than one card. Lenders are watching this ratio as a risk factor and using it as a reason to lower the total credit line for some cardholders. This creates a vicious cycle because a lower credit line increases your total ratio, which then further lowers your FICO score.

2. Keep your cards from being cancelled. Card companies are closing accounts that are inactive to limit their potential risk and expenses. This hurts you in two ways. If it is a card that you’ve had for many years, closing it will have a negative impact on your credit rating, since 15% of your FICO score is based on your credit history. The longer your history, the better. It will also increase the ratio of how much you owe to your total available credit and make it more difficult to keep below that 20% target. To keep your cards from being cancelled use them at least once every 3 to 6 months. Putting a revolving monthly charge on your lesser used cards is an ideal way of preventing cancellation.

3. Read all those boring mailings you receive from your card companies. In the past they were usually privacy statements or other dry material, but lately they have included notices on rate hikes, additional fees, changes in billing cycles, grace periods and other items that impact you. If you don’t know the billing cycle has changed and it causes you to be late, it will impact your credit score for up to a year. Your payment history is 35% of your score – the biggest factor. If they hike your rate and you have a credit score of 730 or above (the range is 300 to 850) consider looking for a lower rate card on http://www.bankrate.com/ or http://www.cardratings.com/ where there is still plenty of competition for your business.

If you aren’t in the market for new credit, you should still check your credit report for errors or suspicious activity on your accounts. You can do that by going to http://www.annualcreditreport.com/ to obtain a free report. You are entitled to one from each credit bureau every 12 months, and if you find a mistake on your report you can follow the instructions on the credit bureau’s website to get it corrected. Correcting mistakes can make a significant positive impact on your score.

It is crucial in this time of significant change to the financial sector to take an active role in protecting your all important credit score. By taking these simple steps, you will be well on your way.

By Jeannette Jones, CPA, CFP®
jjones@taaginc.com

Counting to 10

One of George Santayana’s most famous, and misquoted, sayings is “Those who cannot remember the past are condemned to repeat it.”

The biggest regret we face from the recent downturn is failing to learn anything as it passes. That is not to say we can avoid another downturn, as surely another bout of greed will come along and create another bubble that will subsequently burst, but perhaps we can at least take away a few ideas that might generate some smarter investment decisions down the road.

A footnote to an article by Dayana Yochim for Yahoo! Finance this month mentions that she regulates herself with a three-day waiting period before making any major money decision. Long a means of gun control and a common rule to waiting to call for a second date, there is no doubt this cooling off period could also be a great tool in governing personal finance on several fronts.

The first is making knee jerk reactions in our portfolios. So many stories are starting to be told about those who finally reached their boiling points right as the market seems to have hit its trough back in March and sold a significant chunk of their equities at the lowest of their lows. While three days might not have saved everyone, certainly taking a breather and realizing this downturn’s place among a lifetime of investing ups and downs might have provided some additional reflection, and an opportunity to avoid selling out right before a historic upswing.

This helps on the upside as well. Greed is a powerful force in convincing investors to stay overweight or even buy more of a certain asset class when things are soaring and can’t possibly go down. If instead, that investor takes a few days to really think about times such as these, they might instead decide to take the respectable profits they have already achieved and buy into that lesser producing asset classes that, while not exciting anyone at the moment, are sure to impress down the road and keep the investor true to their original plan.

Lastly, just think what this waiting period could do for budgets. My wife and I were joking over the weekend that it seems all too easy for a quick trip to Costco for some paper towels and baby wipes to turn into a several hundred dollar shopping spree. By picking a certain dollar amount above which you will wait three days before making the final decision to buy, think of how many wasted purchases could be avoided.

A running theme in some of my past posts is that sometimes the best lessons are not those that induce sweeping reform or dramatic differences in outlook on how we do things. Major changes are rarely sustainable over time. It is instead those lessons that result in small, balanced tweaks to our behavior that can truly have the most impact over time. Don’t agree with me? Take a deep breath, wait, and then decide.

By Chip Workman
cworkman@taaginc.com

Mandatory Vaccines: Measles, Mumps, Rubella...and Swine Flu?

It's back to school season, and if you have school-age children, you might be used to ensuring that your kids have the vaccines necessary for school. Commonly required vaccines include shots for measles, mumps, rubella, tetanus, and polio, but how would you feel if you had to add one more to this list? There is intense debate between politicians and the medical community right now as to whether the vaccine for the H1N1 virus (Swine Flu) should be forced on individuals.

The Department of Health and Human Services hopes to vaccinate 160,000,000 people by this December. The vaccine was introduced for testing to adults and children in August and they hope to release the drug by mid-October. Many individuals raise issue with the vaccine, arguing that a few months cannot be long enough to truly determine the long-term effects of the vaccine.

There are also concerns about the ingredients and side effects. Thimerosol is a component of the vaccine. Thimerosal contains mercury and it's use has been linked to autism in children, among other neurodevelopmental disorders. The FDA's website even warns, "because of these concerns, the Food and Drug Administration has worked with, and continues to work with, vaccine manufacturers to reduce or eliminate thimerosal from vaccines."

There are also mixed opinions about the correlation between the H1N1 vaccine (both the vaccine being tested today and the vaccine used during the 1976 swine flu) and Guillain-Barre syndrome. There is much debate about whether the syndrome is a result of the flu itself or of the vaccine. Until there is conclusive evidence, the debate and concerns will continue.

It should be noted that there are no constitutional authorities that permit the government to force vaccinations on competent adults. The populations likely to face compelled vaccination are deployed military personnel, health care workers, and grade school and day care students.

I am not advocating for either argument. I certainly would not consider myself educated enough about this issue to make a case for or against mandatory vaccination. Instead, I think individuals should arm themselves with as much information as possible surrounding the issue and make the decision that is right for you and your family.

By Amanda Bashore, CFP(r)
arbashore@taaginc.com

Role Reversal

I have seen many clients struggle with caring for their parents, and I thought it would be years before my time would come. It is particularly difficult when you live in different cities.

In May, my 68 year old mother-in-law, Charleen, had surgery to receive a pacemaker to control her arterial fibrulation. The operation seemed simple enough and she should be home the next day. Unfortunately, she experienced multiple complications due to a device malfunction and an inept surgeon. Finally, after her third operation, she is on the road to recovery.

My mother-in-law lives alone and my husband and I wanted to ensure that she continues on the road to recovery. We recently hired a Geriatric Care Manager, Terry, to meet with Charleen and communicate with her at least monthly. I found Terry through http://www.caremanager.org/. I selected her because she is an RN and JD. She has been a valuable resource to ensure that Charleen is getting the best care possible.

After an initial assessment of Charleen's health, she furnished my husband and I with a report listing all of her medications, any potential interactions between drugs, follow up questions for her next doctor's visit and a list of recommendations to make Charleen's life easier. Based on this report we now know she needs a cleaning service to help her with heavy cleaning on a monthly basis and that she has started feeling isolated as her arthritic knees limit her mobility. We now have local contacts for transportation during the winter and social activities for seniors.

The biggest benefit to hiring a Geriatric Care Manager is peace of mind for my husband and I, as well as Charleen. Because we cannot see her in person on a frequent basis, it is comforting to know that Terry can visit when needed and give us an assessment of Charleen's progress. Charleen likes having a medical professional she can call when she has questions that she wouldn't typically call her doctor to ask.

Our parents spend years taking care of us. Now it is time to return the favor. A possible knee replacement is in Charleen's future. With Terry's help, we feel much more confident assessing Charleen's options so that the decisions we make with her will have Charleen out and enjoying her retirement once again.

-By Chris Carleton CFP(r)
Clcarleton@taaginc.com

Scams are Back

Scammers are talented at taking advantage of people by tapping into their fears and desires to get ahead financially. Periods of high stress and abysmal returns often bring out promoters who promise miracle money strategies. Since the last two years have been particularly trying for investors, scammers know this is a great time to strike.

You do not have to be financially unsophisticated to be taken in. Many of the schemes are packaged to appeal to the very educated by appearing to be very complex and available only to wealthy investors. This was Bernie Madoff’s strategy, and his $50 billion dollar Ponzi scheme proved he was quite good at it. But you can find other examples right here in Cincinnati.

According to the June 1997 SEC litigation filing, Mark Gatch and Henry Schmidt solicited investors from February 1992 to March 1995 with the promise of 4-5% per month profits using a secret trading strategy marketed through Ben Mar Investments, an unregistered investment company. They found their clients at country clubs, within the Reds and Bengal rosters, and through relationships with other high net worth Cincinnati residents with an invitation only entrance requirement. By the time the scheme came to light, investors had lost approximately $12.2 million, including $4 million that Gatch and Schmidt took for themselves.

After suffering losses in 2008, many people are probably wishing for guarantees. From 1995 to 2002 George Fiorini's 10 Percent Plus Income Plan was advertised on TV, radio, newspapers and even bus benches across the Tristate. “There aren't many things in life that are guaranteed, but the Fiorini Agency's 10 Percent Income Plus Plan guarantees you an income for life — without any risks,” Mr. Fiorini promised on the radio. The late television celebrity Bob Braun, a face familiar to generations of Cincinnatians, backed him up. The problem was, there was nothing paying an annual tax-free interest rate of 10%, and any investment (like stocks) that could provide a high return was NOT guaranteed. In August, 2004 Fiorini finally plead guilty to mail fraud, income tax evasion and interstate transport of stolen money which ended more than four years of law-enforcement efforts against the one-time insurance agent.

The FBI is reporting a surge in investment fraud cases including high yield investment frauds, Ponzi schemes, pyramid schemes, foreign currency fraud and other plans. It sounds obvious, but if you are solicited by a friend or stranger with an investment idea that sounds too good to be true, no matter how credible it sounds – walk away!

By Jeannette Jones, CFP®
Jjones@taaginc.com

Personal Finance 101

One big wake-up call from the recent economic downturn is that the literacy rate in this country is at absolute crisis levels. Financial literacy, that is.

Millions of high school, college, even graduate level students leave their alma maters every year completely unable to decipher basic financial information. Whether it is how a mortgage works, the true cost of carrying a credit card balance or the importance of maintaining a high credit score, even the extremely well educated are often completely in the dark.

I’ve talked to many baby boomers recently who are concerned, some downright guilty, about the societal legacy they are leaving their children and grandchildren when it comes to living within one’s means. If we really want to try and right the ship, we should use this teachable moment, to use a popular phrase of late, to show today’s students the importance of financial literacy.

Fundamental finance should be required at the high school level, or, at the very least, as part of a balanced college curriculum. In my undergraduate studies, I took such courses as Geology of U.S. National Parks (aka Rocks for Jocks), History of Western Art – Prehistoric to Gothic, Beginning Photography and even Horseback Riding. I registered for the latter two only because Wine Tasting 101 and a class actually entitled “The Meaning of Leisure” were already full. While I understand, to a point, the role these courses play in shaping critical thinking and producing well rounded alumni, I do not think it will do too much damage to the liberal arts model to require students take a 1 or 2 hour class in basic personal finance.

More and more, we are starting to see positive change. Several local high schools are starting some kind of program in financial education. Until it becomes more mainstream, a tip of the cap to the American Institute of Certified Professional Accountants. They have created two websites worth a look for anyone wanting to learn about financial issues. The first, http://www.feedthepig.org/ includes great tips for how to save for all age groups and a link to a site especially made for young children. The second, http://www.360financialliteracy.org/ is a database of invaluable information, broken down by life stages.

What can you do? If you have the opportunity, let your local representatives, your high school or college alumni associations know that you support financial education as a core educational component of future generations. While we would be foolish to think we can stop the cycle of fear and greed that drives our economy, perhaps with a little basic education, those cycles do not have to be so drastic.

By Chip Workman

Cworkman@taaginc.com

Why Don't You Just Give Your Broker a Gun and Tell Him to Shoot You?

(From Dan Solin's blog, Huffington Post, July 14, 2009)

A reader of my blogs sent me an e-mail with a Customer Agreement from a major brokerage firm. She asked me to look it over and tell her if she should sign it.

The first thing that struck me was this clause:
"Brokerage activities are regulated under different laws and rules than advisory activities and generally do not give rise to the fiduciary duties that an investment adviser has to its clients."
The agreement pointed out that the brokerage firm "...may face certain conflicts of interest and as such, its interests may differ from yours."

These statements are typically inserted in account opening agreements.
I asked the reader this question: Why would you entrust your assets to a firm that tells you it does not have to act in your best interests and further that it may have conflicts of interest with you which it will resolve in its favor?

It gets worse:
The agreement also provided that all disputes must be resolved by mandatory arbitration. Not before an impartial panel, but one appointed by FINRA, which is essentially a trade group for the securities industry.

William Galvin, the highly respected Secretary of the Commonwealth of Massachusetts aptly described FINRA's arbitration process in testimony before a congressional sub-committee as "an industry sponsored damage-containment and control program masquerading as a juridical proceeding."

Taken together, these clauses are a sucker punch for the unwary investor. The brokerage firm is telling you straight up that they will not act in your best interest. By consigning you to FINRA's mandatory arbitration, it is unlikely that you will get justice when you try to recover for their misconduct.

Why don't you just give them a gun and tell them to shoot you?

What's your option?
Don't play by their rules. Instead, if you need investment advice, retain a Registered Investment Advisor. They are required by law to be fiduciaries. If their agreements provide for arbitration, it will not be FINRA arbitration and you can often negotiate the removal of the arbitration clause altogether.

Just be sure the advisor focuses on your asset allocation and limits your investments to a globally diversified portfolio of low cost index funds, Exchange Traded Funds or passively managed funds.

The reader sent me this note: "Amazing how 90% of the public does not understand that they are the investor sheep heading to the Wall Street butcher shop."

My sentiments exactly.

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.

There's a Hole in Your Wallet

Chances are you waste a lot of money each month. You probably recognize some of the ways you could live less expensively, but here are a few you might not:

• If you're stashing your cash in an ordinary bank checking or savings account, you're missing out. It would work harder for you by sitting in a high yield savings account. You can even get an interest-bearing checking account. Check out ETrade or ING.
  
• Your home electronics are sucking juice (more than you would think, too) when they are turned off. If you can't bring yourself to plug and unplug all the time, you can buy power strips that will stop drawing electricity when the item is turned off.
  
• Do you complacently pay your insurance bill when it comes? Rates can vary drastically from insurer to insurer. Re shopping your home and auto insurance could save you a bundle. You'll also want to examine your deductibles and coverage every so often to make sure you still need what you're paying for.
  
• Say you're a diligent saver and you automatically invest a little each month into mutual funds. Make sure you're not paying an upfront fee, or load on that fund. You might also be paying a 12B-1 marketing fee, but these are less expensive and more difficult to avoid than sales charges.
  
• If you're a smoker, you don't need me to point out how much money you're wasting, let alone the more costly medical care you're signing up for in your future. A pack-a-day smoker at $5.00 a pack spends $1,825 a year on cigarettes. If you're a junk-food or tanning bed fan, that adds up too.
  
• Do you really need all those cable channels? I've even had luck reducing my cable and cell phone bills by calling and asking. It's worth a try.
  
• Don't pay for your credit report. You're entitled to your credit report for FREE once every 12 months from EACH reporting company. That means you could be even more diligent and remind yourself to pull your report from a different company once every 4 months. Make sure you visit annualcreditreport.com to pull yours. There are many other sites out there that will be happy to charge you for the privilege.

By Amanda Bashore, CFP®

Arbashore@taaginc.com

The Golden Ticket

"Happiness is a by-product. You cannot pursue it by itself"

Sam Levenson

As we approach retirement, much time is spent daydreaming about a life of leisure when we have no one to answer to but ourselves. Happiness seems inevitable when we are in charge of our own destiny. It is common to spend the years approaching retirement creating a plan so your financial house is in order, but less common to create a mission statement describing the purpose for the next stage of your life.

enter

In business, a mission statement is created to describe the purpose of the organization and spells out the goals and direction for a company. With a personal mission statement, you can create an intentional direction for your life.

In the twenty years I have been advising retirees, I have found that the biggest determinant of their happiness in retirement is discovering their purpose. This can be anything from spending time with family and friends, pursuing a hobby, volunteering to starting a new career. Those who are the most thoughtful about how they will be spending their golden years seem to enjoy life to the fullest.

A wonderful web site I have recently discovered is http://www.theonequestion.com/. It includes a wealth of information from a test to discover your purpose, to links to articles, books and interviews so each of us can discover our own passion and begin to live a truly fulfilling life. It's never too late to start!

By Chris Carleton, CFP®

Baby Boomers Retiring - How Will it Affect the U.S. Economy

The Boomer generation is a demographic term for the Americans born somewhere in between 1946-1964. Based on a 2000 United States census, the Baby boomer generation is a population of roughly 83 million. To date, baby boomers range from 42 to 60 years of age. This means that the baby boomer generation is on its way to leave the labor force of the country.

Baby boomers are offsprings of a healthy, erudite and bounty living. Because of this, they have changed the perspective of growing old by reinventing themselves to pursue a new passion.

Because of the distinctive characteristics of baby boomers, they have caught much attention and are the subject of studies and surveys. And for one thing, baby boomers belong to an influential generation that significantly affects the economy of the United States.

In an investigation conducted to discover how baby boomers expect retirement, here are some of the key findings:

• For baby boomers, retirement is an occasion to dedicate themselves to the family and to enjoy their leisure time by pursuing their interests and hobbies. Anyway, they view retirement as a chance to improve their skills and find another career opportunities for their age.
  


• Baby boomers quest for both personal and career fulfillment has becomes a driving force for them when preparing and planning for retirement. They secure social security by accessing health and life plans.
  


• Baby boomers are an optimistic generation with conservative financial hopefulness.
  


• So compared with their parents, baby boomers are far more likely to be continuously working while enjoying their leisure and comparatively the boomers made more money than their parents.
  

Tracing back to the annals of American history, the US economy has predominantly prospered since the baby boomers matured to enter the labor force. Historically, they are considered to be the prime source of the work force. But now that there is the expected demographic decline of baby boomers, the Unites States Bureau of Labor Statistics expect labor shortages that must be resolved quickly. Otherwise, it will inflict dire consequences to the economy.

However, there are some solutions to address the foreseen labor shortage by targeting the other variables that affect the demographic landscape. Organizations and firms can consider retaining the older workers, correcting the gender imbalance in work designations, outsourcing and hiring immigrants.

Since the baby boomers entered the labor force, the US economy has grown faster than its overall population. And the impending decline in the participation of baby boomers to service, will mean a slower rate of labor force growth as well as impact the economy.

(with edits) from helloboomers.com March 6th, 2009

The Forgotten Man

The specter of the Great Depression has been raised repeatedly since our current recession began. After hearing all the comparisons I decided to do some research of my own.

Amity Shlae's book, The Forgotten Man – A New History of the Great Depression, does an excellent job of reviewing what the US went through from 1929 – 1940 with balanced and well-documented facts. After reading the book I am amazed that we came out of that time in history without becoming a socialist country or carrying permanent financial scars.

My first major take-away from the book was we think we know how tough it was back then, but we have NO idea. William Troeller, a 13 year old boy in Brooklyn, hung himself from the transom in his bedroom so that his remaining family would have enough to eat. His father had lost his job and the family’s gas for their apartment had been shut off for 7 months. Wide-spread hunger was severe. Deflation was so bad that money literally ran out, and many states, like New Jersey, created their own substitute currency so people would have something to pay their bills. There was a black market for paper money.

My second observation is that the history we were taught – that Hoover was the villain that got us into the Depression and Roosevelt and the New Deal saved us – is severely flawed. The boy who hung himself did so 5 years after Roosevelt was elected and the New Deal programs had been implemented. The New Dealer’s efforts, though good intentioned, caused major damage to the US economy due to their bureaucratic management of the markets. The Schechter brothers, who ran a small kosher butcher shop in Brooklyn, were almost thrown in jail and driven out of business because they allowed their clients to choose their own chicken to be butchered – a violation of the National Recovery Administration’s “Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and About the City of New York.” The case went all the way to the Supreme Court before it was thrown out. The rules forced onto businesses by the NRA crippled entire industries and forced the shut-down of companies increasing unemployment and causing the second wave of the Depression.

The level at which Roosevelt and his staff experimented with the markets was also sobering. Every morning FDR would set the target price for gold for the United States. One morning he told an assembled group that he was thinking of raising the price of gold by 21 cents because it was a lucky number. Utility companies like Commonwealth & Southern were driven out of business by government sponsored projects such as the Tennessee Valley Authority, and shareholders lost their investments. Ironically, the cost of power went up in many areas where the government had taken over.

World War II has been cited as the reason we were able to climb out of the Depression, but I believe that change in the attitude of Americans had already begun. The US has a culture of fighting back, and it had become obvious to many that the New Deal was not working. In January 1940 an article, directed at FDR, was published in Fortune magazine entitled “We the People.” In it Wendell Willkie, the former president of Commonwealth & Southern, urged the president to “give up the vested interest you have in the Depression, open your eyes to the future, and help us build a New World.” People were tired of seeing the government beat up on business while telling the unemployed it was for their own good. Americans might allow politics and policy to fool us for awhile, but we don’t believe it forever.

By Jeannette Jones, CPA, CFP®

An Oracle Missteps

While as a rule I prefer not to forecast, an undeniable attempt by the markets at a recovery has begun, with some asset classes enjoying historic gains since early March. Even with this news, Warren Buffett, the Oracle of Omaha, has appeared in the media quite a bit with some downright depressing comments about the future of the economy. While I certainly believe that a return to “normal” will include some potentially significant bumps along the way and that a quick and easy ride back to where we were in 2007 (which was not, by any measure, normal either) is not likely, I am equally pessimistic about the uncharacteristically morose view that the world’s second wealthiest man has taken of late.

I have spoken with many people over the last few weeks that share this negative outlook, often quoting Mr. Buffett as a source for their worries and concern. While a fan of his overall career and his disciplined handling of his personal finances, I would like to offer an opinion that may not be so popular with the Warren-nation. Is it possible the Oracle has misstepped of late and is struggling to acknowledge the error of his ways?

Warren Buffett is a human being. That’s right, I said it. He plays bridge, he drives a Caddy, he has lived in the same house for 51 years. He also happens to be one of the most successful, disciplined investors of all time. Yet even with all his discipline and all the information a man of his status has at his fingertips, he has proven just as likely to succumb to the “what goes up, must move higher” mentality as any of us.

Buffett’s primary reasoning behind his most recent comments is that he is not seeing recovery on the floors of the companies in his portfolio. Is that because the economic recovery is a pump fake and we should prepare to run and hide? Or could it be Berkshire Hathaway is not nearly as diversified as one might think?

Over the last several years, look at the companies Berkshire has acquired. Acme Brick, Borsheim’s Fine Jewelry, Clayton Homes, Helzberg Diamonds, MidAmerican Energy, RC Willey Home Furnishings, NetJets. These are home builders, mortgage companies, furniture stores, fine jewelry dealers, energy companies, even private jet charter services. Berkshire got caught up in the boom in housing, luxury goods, energy and credit just like the rest of the world.

Once things turned sour, he made a multi-billion dollar bet on General Electric before it subsequently tanked even further. This is certainly not just an attempt to point out fault (I actually think with the terms he secured, this will be a good deal for Buffett in the long run), but rather an attempt to point out that no one person, not even the Oracle, has all the answers. The ability to be right time and time again is a noble endeavor, but a sucker’s bet. Greed and a sense that some companies just simply never underperform are powerful emotional pulls for even the shrewdest investor.

As the U.S. and global economies get back on their feet, and they will, even if it’s a slow, volatile comeback over several years, we must remember to not take the wins too seriously or the losses too much to heart. In the long run, smart, disciplined investors with well diversified portfolios will be rewarded, while speculators and gamblers will win some, but lose most.

By Chip Workman

Make Your Own Declaration of Independence

You don’t have to be Jefferson to create your own Declaration of Independence. Writing your own can be a great way to recommit to yourself and your financial independence this summer. Make it your half-year resolution.

We have all thought about our goals and what we want our future to look like. If you're anything like me, it will help you to write it down. Each day we make financial decisions and take steps to get there. We go to work and earn another day's pay. We pay our mortgage and can check one more payment off the list.

Start your Declaration with a mission statement. What is your goal? Is it to have enough saved to be financially independent until the end of your life? If you’re having trouble defining your goal, answer the question “How do I look in fine, ten or more years?”

Try not to just pick a number for your goal, such as stating “I want to have $1,000,000 by retirement.” Instead, try to model as closely as you can how much you will need in dollars to fund your desired lifestyle (Note: This sort of modeling can be made much easier with the help of a financial planner). Knowing what you need to save in order to fund your goals is much easier than picking a number and working backwards.

Once you have defined your goals, take it a step further and outline what you will do to work toward that goal. You could have a blanket answer to the questions by saying that you will work to fund your goals, but you might find it more useful to be specific. An example might be “I will set aside $250/month in order to have enough saved in 5 years for the boat we want.”

After you progress through defining your goals, rank them in order of importance. You might find that once you have them listed in this order, you see that your list moves from ‘needs’ to ‘wants.’ You might be surprised to see which items fall to the bottom of your list.

Finally, sign and date your declaration. Don’t just file it away, either. Keep it somewhere that you will remember to re-evaluate it each year. Perhaps you stick it in your current year’s tax file? That way you will find it next year and remind yourself of what you’re trying to do.
-It’s much easier to get there when you know where you’re going.

By Amanda Bashore, CFP®

The F-Word

One of the least discussed but most important factors to consider when hiring a financial advisor is whether or not they are a fiduciary. This means the advisor has a legal obligation to put their clients’ interests ahead of their own. Most consumers assume that their advisor is acting in this capacity, when many times he is not.

The law regards the job of advisor as a position of trust and requires those with a fiduciary obligation to disclose any conflicts of interest and to act with a heightened sense of duty toward clients. Registered Investment Advisors with the Securities and Exchange Commission are held to this standard. As of July 1, 2008, Certified Financial Planners had the ethical standards by which they are held revised, making it explicit they too must put clients’ interests first, act as fiduciary and disclose the scope of their engagement and their compensation when engaging in planning activities.

Because a broker’s job is considered to be transactional as they are often placing trades on a client’s behalf, they are held to a different regulatory standard. Their duty is to make a recommendation that is “suitable” to their client’s circumstances. If a brokerage house manages a large cap growth mutual fund that has an internal expense ratio of 1.50% and an additional 12b-1 marketing fee of 1% that is paid to the broker, this would be considered suitable instead of recommending another large cap growth fund with much lower internal costs.

In the financial services industry, there has been a lot of talk about how consumers are confused about the difference between brokers who call themselves "financial advisors" or "investment advisors" and Registered Investment Advisors who are held to a fiduciary standard. In the past each were paid very differently – advisors charged management fees and brokers received commissions. Over the past several years many brokers have begun charging fees, giving consumers the impression that they are acting as fiduciaries.

The recently proposed financial regulatory reform legislation gives members of Congress the opportunity to improve the world of consumer finance. Fortunately Mary Shapiro, head of the Securities and Exchange Commission, has stated that the SEC might recommend creating a single standard that applies to advisors and brokers – a fiduciary standard.

In the interim, make sure you question your financial advisor as to which standard they are held.

By Chris Carleton, CFP®

Casualties of Complexity

At the risk of sounding naïve, I believe that many of the problems we experience as investors and the institutions that regulate us are brought on by complexity.

The book, A Demon of our Own Design, got me started thinking this way. Written by Richard Bookstaber in 2007, it gives an insider’s view of the 1987 Crash and the collapse of Long-Term Capital Management, the hedge fund that took down UBS when it collapsed in 1998. Each disaster, and several others described in the book, was caused by an attempt to use complex financial strategies to circumvent the normal movement of financial markets – and each failed miserably.

None of the designers behind these strategies were intellectual light-weights. The author himself received his PhD from MIT in economics; but in all cases the complexity of the product design (portfolio insurance, currency options, etc.) failed to take into consideration some factor that only seemed obvious in hindsight. There was too much complexity in the plan to take all possibilities into consideration in advance.

Ironically, the last chapter of the book recommended that “rather than adding complexity and then trying to manage its consequences with regulation, we should rein in the sources of complexity at the outset.” This was written before collateralized debt obligations and other complex financial instruments created what some are now calling the Great Recession of 2008.

Not only did we experience a global drop in the equity markets in 2008, but to add insult to injury people had their money stolen from them by people like Bernie Madoff. Now the Obama administration is proposing regulation to prevent what we’ve been through from happening again. While I believe that regulation usually does more harm than good, I understand that something needs to be done.

If complex regulations are proposed to control investment companies then more inventive ways to circumvent the regulations will result. I propose simplicity instead. Make all brokers, financial planners, financial consultants, investment advisors, money managers, etc. follow the same 3 rules:

1. Use an INDEPENDENT company to hold your client’s assets.
2. Hold yourself to a fiduciary standard when you work with your client.
3. No matter what you are doing, or who you work for, follow rules 1 and 2.

There is hope, since the Obama proposal mentions establishing a fiduciary duty requirement for all advisors, but we’ll see if it makes it through a Congress that is heavily lobbied by groups that don’t want to be held to the standard.

People who lost money before these rules were in place might have been saved by them, but they could have saved themselves as well. All of the Bernie Madoff victims interviewed said they did not know how he was investing their money and could not explain how he could give them a steady 10% per month return when markets were falling. Complexity can be very seductive to investors because it appeals to the belief that really, really smart people have secret ways of outperforming the market.

If we don’t understand something because it is too complex, then we risk becoming a casualty of the complexity. My rule – keep it simple enough to know what you have and what you are doing. It works in life as well as investing, but that’s for another day and another blog…

By Jeannette Jones, CFP®