Archive for June, 2009

Health insurance has been in the spotlight recently as the debate for a nationalized health care system ensues. What is often overlooked is the quality of healthcare in the United States. Forrest Simmons, had a right hip replacement at Piedmont Hospital in Atlanta and says exactly two weeks after the operation : “I am, sitting at my desk at work, only having to use a cane to get around, and it reinforces my belief that we have the most incredible health care and technology systems in the world”.
 
The debate on health care reform impacts every one of us and when you think about it, this may be the one piece of legislation that touches all of us in the most direct, intimate fashion. What’s more personal than your health? Whether you agree with some type of government provided health care or not, this is too big of an issue for us not to reflect our views to our elected representatives.
 
With that in mind I have attached a link that will help you contact your representatives in Congress and let them know your opinion. Here is the link to copy into your browser:
 
http://www.house.gov/zip/ZIP2Rep.html
 

Type in your zip code, and when the name of your Representative shows up, click on “Contact” in the upper right hand corner. Let him/her know your thoughts.

 With the recent housing decline, coupled with the general economic decline, many Americans have become upside on their mortgage. That is, owing more than your home is currently worth. Those in this situation are in a tight spot, but do have some options.
 
Not the greatest options:
 
Selling the house: This is not the most attractive option because homeowners are likely to have a loan balance left over after the house is sold equal to the spread between what the house is worth and what is owed.
 
Renting the house: Along with housing prices, rental prices have also experienced a decline. In this economy you are doing very well to rent out a home that you are upside down on equal to your mortgage payment. Renting the home may not be the best option either.
 
The positive options:
 
Trying to refinance your home: talk to your lender about any options you may have to reduce your payment or restructure your loan.
 
Talk with a HUD Certified Counselor: There are government programs that can help those who are in homes they can no longer afford and you may qualify for them. (http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm)
 
Visit Hope Now: This is a site that provides guidance to avoid foreclosure.
 
Many homeowners will qualify for some sort of aide through government programs that are aimed at making housing affordable and the best way to find out what help is available for you is to contact a certified counselor.

Online Banks, those without brick and mortar facilities, are often able to offer consumers great interest rates on checking and savings accounts and low fees (sometimes free!). As big banks are ramping up their fees and charges many people are turning to online banks to save money and to earn a better interest rate.
 
Online Banks typically let you use any ATM that you can find and will usually reimburse you for the ATM charge. Additionally, these banks make fund transfers to a multitude of different accounts hassle free. Online bill pay is included with online banks.
 
For more information see: Online Bank Deals

Americans are able to check their credit report three times in a one year period, FOR FREE!! The three credit reporting agencies are Equifax, TransUnion, and Experian and each provide you with a free credit report once in a twelve month period.

 
To obtain the report you need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

 
It is important to maintain a watch on your credit report to ensure you identity has not been stolen and there are no inaccuracies on the report, especially when you are applying for new credit.

To obtain your credit report go to: www.annualcreditreport.com

Whether you are divorced, widowed, or just happily single, it seems that there is very little personal finance advice out there for you.  However, those who are single need just as much guidance as the average couple.

An emergency savings plan is particularly important if you are single.  It can be a bit daunting to know that there is not the safety net of a spouse’s income.  Having a financial plan for the unexpected emergency can mitigate that fear.

As I have mentioned in the past, taking advantage of group, association or personal disability insurance is the first step toward income replacement.  If your employer does not offer disability insurance, often professional associations do.  Or, you can seek out personal disability insurance through a trusted insurance advisor.

It is also important to have an emergency savings account. An emergency savings account should be liquid, which means that you could write a check for your mortgage payment right away.  A single person should have a minimum of six months expenses saved in this type of account.

My single clients always ask me if they need to have a will.  My answer is yes.  You should make the decision about how your estate is distributed even if you feel it isn’t big enough to refer to as an estate.  You need to have powers of attorney documents anyway, so you might as well have a will drafted while you are visiting your attorney.

A durable power of attorney, health care power of attorney and a living will are especially important legal documents for singles to have.  Singles do not have a spouse, which is the obvious choice for couples, to make business, health care and life sustaining decisions in the event of an emergency.  For this reason, it is particularly important for singles to have their choices clearly defined in a legal document.

This advice is applicable to everyone, but the emphasis on emergency planning is particularly important for singles.  As always, seek the advice of experienced professionals who come highly recommended.

http://www.cnbc.com/id/27401328

Buying an investment when the price is low and selling when it is high.  The concept is simple, the discipline is not.   It is more likely for financial professionals to hear clients say, “Why would I buy that loser stock, mutual fund, you fill in the blank?  XYZ is booming let’s buy it instead!”

It makes sense psychologically to want to participate in something that is doing well and disassociate with something that out of favor.  Financially, this is not always the case.  Having an investment strategy to follow can curb the urge to buy high and sell low.  If you work with a reputable financial advisor, you probably already have an investment strategy.

An investment strategy should address your short and long term financial goals. The end result of a properly implemented investment strategy should be a diversified portfolio across all of your investment accounts.  The strategy should be based on your tolerance for risk, your time horizon and your overall financial goals.

Once in place, an investment strategy should include a plan for rebalancing your account on a fairly routine basis.  Rebalancing means bringing your portfolio back to the target asset allocation.  Profits can be taken from investments that have become over weighted (selling high) and used to purchase investments that have become under weighted (buying low).

Of course there are actually loser investments out there as well as some winners who haven’t reached their full potential.  For that reason, it is important to work with an experienced, accomplished and trusted advisor to help you make these decisions.

Financial planners are infamous for using strong sales tactics regarding insurance products.  Most of them make a nice living on the commissions that come from these sales.  The commission throws up the red flag that there is a conflict of interest.  Sometimes there may be cause for concern.  However, insurance is a necessary evil to protect against loss.  My company does not sell any products or accept referral fees or kickbacks.  It is important to make that distinction as I am about to write about the need for insurance without an agenda.

Property and casualty (P&C) insurance is rarely discussed.  Most clients have coverage, which is a step in the right direction.  Unfortunately, it is usually the cookie cutter policy rather than a customized insurance plan specific to the client’s risk exposure.  In the case of P&C insurance, the relationship most clients have with their agent is practically non-existent.  Interaction usually occurs only if there is a claim.  Otherwise, the client receives the bill, reviews the premium from the previous year, writes the check and continues with the same coverage for the next year.

Finding an agent who represents multiple companies is important.  One company might be more willing to give a break on a certain risk exposure than another.  Having a choice can lower your premium.  Please note the distinction between finding an agent to discuss your choice of insurance companies rather than just comparing price quotes.

It is also important to be aware that even the maximum limits on the traditional coverage might not be adequate.  An umbrella policy can be used to supplement traditional coverage.  Unfortunately, umbrella policies are becoming necessary in our litigious society.

According to Mike Gautreaux, a partner at AI Insurance Group, the most important thing a client can do to be adequately covered is to review their coverage annually.  It is important to have a meaningful dialogue with your insurance agent to be sure all changes to the client’s risk exposure are considered.

Not only do I encourage my clients to follow this advice, I too have benefited from these types of meetings.  Recently, I saved hundreds of dollars a year on my homeowner’s just because fire hydrants have been installed near my home.  If I did not have a good working relationship with my agent, it is unlikely that I would have realized this savings.

The recurring theme of my advice is to work with a professional who comes highly recommended, who has proper credentials and with whom you feel comfortable.  It is likely that you already have coverage and an agent, but it never hurts to get a second opinion.

No it is not a new REM song, but it is a new trend for 401k plans.  Employers are now choosing automatic enrollment as a way to increase employee participation in retirement plans.  The typical method of enrollment in the past has relied on employees to actively seek enrollment, once eligible.  Due to regulatory changes, employers can now automatically enroll eligible employees.  Employees who are not interested in participating could choose to opt-out, but must do so by a set deadline.

As a financial planner, I am very excited to see this new trend.  There are so many reasons that employees don’t sign up to participate in the company 401k.  Rarely is it the case that employees don’t want the benefit.  It is more likely the case that employees don’t understand the benefit, think they are too young to save for retirement, or procrastinate.  The fact is that saving for retirement is one of the keys to financial freedom, and the compound effects of saving early is tough to beat.

Automatic enrollment is great, but then what?  How are the passive participants’ funds invested?  The disconnection between 401k participants and investments still exists.  Employers are also trying solve the asset allocation dilemma for 401k participants.  Now, employers are offering a diversified account as a default instead of a money market default.

I have personally seen 401k accounts with staggering amounts of risk due to single fund or single stock risk.  The diversified account default option is particularly helpful to participants who have limited investment experience.  It is often young, new employees who are likely to benefit the most from the new 401k automation.  These employees usually don’t have a financial advisor or any investment experience.  They are also the participants who elect to stay with the money market default when they are the ones who benefit the most from the compounding aspect of a well diversified growth account.

The automation is not just for new employees.  Existing employees who are not actively electing to contribute or manage their 401k accounts are being enrolled and placed into the default diversified account as well.

Many local and community banks may be able to benefit from the repaying of the Troubled Asset Relief Fund (TARP) funds by larger banks. Recently, ten big banks received approval to return a combined $68 billion in TARP funds to the government.
 
As the amount of money in the TARP reserve grows they will be able to lend that money back out, and much of it should go to local and regional banks (that want/need it of course). This would allow banks to make loans to the individuals and businesses in local communities and benefit the economy right in your home town.
 
Local banks are able to get to know you on a personal level and consequently are able to provide exceptional customer service and are able to get to know your plan for the loan proceeds. Local communities can really benefit from a strong local bank presence as loan officers get to know you and your plan and not just look at the numbers.