Financial Answers "IN SIMPLE LANGUAGE"

 So here we are on the last day of April celebrating “Financial Literacy Month”.  What!  You didn’t know it was “Financial Literacy Month”.  Well either did I until a few days ago.  Read my April 28, 2009 blog post about my surprise.

 

Paralyzed Public

 

What we are currently experiencing is the paralyzing, the numbing, and the shell-shocking of the American public.  Everywhere we look and everyone we talk to, or so it seems, have put their retirement, savings, and investing plans on hold.  And it may be for very good reason.  Or is it?

 

It seems this American trend of not saving for retirement, or for that matter anything else, has been going on for some years now.  The average savings rate from one report I read said that we have been saving about 8% on average for the last couple of decades.  That seems a little high to me based on my experiences as a former investment advisor.

 

What is particularly disturbing is whatever the true savings rate really was it is at or near zero today. As a matter of fact,it has been near or at zero for the last couple of years.  Now remember, I am talking about the savings rate here not the investing rate.  These are two separate animals.

 

The savings rate is what you earn on the money you keep in your checking account, your savings account, your money market account, or even bank certificates of deposit.  This is money that is protected or guaranteed from dropping in value because of some financial economic event.

 

The investment rate is all about the stock market.  We all know what has happened with that.  If you don’t, then open one of those 401k statements that you have piled on your desk and are afraid to open.  When you see that you have lost from 40% to 50% of the value of your 401k investments-which are not protected or guaranteed- you will better understand the difference between savings and investing.

 

Nagging Fear

 

Part of the problem within the last twelve months or so has been the nagging fear of people losing their jobs.  That fear has been justified, unfortunately, by the enormous amount of jobs lost.  This has added fuel to the fear fire for people not to save for retirement but rather just for their perceived survival, real or not.

 

I have been preaching for months that you should still fund your 401k plan at work even if it is just putting money into the money market fund of the 401k plan.  That is if you have a money market fund in your 401k or have a job.

 

The bright spot in this whole economic mess is that it will eventually go away.  When it does let’s hope that we have all learned a lesson from all of this.

 

The Lesson Learned

 

So what is the lesson learned from one of the most debilitating financial downturns we have experienced in our lifetime?  We have to take care of ourselves and not rely on the government or some faceless, heartless corporation we work for.  Or some financial wizard on Wall Street that razzles and dazzles us with a lot of stuff that we don’t understand.  We have now learned that it is up to us to learn about financial matters and take things into our own hands.

 

We must begin to financially educate ourselves and financially educate those growing up behind us in our schools.  If we don’t take the bull by the horns, no pun intended using the word bull, we will see a repeat of this financial fiasco again in the future.

 

If you are not bookmarking In Simple Language and other financial web sites why not?  If you are not signing up for a financial class in the local college why not?  If you are not talking with your financial advisor on what you can do about becoming more financial savvy why not?

If you’re not at your library or on Amazon books or Barnes and Noble or Borders looking at financial books then why not?  If you aren’t going to help yourself now then don’t blame anyone else when the sh*t hits the fan again.  And you can bet it will.

 

Remember, this is the last day of “Financial Literacy Month”.  End it on a good note with an investment in the best thing you can invest in, yourself!

 

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.

 

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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

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I am using this last week of April to let you know that April is financial literacy month.  It is interesting to note that I am very keen on financial literacy as evidenced by this free financial blog.  Yet I did not know it was financial literacy month and only found out by accident.

 

Tell Somebody

 

This is disturbing to me that we talk and talk and talk and talk about financial literacy and yet financial literacy month is almost over and no one knew about it.  With all the noise and talk about what has been going on in the financial markets and complaints about all the financial companies, you think someone would have widely promoted financial literacy month.

 

Is this indicative of what and where the problem lies?  I think so.  They, meaning the federal, state, and local governments, talk about the problem but don’t take any meaningful action.  If financial literacy was such an important issue with our bureaucrats why are we just hearing about financial literacy month when it has almost ended?  This bothers me but I blame myself for not being more aware.

 

Most Americans can’t answer basic financial questions and everything we have been hearing lately, other than war and disease, is financially connected.  What is it going to take to make a concerted effort by the powers to be to put financial education as a priority in our grade, middle, and high schools? 

 

Let’s face it folks-whether we like it or not-the world revolves around money and financial matters.  It doesn’t matter which country you live in or what you do.  Money is the motivating force behind all countries.   If you think that is not true then why are the “Pirates of Somalia” hijacking ships and holding them for ransom. 

 

Here is a third world country, extremely poor, which needs money for the people to buy the things that they need to live a decent life.  This last part about the decent life is the key.  These people want a better life and that is what money can do when used properly. That is the way it is.

 

National Survey Shows Disturbing Data

 

A recent national survey completed by the Center for Economic and Entrepreneurial Literacy in Washington showed that Americans are still having trouble understanding even basic financial concepts- even with all of the publicity in the news over the last six months.

 

This survey has shown that 53% of the respondents don’t even know what the Dow Jones Industrial Average is yet they are putting money into 401k programs through work.  That’s like taking your money and handing it to someone and saying “do whatever you want with my money and let me know later if I made any”.

 

Another 52% had no idea what a Roth IRA was, let alone its advantages.  Another 43% couldn’t identify the most important factor in receiving a loan, a Fico score.  Do you know what a Fico score is? 76% of the respondents didn’t know that bouncing a check was more expensive that getting a payday loan advance.  71% underestimated the amount of time needed to pay off a credit card when you only make minimum payments.

 

Time for You to Take Some Action

 

We keep talking but not much action is being taken.  What is it going to take to promote, effectively, financial literacy in this country?  Are we going to wait for the country to go bankrupt and then take action?  We need to do something today.  Now! 

 

So what are you going to do to increase your financial knowledge?  Are you going to call your local college and see what financial programs they have available in their non-credit department courses?  Are you going to call some local banks and brokerage companies or financial advisors and ask if they know of financial courses or seminars being offered?  Or are you going to just sit there and complain when you read about the likes of the Bernie Madoff’s of the world ripping people off.  Don’t be a sheep following the crowd.  Take control of your financial future.

 

If you live near Indiana University Southeast then you can sign up for my class called “Understanding Investments – The Basics” beginning on Tuesday, May 19, 2009.  I look forward to seeing you there.

 

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

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Last year in May 2008, I had talked about a particular type of mutual fund which was called a Target Date Fund.  This type of mutual fund was specifically designed to make retirement planning easier and more effective.  It was to become a useful part of your retirement plan.

 

How Does This Target Date Fund Work?

 

A Target Date Fund is a hybrid mutual fund that is designed to mature on a specific date in the future.  As the fund moves closer and closer to its “target date” it is supposed to get more and more conservative focusing on protecting the principal and growth of the fund. 

 

After all, the purpose of this type of fund is providing for a more secure retirement by being aggressive in the early years of an investor’s working career and more conservative as they move closer and closer to retirement.  Well that doesn’t seem to be what has happened in various Target Date Funds that the feds have looked at.

 

Congress Looking at Target Date Funds

 

I think more and more of our congressional leaders are reading In Simple Language because all of a sudden more and more of them are becoming interested in financial topics that I have been ranting and raving about for months and months.

 

The latest congressional hero is Senator Herb Kohl, D-Wis., chairman of the Senate Special Committee on Aging.  Senator Kohl is leading the probe, along with the Department of Labor and the SEC (Securities and Exchange Commission), regarding Target Date Funds and their relationship with older individuals.

 

Target Date Funds have been very popular in 401k programs over the last couple of years.  Many 401k programs have been using Target Date Funds as their default funds for 401k participants.  The default fund is where your employer puts your money when you don’t tell them where to invest it or more often you don’t know where to invest it within the 401k program.

 

This has created a problem and goes back to what I said in my previous blog post of April 21, 2009. The lack of financial education is the real culprit in the huge losses in 401k plans.

 

Some of these Target Date Funds have lost 40% of their value.  This is particularly painful for individuals that are close to retirement.  This was not supposed to happen because of the design of Target Date Funds becoming more conservative as a person got closer to retirement.

 

Senator Kohl, the Labor Department, and the SEC are questioning whether the actual asset allocations that are represented by Target Date Funds are what they say they are.  Such is the case of the 2010 Target Date Funds.  Data from Morningstar, a mutual fund rating company based out of Chicago, indicated that for the one year period ending March 2009, Target Date Funds lost, on average, 23.8%.  Yet 2010 Target Date Funds should be invested very conservatively and not have lost almost a quarter of their value.  Yet they did.

 

Let’s Compare Target Date Funds

 

Target Date Funds, by their very nature, should all be relatively close in their gains and losses when comparing comparable dates.  However, if we look at the Oppenheimer Transition 2010 Fund, it showed a loss of 40.16% while the DWS Target 2010 Fund reported losses of 6.22%.  That’s an enormous difference for what are supposed to be relatively the same type of mutual fund with the same conservative investing goal.

 

What this tells me is that some mutual fund companies are defining Target Date Funds in very different ways.  If that is the case then how is the investor to know what they are truly getting themselves into?  This is one of the main reasons why the governmental agencies are taking a long hard look at Target Date Funds.

 

If you happened to own any Target Date Funds have your financial advisor find out “exactly” how the fund is currently invested.  If it does not meet your current needs for your retirement plans then you and your advisor need to decide on whether you should continue down that road.

 

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.

 

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·         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

 

 

 

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If you happened to see the TV show “60 Minutes” last Sunday April 19, 2009, their opening segment was on 401k programs. The segment discussed the affect 401k’s have on our ability to retire in a comfortable manner-or maybe not at all.

 

It was very heart rendering to listen to the people that were interviewed; some visibly holding back tears while trying to discuss what happened to their 401k program assets.  Several of these people showed their 401k statements to Steve Kroft of 60 Minutes and even Kroft seemed to be visibly moved by what he saw and heard.

 

Is the 401k System broken?

 

This question was asked by Kroft several times that night.  People who are familiar with how a 401k program works didn’t feel the program is broken.  Participants in a 401k program felt that the program is broken and doesn’t work.

 

The problem, in my opinion, is not that the 401k program is broken or should be ended.  The problem really lies in the fact that the lack of financial education that permeates our society is the real culprit.

 

Think about when you were in high school. How many financial courses where required or even provided by the public school system.  Probably none.  This is the root cause of why we have had such a difficult time with, not just the 401k program, but with all pension and savings and investment programs being offered today.

 

Our financial education is so woefully lacking that I have had college students in many of my business classes, ages 18 to 40, who did not know what a savings account is or what a CD, Certificate of Deposit, is.  These people looked at me and wondered why I was talking about a compact disk in a business class.  Come on America!  Let’s not worry about being politically correct and look at the “real” reason so many people got beat up on their 401k programs.

 

Investment Knowledge Would Have Minimized Your Losses

 

Now I am not saying that you would not have lost anything in your 401k plan.  What I am saying is you would have been able to better understand how your money was invested and then adjusted, based on your plans, the investments into more conservative areas such as bonds and cash.  This one move would have minimized your losses.

 

If you would have moved all of your investment money to a money market fund in January of 2008, when all the signs of the market tanking were screaming at us, you would not have lost a dime.  Nothing. Nada.  Understanding your investments would have sent up all kinds of red flags for you to know that you needed to re-shuffle your investments.

 

The current 401k program is one of the best methods for securing retirement that anyone has ever thought up.  We need to get financially educated and take control and accept responsibility for our own retirement future.

 

401k Programs Need to be Presented in an Unbiased Way

 

This unbiased way is why businesses have guys like me come to their companies and explain to their employees how their company 401k program investments work.  I do not sell products and I do not represent any financial companies.  I can there for be totally unbiased about what I am “teaching” the employees of the company.

 

This has been a major concern of many companies bringing in someone to “teach” the 401k program to their employees.  Many of these people have been product salespeople or represented specific companies and, of course, would push their own agendas.

 

At Least One Congressman is Not Asleep at the Switch

 

It seems one of our congressional leaders feels the same way I do.  Representative Robert Andrews, D-NJ, who is also the chairman of the House Subcommittee on Health, Employment Labor and Pensions, also thinks that the 401k program needs some minor fixing but can and will work.

 

The 401k program can be an intimidating animal for the financially challenged but a knowledgeable, independent “teacher” can get employees pointed in the right direction and feeling comfortable about maximizing their company’s 401k program. 

 

Where else can you get “free” money from your employer but through the 401k company match program?  Folks, that is as good as it gets.  Not signed up for your company’s 401k program?  What are you waiting for?  Do it today!

 

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

 

 

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In Tuesday’s post, April 14, 2009, we talked about the new law pending in the State of Florida called SOS or Safeguard Our Seniors.  Today’s blog post is on a similar, but very disturbing, topic of senior financial abuse.

 

When I came across this information I was stunned by what I was reading.  I think this is a good addition to SOS.

 

How Do You Abuse the Elderly and Live With Yourself?

 

Abusing an elderly person is no different than abusing or taking advantage of a child.  In almost all cases neither can defend themselves in most situations.   Yet there are people out there that don’t think anything about abusing children or the elderly.

 

I guess my brother, who died in January of 2009, would be considered a senior citizen or elderly since he was one month away from his 65^th birthday.  Does that make him elderly?  There are a lot of young 65 year olds and a lot of old under 65 year olds. Considering my brother’s physical condition and his mental age I would think that he might have been elderly. 

 

Could he have been abused physically and mentally and financially by someone?  My brother was a total vegetable from the neck down so he could not even feed himself.  Anyone could have taken advantage of him physically although his mind was still sharp.

 

No one did however take advantage of him, because of a loving, devoted wife and family.  Unfortunately that love, devotion and care doesn’t exist in all cases.  Senior abuse or elder abuse, as it is also called, is all around us.  And in many cases it is not the location-nursing home, assisted living facility-the elderly are living in or the professional people that are taking care of them.  It is often their own family and friends.

 

A Recent Study

 

I am not going to get into the physical aspects of elder abuse because this is a financial blog.  The financial side of this abuse is disturbing enough.

 

According to a study done by the MetLife Mature Market Institute of Westport, Connecticut called “Broken Trust: Elders, Family, and Finances” researchers over a three month study period discovered that approximately $396 million in losses were revealed from all forms of financial elder abuse.  That was for a quarter of a year.  For the whole year that equals over $1.5 billion!

 

That is bad enough.  The really disturbing part of this report was that almost $14 million was taken by family members and friends.  $121 million involved Medicare and Medicaid fraud.  $250+ million was taken by industry and business fraud.

 

It’s the $14 million that really bothers me.  We have family and friends out there that are abusing their own parents, aunts, and uncles by stealing money from them.  I guess this is nothing new.  But what I am really concerned about is that with our economy currently in the toilet and unemployment moving to within double digits-it’s really already there-this financial elder abuse will only get worse.

 

What can be done to protect our seniors from this financial elder abuse?  All of us, if we are fortunate, will become senior citizens some day.  Is this financial elder abuse something that we need to worry about?  Sure sounds that way.  Probably not from “our” family and friends but there will be others that will not be that fortunate.

 

The best way that I know of to protect yourself from financial abuse is to educate yourself about financial matters.  Now I know that if you get sick with a mental handicap you will be glad just to remember who you are let alone remember your financial matters.  But most of us will not experience mental handicaps. 

 

Take action!  Now is the time for you to:

 

·         take an investment class at a local college

·         buy a basic investing book from a book store or get one from the library

·         go to local financial seminars where you know and trust the organization presenting the program

·         talking with your financial advisor on a regular basis and picking their brain

·         watching financial news programs on TV

·         check out financial sites on the internet 

 

There is an enormous wealth of information available including and especially this free financial blog you are reading.  What are you waiting for?

 

Who do you want to be as you reach your elder years, the victim or the victor?

 

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

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