Financial Answers “IN SIMPLE LANGUAGE”

I just came across some interesting research about women and their financial advisors.  Whether you are a women reading this or not or a financial advisor, female or male, you better take note of what is happening in the investment advisory world around you.

You’re Fired!

This recent research conducted by Allianz Life Insurance Company stated that within one year of a women becoming widowed, 70% of these widows fired their financial advisor.  We have talked about this issue before in some of my “Women & Finance” posts.  For some reason financial advisors are still missing the boat.

Let’s take a look why this may be happening.  It seems many financial advisors are not contacting their women clients during this severe market downturn we all are experiencing.  21% of women clients as compared to 6% of men clients said they have not heard from their financial advisors.  That’s one out of every five female clients is being ignored.

Another problem that has developed during this financial meltdown is that 14% of female clients stated that they are hearing from their financial advisor less and less.  Whereas, only 4% of men had the same complaint.  Does anyone see a communications problem here?

Who really controls the money?

Maybe some of us of us have been asleep for awhile but it has been my experience that women really control the money in the family.  If you don’t believe that have a talk with your wife and then call your divorce attorney.  All kidding aside, women do control most of the money and will continue to control most of the money because men don’t live as long or usually get sick and have to be taken care of by women.  This is the way it works so get used to it.

We cannot look at women like our fathers did in the 1950s, 1960s, 1970s.  Those days are gone and women are more important than ever in today’s modern financial society.  Even in those bygone years my mother handled the money in my family.  My father came home from the shoe factory and handed my mother an envelope with his paycheck in cash in it and she handed him his allowance.  Then my mother would figure out what bills needed to be paid and when and would usually drag me along on the bus to go and pay the bills.

It is estimated that somewhere between 80% to 90% of women will be solely responsible for their finances somewhere in their lives.  Yet many financial advisors are not picking up on this reality. 

How many women are business owners?  Or received an inheritance? Or are the breadwinners in the household?  It is a different world and if you still don’t believe that women control the finances in this country than you need to look around and do some research.

More attention needs to be paid to women

Financial advisors, both male and female,  need to be providing more seminars, workshops, and forums for women so they can better educate these women and develop a long term financial relationship…which is what most women want.

Surveys have shown that women, more than men, were more responsive to financial advisor’s suggestions and didn’t bailout of these suggested investments as easily as the financial advisor’s male clients.

Many of the female clients also said they were more satisfied with the results of the financial advisor’s suggestions.  This to me makes for a better client to work with.  Financial advisors need to start rethinking their marketing plans.

Female investors were also more risk adverse than their male counterparts.  And also female investors are more apt to consult with their friends and family where men usually don’t.

So if you are a women reading this talk with your current financial advisor and express your investment concerns and tell your financial advisor what you expect out of this business relationship.  If you are a financial advisor than listen, really listen to what your women clients are saying.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (0)

My last post of June 23, 2009, talks about the government requiring employers to setup up mandatory IRAs for their employees. If the employer does not provide a retirement or pension program such as a 401(k) plan than they will be required to set up this IRA program.  So what!

Where am I supposed to put my money?

So the government is going to require my employer to set up an IRA account for me if my employer doesn’t offer any other type of retirement/pension chose.  Even if that were the case I don’t have any idea what to invest my money in.  So what am I supposed to do?

Drum roll here!  The United States Government to the rescue.  Can you picture Tim “Mr. Personality” Geithner, our treasury secretary, sitting down with your employer and explaining what the employees should do with their retirement investments?  Yea right! 

Well you won’t be that lucky, if that is being lucky.  Instead the government is thinking about creating something new.  Something that will help protect you from yourself and all the Madoffs out there that are going to try and take your hard earned money.

And what is this miracle investment that is going to protect you from yourself and all the other dirtbags in the world that are figuring out how to rip you off.  Let’s have another drum roll here.  The government is talking about creating the “R” bond.  Are you excited yet?

Yes the government in its infinite wisdom is talking about using a new form of bond called the “R” bond.  Will this be the new savior of the common man?  Now I have not seen anything up to this point to explain what the “R” means.  I am assuming that it stands for retirement.  I think we all know how good the government is when it comes to using acronyms.  TARP is a perfect example. So I would guess that the “R” stands for retirement.

So what’s an “R” Bond going to do for you?

This new bond is supposed to be designed to provide you with a source of secure and steady returns.  It is supposed to work for you by protecting your original investments.  Remember bonds are a lot less volatile than stocks.  And it sounds like there may be some government guarantees that go along with these “R” bonds.  We will have to wait and see.

I will be tracking information regarding these proposed “R” bonds.  As soon as I know more information about them I will be doing another more specific article post to let you know what’s going on.

Update on 401(k) programs

I wanted to bring you up to date on what is going on in the 401(k) arena.  It seems that almost one quarter-23%-of employer’s have eliminated their 401(k) employee matches.  This is not good news for you the employee.  These employer matches, if you remember, were free money and gave you an immediate 100% return on your 401(k) contributions up to a certain percentage usually 3%.  A really good deal for the employee.

Sorry folks, but it looks like those days are over and probably forever.  Several recent surveys are showing that employers are going to continue to eliminate the matching contributions and many may not go back to them even if the economy turns around and gets better.  You’ll have to wait and see and hope your company will have the sense to reward you for your hard work and loyalty by providing this tremendous benefit.

This is tough to swallow but you may as well get used to it.  We are in a different world from this day forward so what you were used to is probably gone for good or at least for quite some time.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

.

• Leave a comment... (0)

I think anyone reading In Simple Language for any period of time will understand that I am totally in favor of keeping 401(k) plans around with a few minor tweaks.  I still feel the 401(k) if properly used like it was intended is the best pension plan idea anyone has yet to come up with.

If You Can’t Have a 401(k) than How About This

In previous posts on the subject of retirement planning, I stated that I was in favor of having automatic enrollment in an employer sponsored 401(k) plan.  And I still am with one condition.  The employee needs ready access to information on where they should be putting their money. There’s not enough “understandable” information for the average 401(k) participant for them to make good investing choices in their 401(k) plan.

Most of these automatic enrollment plans put your money into a cash money market mutual fund which will never grow enough to give you the retirement dollars you are going to need.  This is the real issue about any retirement program.  Educating the participants is as important as setting up the plan.  Hello corporate America.  Is anyone listening?

So if you can’t have a 401(k) than what else is there?  The Obama administration is proposing that employers that do not offer any type of retirement plan to their employees should then be required to enroll their employees into a direct deposit IRA account automatically.  The employee would have the option to refuse or drop out of the IRA.

Critics Don’t Like This Idea

Let’s face it folks, all of us, including me, are inherently lazy by nature.  So by forcing someone to invest in their own future is, to me, not such a bad idea.  Plus you do have the option of canceling your automatic enrollment in the IRA program.  So where’s the problem?

Well the problem seems to be with the U. S. Chamber of Commerce in Washington, D. C.

The chamber is upset because a mandatory enrollment of all employees into an IRA program, or any pension program for that matter, would impose new requirements and costs on small businesses.  I have to agree with the U. S. Chamber of Commerce.  There would be some additional costs.

However, if we let things go on the way they are, we are going to have a very serious and severe retirement issue in the forthcoming years.  This lack of saving and investing for retirement is not going to go away.  The sooner we bite the bullet and do something about this the sooner we can all move on to the next problem that needs to be fixed. 

You are certainly aware of the mess the social security system is in.  Unfortunately many people in this country are depending heavily on social security as their one and only source of retirement money.  Do you see why we need to do something now?

The part of this mandatory enrollment into IRAs that scares me is the government may make this even more burdensome on small businesses.  When the first IRA programs appeared in the 1970s, there was one type of IRA and it was simple to fund and keep track of.  Today the IRA is a complex multipage confusion of tax laws and exceptions and exemptions and legalese that confuses all but experts specializing in the IRA area.  Will the same happen with this new proposed mandatory IRA program?  You can bet on it.  That is why we need to do something now before the government and the lawyers and tax people make it even more difficult and costly to understand and administer.

Employers Don’t Have to Contribute

This new IRA proposal is not requiring employers to have to contribute any employer money into the employee’s account which is good for the employer.  I just hope that employers don’t get the idea that this is a better way to go for the employer and do away with their 401(k) programs.  Probably not because it would bring the wraith of the government down on them and also the adverse publicity would beat up those companies that decided to do that.

Let’s see what happens with all of this.  We need to do something with retirement and this new IRA program may be a part of the solution.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (0)

This is a really important post for all of us.  I came across this while doing some research on another topic and decided that this was too important to pass up.

Retirement Security Needs Lifetime Pay Act

HR 2748, the Retirement Security Needs Lifetime Pay Act, submitted to the House of Representatives June 8, 2009 could be the most important piece of legislation to go through congress this year or maybe any year.

You already know what a beating everyone took on their 401(k)-for profit and 403b-not for profit-retirement accounts.  And you also know that many people, maybe even you, are not depending on Social Security to be much of a retirement factor in the years ahead.

Well it looks like someone is trying to do something about the mess all of us Americans are in with our depleted retirement accounts.

Congress to the Rescue?

It seems that two members of the House of Representatives in Washington, D.C. are earning the money you pay them to represent you.  Representatives Earl Pomeroy, D-N.D. and Ginny Brown-Waite, R-Fla., have joined forces and have submitted house bill HR 2748, the Retirement Security Needs Lifetime Pay Act, to try and save all of us from ourselves.

This bill is designed to give you the opportunity to save your hard earned dollars in what they are calling “lifetime income annuities” through tax breaks.

The meat of this HR 2748 bill states that half the taxes on income from a non-qualified annuity, up to $10,000 per year, would be excluded.  This means that you could draw up to $10,000 from your non-qualified annuity and only pay taxes on $5,000.

Let me explain that a non-qualified annuity is an insurance contract that is funded with your after tax dollars and earns interest on a tax deferred basis.  So if I put $100,000 into a non-qualified annuity I would only pay taxes on the interest of the annuity and not on the original money I put in.  And also I would only pay taxes on $5,000 of the interest of the annuity out of the first $10,000 in interest the annuity generated.  This is a good deal.

HR 2748 also states that it would also exclude taxes on 25% of the income payments from IRAs (Individual Retirement Accounts) and qualified retirement plans-401(k) and 403b plans-but not from regular pension accounts (defined benefit plans).

Confused?

I know! I know! This can get very confusing.  Remember it is coming out of Washington so it is never easy to understand.  I will be keeping an eye on this bill and reporting back to you as I get more information.  If you want to read this bill-maybe you have insomnia or just like to torment yourself-you can Google the bill by putting in Retirement Security Needs Lifetime Pay Act in your browser and follow the information displayed by Google.  I tried to get an easier way to do this but nothing seemed to work. 

The info is listed on a web site called www.washingtonwatch.com along with a lot of other bills.  I had a difficult time trying to find HR 2748.  I’ve been told that I am computer challenged so maybe you will be more successful in finding the bill.  Hey, what do you want from a financial writer/speaker who is Internet challenged?

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (0)

Just when you thought you understood the old standby, plain vanilla bank certificate of deposit you get thrown a curveball.  Not to worry!  In Simple Language is on the case.

Invented Twenty Years Ago

About twenty years or two decades ago, the then called Chase Manhattan Bank of New York, developed a new version of the plain ole certificate of deposit. This new hybrid CD is called a “Market-Linked CD”.  This new CD was said to provide both upside exposure to the market so you could get a better rate…making you more money.  And it was also designed to offer you downside protection limiting your losses.

Now wait a minute!  Isn’t a CD all about protecting your principle with FDIC (Federal Deposit Insurance Corporation) protection so you don’t have to worry about losing any of your money?  A normal CD yes, but not necessarily this “hybrid” CD.

Between January of 2009 and May of 2009, these “Market-Linked CD’s”, or more commonly called “Indexed CDs” sold to the tune of approximately $2 billion.  Down from previous years, but nevertheless a significant number.

So What Are These Indexed CD’s?

First of all, an Indexed CD is like a regular CD with the full guarantee of $250,000-the $250,000 guarantee is only good until December 31, 2009 unless Congress makes it permanent otherwise it falls back to $100,000-from the FDIC (Federal Deposit Insurance Corporation).

However, with this “Indexed CD”, the principal is only guaranteed if the Indexed CD is held to maturity.  So if you need to cash in your CD for some reason you could lose a significant, whatever that may mean at the time, portion of your principle.  So you can see that these CD’s may not be for everyone.

The principal is guaranteed by the FDIC but the accumulating (accrued) interest is not.  So you have to look at the underlying strength of the bank that is issuing the Indexed CD.  That is a difficult thing to do in today’s tumultuous economy.

Another potential drawback of an Indexed CD is the earned interest-which may be tax exempt in some states-would be taxed as ordinary income.

Caveat Emptor (Buyer Beware)

This Indexed CD is not for everyone.  Make sure you totally understand what you are getting yourself into.  If a certificate of deposit is part of your overall savings and retirement program, then you should ask yourself whether the long term gains of fooling around with this type of “hybrid” certificate of deposit is worth the potential short term risks?

If you answered yes then this Indexed CD could very well be a part, albeit a small part, of your overall retirement and/or savings strategy.  And that is all right.

Like traditional CD’s there is no fee charged to you for purchasing an Indexed CD.  However, there are financial advisors out there that do charge a commission.  Ask your financial advisor, before you sign anything, whether you are going to pay any fee, upfront or otherwise, if you decide to purchase an Indexed CD as part of your financial strategy.

The bottom line to this type of financial purchase or any financial purchase for that matter is- drum roll please-“Can you sleep at night with the investment decision you have just made”?

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (0)

There’s a new Sheriff in town and she ain’t taken no prisoners.  With all the turmoil in the financial markets over the last eighteen months and everyone beaten to a pulp with their investments, especially their 401(k) and 403b plans, we have all become a lot more skeptical of who we can and should trust when it comes to investing.

Here’s Where to Look for Info on Your Financial Advisor

This information came to me via a financial source that I get on a regular basis and it is both good and bad.  It is good because it provides another source of information in which we can check up on the people who we do our investing with.

This new “free” source of information available on the Internet is called AdvisorCheck (www.advisorbackgroundcheck.com) and it allows you to investigate the professional background of your financial advisor…or any financial advisor you want to check.  That is, if the financial advisor has signed up to be included in their program.

I went to their site and put in a couple of names of friends of mine who are financial advisors and what it told me was they had not yet completed their profiles which means basically nothing.  It is so new that they are still compiling information on financial advisors.  You may want to ask your financial advisor if they are on it or will be joining AdvisorCheck.

Being able to find information about financial advisors is nothing new. FINRA (Financial Industry Regulatory Authority) Inc. of New York (www.finra.org) which is the official watchdog of financial advisors also has, on its site, information on all licensed financial advisors.  This is also free.

There are also places like the SEC (Securities and Exchange Commission), the Better Business Bureau, and state licensing agencies that can provide information on financial advisors.  All of these agencies provide a valuable service to the investing community.

A Word of Caution

Please read and reread this part of this article very carefully.  We all know about that dirt bag Bernie Madoff and how he stole $60 billion from his clients.  It had a devastating affect not only on many individuals but also many institutions including non profits.  So here is where I ask a word of caution. 

Just like many of our credit reports that are screwed up so it can be with the reports on financial advisors.  Don’t just make a judgment on a financial advisor based solely on what you find on the AdvisorCheck site or the FINRA site or any other site.  I have personal friends who are financial advisors who are as honest as the day is long and I would trust them without hesitation. 

With that said there is no guarantee some unscrupulous former or current client could write up and send in a false accusation about a financial advisor just to get “even” with them for some stupid reason.  I have seen this happen in the past and I know it goes on today.

If you find something on a financial advisor in one of these sites and you like and feel comfortable with that financial advisor and maybe they were even recommended to you by a friend or relative than ask the financial advisor what the supposed “adverse” information means.  I have seen many times where the adverse info was incorrect, inaccurate, listed against the wrong advisor, or placed there by their previous brokerage company in retaliation for leaving for another brokerage firm, and on and on.

The point is if you really want to work with this particular financial advisor do your homework.  But do it thoroughly.  Give the financial advisor the benefit of the doubt.  I’ve known a lot of financial advisors over the past thirty plus years and almost all of them are honest, hardworking individuals trying to make a living by doing the right things for their clients.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (2)

Things are certainly changing in who is handling the household finances.  Women are stepping up to the plate more and more.  This is probably a good thing since us guys have been screwing things up long enough.  Let’s see if the women can fix our mess.

Recent Surveys

There seems to be a lot of recent surveys conducted by financial institutions on how who is handling the family finances is changing.  Women & Co. (www.womenandco.com), a Citigroup financial resource program, released their findings and said that 63% of the women surveyed said that they were responsible for the majority of their family’s financial decisions.

Another survey conducted by New York City based Campden Media (www.campden.com) showed that 88% of the women in the study have a high to moderate role in the management of family assets.

Women Look to Financial Advisors

It seems that more and more women are looking to financial advisors for help in making financial decisions.  The Citigroup survey showed that women said that financial advisors were their primary source for financial information.  Their spouse or partner and reading and research came after their financial advisor.

Women approach financial matters in a different way than men.  Men don’t want help in the same way that women do.  There is a lot of truth in the way men don’t want to ask for directions if they get lost.  The same holds true with investing.  Men just want some direction and they’ll do the rest.  They don’t need to make a relationship out of working with their financial advisor.

Women, on the other hand, want help but they also want to establish a long term working relationship.  One of the studies concluded that women want to be more engaged and have more collaboration with their resources.  Women take a broader view.  Women at the same stage of their life as men have different priorities and concerns than men.  This may be in part because they know they will usually outlive their male counterparts so they have to think about financial matters in a different way.

Wealthy Women

Wealthy women in particular want their financial advisors to be focused on building a long term business relationship and not on financial transactions. 

Another major difference that was disclosed in one of the surveys showed that women are not necessarily interested in power, like their male counterparts usually are, but rather women see wealth as a means to independence and equaling personal productivity and empowerment.

One of the studies also disclosed that very wealthy women want a holistic approach to wealth management.  They want to emphasize establishing family governance structures.  And they are very interested in educating their children about financial matters.

Overall the most effective way of working with women, especially high net worth women, is to establish a long term business relationship with them.

Charitable Decision Making

Fidelity Investments (www.fidelity.com) did a recent survey through its Fidelity Charitable Gift Fund program which included 1,003 respondents.  The survey showed that women with annual incomes of $150,000 or more were the main decision makers in their family’s philanthropic decisions.  What we are seeing is more and more women taking over the family finances.  And as I stated previously, the guys had their shot now let’s see what the ladies can do to straighten out the mess we made.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (0)

I recently mentioned about my using information from surveys.  Well here I go again.  I could not pass this one up because it is what In Simple Language is all about… Financial Literacy.

What in the World is going on?

If you have not been a reader of In Simple Language-there can’t be very many of you left-over the past year, than you know I am constantly ranting and raving about the lack of financial literacy in the United States.

I have talked about teaching business classes, college level, in which most of my students did not have a basic understanding of financial services or understand the basics of how checking accounts, savings accounts, and certificates of deposit work.

Well hold onto your hat because it gets better…or should I say worse?

Recent Survey

A recent survey conducted between March 13 and March 16, 2009 by the NFCC (National Foundation for Credit Counseling) has recently released its findings.  I am not shocked or surprised by the findings.  What I am though is disappointed that financial literacy is still not being addressed in a way that is effective.

Forty one percent of adults in a test group of 1,000 phone participants said they would give themselves a grade of C, D, or F on their knowledge of personal finance.  That is almost half the respondents either failing or barely passing and admitting it.

The real scary part to this is that at least half of those people are people born in the 1980’s who are often referred to as “Gen Yers”.

Eighty percent of the respondents agreed that they would benefit from talking with a financial professional who could answer their questions and give them financial advice.

Here We Go Again

Is it going to talk a brick wall to fall on the heads of the people who run our public school systems to realize that they are turning out one class after another of functionally financial illiterates who can’t help themselves with even the basics of living in a capitalistic society?  What chance can these people possibly have?

These financial illiterates are the people who are a good portion of the future of our country yet we continue to look the other way.

Let’s look at some other statistics from this survey.  I’ll keep it short so I don’t bore anyone with numbers and percentages.

One of the questions asked was on budgeting.  It seems that less than half (42%) of the respondents don’t have a budget.  They don’t have any idea about what they spend or on what they spend.  Twenty-six percent, that’s one out of four, said they do not pay all their bills on time.  Fifteen percent admitted being late with credit card payments and close to ten percent hasn’t made a payment.

Six percent of this group had credit card debt of at least $10,000 that they were carrying over from month to month.  This same number has debts in collection and if they haven’t filed for bankruptcy in the past three years they are seriously considering bankruptcy as their only way out.

Thirty two percent of the total respondents said they have no savings.  Nearly half of the Gen Yers reported they had no savings.  They were relying on their credit cards for any emergency that may come along.

Do you think that maybe this is why you and I have to pay such high credit card interest rates and penalties when we screw up?  Do you think that if these adults truly understand what a devastating financial effect this has on their money that they would make some adjustments?  If they don’t understand what is going on nothing is going to change.

This vicious financial illiteracy cycle will continue on its merry way dragging all of us along with it in the form of higher costs.  I don’t believe that we can cure the problem of financial illiteracy 100%, but the number can surely be drastically improved.

If you would like to get into all the numbers and read the actual survey, please go to www.nfcc.org and look for the financial surveys section on the site.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (2)

Being in the financial services business for over thirty years, I have often heard that in order to have a secure retirement you would need to address three areas to insure that retirement. These areas were commonly referred to as legs, as in legs of a stool.  Before I get into these legs ask yourself which is a sturdier stool?  A stool with three legs or one with four legs?

The First Leg of Retirement

The first leg of retirement has to be your own personal savings.  How much can you put aside for tomorrow out of your current income?  How much can you put aside, not only for an emergency fund, but also for down the road.  This is the part of your retirement stool that includes interest bearing checking accounts, savings accounts, government savings bonds, and bank certificates of deposit. 

These are your “guaranteed” monies.  This part of retirement has the guarantee of the federal government in the case of government bonds or in the case of the checking and savings and certificates of deposit, they have the guarantee or insurance provided by the FDIC (Federal Deposit Insurance Corporation).  This leg is your responsibility, first and foremost.

The Second Leg of Retirement

This leg is your forced responsibility.  It is the part of your retirement that you have no choice in participating in.  It is the leg that says either you participate or the wraith of the government and the IRS will fall upon you.  You probably have figured it out….Social Security. 

By law, your employer, must withhold and match a certain percentage of your wages whether they want to or not.  Unless, of course, you are a congressional member.  See how that works?!  Do as we say not as we do.

If you are self-employed you must also pay into the social security system.  You don’t have a choice.  It’s forced on you and you must pay the social security tax, as a self employed individual, at least quarterly.  You must file form schedule SE when you do your own federal taxes by or before every April 15^th or you will get a nasty letter or visit from your “friendly” IRS.

So now we have two legs of the three legged stool in place.

The Third Leg of Retirement

This third leg of retirement is familiar to most of us.  It is our employer sponsored defined contribution plan better known as our 401(k) plan.  It is our non-profit employer sponsored defined contribution plan know as our 403b program.  Or if you work for a governmental employer it is a defined contribution plan known as a 457 plan.

And don’t forget our defined benefit programs-this is our parent’s programs beginning after World War II-of which there are not a lot of these around anymore.

If you are self employed then you can have a Keogh plan or an IRA (anyone can have an IRA if you qualify) or a variety of other choices.  So everyone has some kind of choice in this third leg.

Unfortunately, all three legs of this retirement planning scenario have been devastated by the recent “severe” recession or “mild” depression however you want to label it.  So what you should do from this point moving forward is adjust this three legged stool and make it a four legged stool.  A four legged stool, in my opinion and from practical everyday living, has always been stronger when I used it.

The Missing Fourth Leg of Retirement

This fourth leg that is currently missing and has always been missing is the financial planning leg of the stool.  Yes, we have our savings portion in place.  And yes our social security is forcibly being taken from our wages by our employer.  And yes we qualify for some type of defined contribution plan or maybe a defined benefit plan.  But so what! 

If you are not watching what is happening to these three legs what will be there for you when you retire.  This is exactly what has happened in the last 12 months.

Your pension plans have been devastated.  Social Security is constantly on the brink of bankruptcy.  And it is impossible to save in the first leg of retirement if you don’t have a job and or income and need to live off of what you have saved.

This fourth leg of retirement is critical as a lot of people have found out. It doesn’t matter what the other three legs of the stool have been doing if the fourth leg is not in place. 

Attach your fourth leg of retirement through financial education.  Accept the responsibility of educating yourself so you can understand and act upon any problems within any of the three other retirement legs.

It’s your money.  Your future.  Your retirement.  What are you going to do about it?

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

·         Please give In Simple Language your comments and suggestions about this post and/or future topics of interest to you.

·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

·         Did you remember to bookmark this blog?

Thank you for taking the time to visit In Simple Language.  J 

Copyright © 2008-2009  “All Rights Reserved”

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

Check out the “SERVICES” tab above the beginning of the post for all available services.

Member One Southern Indiana Chamber of Commerce

• Leave a comment... (1)