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Hope to Prosper http://hopetoprosper.com Simple Practices that Lead to Wealth Wed, 13 Jul 2016 21:18:41 +0000 en-US hourly 1 https://wordpress.org/?v=4.5.7 3 Innovative New Ideas to Solve 3 of our Nation’s Biggest Problems http://hopetoprosper.com/3-innovative-new-ideas-to-solve-3-of-our-nations-biggest-problems/ http://hopetoprosper.com/3-innovative-new-ideas-to-solve-3-of-our-nations-biggest-problems/#comments Wed, 13 Jul 2016 21:18:41 +0000 http://hopetoprosper.com/?p=8044 I usually stick to financial subjects on my blog, but I have had a couple of big ideas rattling around in my head for years, that I wanted to share.  While our politicians and the media concentrate on all of our country’s problems, I like to concentrate on useful solutions.  Below are three simple, straight-forward and easy [...]]]> I usually stick to financial subjects on my blog, but I have had a couple of big ideas rattling around in my head for years, that I wanted to share.  While our politicians and the media concentrate on all of our country’s problems, I like to concentrate on useful solutions.  Below are three simple, straight-forward and easy to implement solutions for three of our nation’s biggest problems.

Independent Investigation of Police Shootings

Officer Involved Shooting

Image by Tony Webster

What: Provide unbiased, independent and thorough investigations of every officer involved shooting or death in custody.

Why: The last thing we need is to vilify police or to make their jobs more difficult or dangerous.  However, it’s increasingly obvious whenever the police investigate themselves, they are rarely found at fault.  The families and the community are angry with the outcome and people are scared of police who are supposed to protect them.

How:  Every time a bank is robbed, the local police secure the scene and the FBI soon arrives to conduct an investigation.  The same should happen for every officer involved shooting or death in custody.  Allowing the police to investigate their own officers is an unconscionable conflict of interest, especially when a death has occurred.  An independent Federal agency should have jurisdiction over these incidents and investigate every case, instead of the local police.

Background: I live in a beach town in a relatively wealthy area of southern California.  There has been one police officer killed by a civilian and two civilians killed by officers.  The officer who was killed is rightfully treated as a hero in our town and we named a park after him.  As for the civilians killed by officers, that’s a completely different story.  The police reports in both officer involved deaths are beyond bizarre.  I love this town and our police, but what happened and what was reported to the public weren’t even remotely close.  The findings from both internal investigations predictably exonerated the officers, even though these two deaths appeared unjustified.  No one was held accountable and the cycle continues.

Bachelor’s Degrees from Community Colleges

What: To provide quality, accredited public college education that is affordable to most Americans.

Why: Tuition has been rising much faster than the rate of inflation for almost four decades.  Currently, only wealthy families can afford public university and middle-class families must take out loans to attend.  The total outstanding student loan debt is well over a trillion dollars and growing.  This is causing massive problems for our economy, since indebted graduates have a difficult time moving out, getting married and buying homes.  Many parents aren’t saving enough for retirement, because they are trying to help fund their children’s education.

Many studies have shown that access to a college education is a big factor in economic disparity.  Those who can afford college will get the high paying professional jobs and those who can’t will get the labor and retail jobs.  This makes it difficult for the poor to move into the middle class.

How: A simple change to the accreditation standards could resolve one of the biggest social and economic problems facing our nation.  Community colleges should be allowed to offer Bachelor’s degrees, in addition to Associate’s degrees.

Community colleges are affordable to almost everyone, without huge loans and obscene tuition.  The quality of education is very good and the professors are more than qualified to teach undergraduate courses.  Students who get an Associate’s degree or meet the transfer requirements should be allowed to finish their bachelor’s degree at their local community college.  This would save students tens of thousands of dollars and eliminate the monopolistic impediment of the university system.  Universities would have to compete with community colleges for undergrad students, which should bring down tuition costs.

Background: My mom was divorced and raised five kids.  She worked her way through community college and then university at night and graduated with honors.  All five of us kids, following her example, worked our way through college with no help, aid, loans or funding.  Four of us have Associate’s degrees and one also has a bachelor’s.  The other has a professional certificate.  I have an Associate’s in computer information management and it has made a huge difference in my career.  I wanted to get a bachelor’s degree, but university was way too expensive to justify, while I was supporting a family of four on my single income.

Public Funding of Alternative Medical Treatments

What: To identify and certify for medical use, cures and treatments that are safe and effective, but not economically viable for development.

Why: Virtually all of the funding for new medical technology is targeted towards synthetic drugs and medical devices that treat the symptoms of common medical problems.  Little money is targeted towards curing or preventing the underlying affliction.  Virtually no money is targeted to studying the health benefits of natural substances, because they can’t be patented.  The result is that patients must take expensive prescription medications indefinitely for most common medical issues.  This benefits the medical industry at the expense of their patients.

How: The Federal government should create a fund of a couple of billion dollars to fund the study and development of alternative forms of medicine and the prevention of common diseases.  Natural substances that are known or suspected of having health benefits should be studied for their effectiveness and certified as a treatment, if found to be safe and effective.  Prevention and cures should be given priority over long-term treatment.  Trial results should be published publicly.

Curing or preventing a single disease, such as cancer or diabetes could save tens of billions of dollars annually, lower health insurance costs and improve the solvency of Medicare.  Even a reduction in the number of strokes, heart attacks or birth defects would make a huge difference in the cost and quality of medical care.

Some priority areas of study would be:

  • Opioid-Free Pain Treatment
  • Reversible Male Birth Control
  • Prevention and Cure of Diabetes
  • Prevention and Cure of Cancer
  • Prevention and Cure of Heart Disease
  • Vaccinations and Cures for AIDS, HSV and other STDs
  • Prevention and Cures for Autism and Downs Syndrome
  • Prevention and Treatments for Mental Health Issues

Background: I work for a medical device company that has participated in two clinical trials.  Passing a clinical trial is a lengthy, arduous, risky and expensive task.  A trial costs millions or even billions of dollars and they often fail.  Medical companies can’t afford clinical trials for cures that have no revenue potential.  That’s why these types of trials must be conducted with public funding.

The Bottom Line

The bottom line is that the world is full of problems and always will be.  One reason most problems continue to exist is because they benefit those who profit from the status quo.  It will take innovative new ideas and a courageous new direction from our leaders to resolve the most challenging problems of our times.

“No problem can be solved from the same level of consciousness that created it.”

– Albert Einstein

Recommended Reading

Budgets are Sexy – Can You Imagine?
Don’t Quit your Day Job – The Earth is Flat
Online Investing AI Blog – Lessons Learned from Big Pharma
Out of your Rut – Never Bankrupt Yourself for a College Education

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My Take on the Brexit http://hopetoprosper.com/my-take-on-the-brexit/ http://hopetoprosper.com/my-take-on-the-brexit/#comments Fri, 24 Jun 2016 20:34:47 +0000 http://hopetoprosper.com/?p=8019 So, the votes are in and the dust has settled.  The citizens of England have voted to leave the EU, by a very small margin of 52%.  There are lots of messy details to sort out and the analysts on TV are all buzzing.  I’m a typical American with a limited global perspective, but I [...]]]> So, the votes are in and the dust has settled.  The citizens of England have voted to leave the EU, by a very small margin of 52%.  There are lots of messy details to sort out and the analysts on TV are all buzzing.  I’m a typical American with a limited global perspective, but I do have some opinions I would like to share.

It Could have Easily been Avoided

Brexit Vote Leave Sign

Image by David Holt

The UK had been trying to negotiate with the EU for years on critical issues, such as immigration.  But, the EU not only seemed stiff and inflexible, it turned a deaf ear to the issues and challenges facing the UK.  I don’t know if it was arrogance on the part of the EU or a sense of being repressed by the UK, but it didn’t end amicably for either party.

As an obvious outsider, I believe the Brexit could have been avoided with some basic respect and flexibility from both sides.  I don’t know what pushes leaders into entrenched positions when clearly some compromise is called for.  I do know if you back someone into a corner, the outcome is rarely good.

One of my former co-workers James from England told me years ago, “Once you raise your flag and draw your sword, it’s pretty hard to then back down.”

The Will of the People Really does Matter

In my opinion, the Brexit vote comes down to one thing: sovereignty.

The people of England have a proud culture of rugged individualism.  With popular phrases such as “Carry On” and “Keep a Stiff Upper Lip”, they don’t expect things to be easy.  What they do expect is to have a say in their future.  The step they took yesterday was a vote to regain their sovereignty.  Only time will tell if they made a wise decision.  Will they suffer for their brashness or will they flourish?

America has a similar culture and we are going through our own revolutionary moments right now.  Our government has turned a deaf ear to the problems facing Americans and have instead foisted their hand-picked political lackeys upon us.  But, America isn’t buying it.  We want real changes in our government and we want honest leadership that loves our country.  Instead, we have an arrogant duopoly that is for sale to the highest bidder.  Our vote is coming in November.

The Bottom Line

The bottom line is that freedom comes at a cost.  For the courageous voters of the UK, the cost is economic uncertainty.  Courage is always to be admired and freedom is always to be treasured.  Three cheers for England!

“There is shock, sorrow, anger and fear among people in the EU’s institutions.”

– Mark Mardell

Feedback is Requested

Anyone from Europe, the UK or anywhere else in the world is encouraged to share your opinions in the Comments section below.

Recommended Reading

Financial Samurai – What’s Next After the Brexit?
The Economist – The Brexit Debate
The Telegraph – Glorious Opportunity of Brexit

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Fallout from the Panama Papers http://hopetoprosper.com/fallout-from-the-panama-papers/ http://hopetoprosper.com/fallout-from-the-panama-papers/#comments Sat, 09 Apr 2016 19:44:05 +0000 http://hopetoprosper.com/?p=7982 A Panamanian legal firm, Mossack Fonseca, was recently hacked and Sunday over 11 million of their confidential documents were posted on the Internet.  This is significant because MF is the fourth largest global asset protection (tax shelter) law firm.  These documents list many of the world’s most wealthy and powerful.

Why this is Such a Big Deal [...]]]>
A Panamanian legal firm, Mossack Fonseca, was recently hacked and Sunday over 11 million of their confidential documents were posted on the Internet.  This is significant because MF is the fourth largest global asset protection (tax shelter) law firm.  These documents list many of the world’s most wealthy and powerful.

Why this is Such a Big Deal

Panama City

Image by Matthew Straubmuller

Everyone has known for decades the super-rich and politically-connected can move money around the globe, without any tax implications.  Politicians talk about it; books and articles are written about it; but, nothing is being done to stop it.  In fact, many banks and heads of state appear to be creating and using this tax-evasion network.  Whenever any complications arise, laws and tactics are quickly changed to protect the network.

The Facts are Undeniable

Until now, it was easy to gloss over the problem and deny this was happening on such a massive scale.  Now, it’s virtually impossible to deny.  It’s impossible to even downplay the size of the problem.  The working class knows they’ve been paying an unfair share of the global tax burden and now they finally have the ammunition to do something about it.  It will be interesting to see how it affects the elections.

Everyone is Implicated

  • 12 Heads of State
  • 150 Politicians
  • 29 Forbes List Billionaires
  • Dozens of Global Banks
  • FIFA Officials and Players
  • Drug Cartels and Dealers
  • Arms Dealers and Nuclear Proliferators
  • Companies linked to the CIA

The Fallout so Far

  • The president of Iceland has stepped down
  • The President of Argentina is under investigation
  • Vladimir Putin called the leak an American plot
  • The Prime Minister of England is under fire
  • The President of France is under investigation
  • CEO of Austrian Hypo Landesbank stepped down
  • Swiss Federal Police raided the UEFA offices
  • Police in El Salvador raided the local MF office
  • Australia is investigating 800 listed taxpayers
  • China has blocked MF related media and Internet

Evasion in America

There is a curious lack of Americans listed as MF clients.  Does this mean it’s not happening here in the US?  No, it just means Americans don’t move their money through Panama.  There are three key reasons for this:

  1. The Panamanian Free Trade Agreement forces Panama to release information to American authorities.
  2. US law makes it easier to setup shell companies in the Caribbean and other tax havens.
  3. Recent US laws like the Foreign Account Tax Compliance Act (FACTA) make it harder for American citizens to hide their money abroad.

Don’t be surprised to see Americans implicated in future leaks.

The Bottom Line

The bottom line is that transparency is a good thing, unless you are breaking the law.  International law is pretty murky and much of this may be legal, in some countries.  But, evasion and laundering are taking place on a global scale.

“Corruption, money laundering, and tax evasion are global problems, not just challenges for developing countries.”

– Sri Mulyani Indrawati

Recommended Reading

CNN – The Panama Papers: 7 Things to Know
New York Times – The Panama Papers: Here is what we Know
The Guardian – Fallout from the Panama Papers

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Robo-Investing is the Next Big Thing http://hopetoprosper.com/robo-investing-is-the-next-big-thing/ http://hopetoprosper.com/robo-investing-is-the-next-big-thing/#comments Tue, 25 Aug 2015 00:29:28 +0000 http://hopetoprosper.com/?p=7930 Image by Randy Chiu

It’s no big secret the financial services industry often takes advantage of retail investors.  High fees, poor performance and a lack of liquidity can be the cost of doing business with a commission-based financial advisor.  They have to get paid and that requires some costly products.

Finally, there is an [...]]]> Toy Robot

Image by Randy Chiu

It’s no big secret the financial services industry often takes advantage of retail investors.  High fees, poor performance and a lack of liquidity can be the cost of doing business with a commission-based financial advisor.  They have to get paid and that requires some costly products.

Finally, there is an alternative to hiring a financial planner or choosing your own investments.  For a small fee, you can try robo-investing, also known as automated investment advisory.  It is suddenly all the rage with millions of retail investors, especially Millenials, who seem to trust technology more than people.

Since programming an algorithm is cheaper than hiring lots of financial advisors, there can be significant savings for automated investors.  There can also be a big advantage to automating the entire investment process.  You can set it and forget it, instead of manually rebalancing your portfolio.  There are also automated features for very complex transactions, such as Differentiated Asset Location and Tax-Loss Harvesting.

Disclosure: This is not a paid post. I received no compensation from nor do I have any financial interest in companies profiled in the article. This information is provided objectively for the interest and entertainment of my readers.

The Key Players

Wealthfront – Wealthfront was established in 2011 and has over $2.6 billion under management.  They have quite an array of automated services including Direct Indexing, Differentiated Asset Location and Single Stock Diversification.  Customer assets are held in a brokerage account by Apex Clearing Corporation.  The management fees are .25%, with the first $10,000 managed for free.  The account minimum is $500, which is great for small investors.

Betterment – Betterment was founded in 2010 and has over $1.7 billion under management.  One nice feature of Betterment is individual goal setting.  This is something I did manually for my retirement funds, my house fund and college funds for my kids.  Management fees range from .15-.35%, in three tiers, depending on assets in the account.  There is no account minimum, but you will pay the highest tier fee (.35%) until you have at least $10,000 invested.

Schwab – Charles Schwab has been a champion of small investors for decades.  As one of the early discount brokers, they offered an alternative to pricey brokers on Wall Street, long before you could buy stocks online.  Their Intelligent Portfolios are available to investors with an account minimum of $5,000 and are free of commissions and advisory fees.  Managements fees are generated from the Schwab ETFs and third-party ETFs available in the portfolio.

FutureAdvisor – FutureAdvisor was founded in 2012 and has over $600 million under management.  They don’t hold your assets directly, instead you invest with Fidelity or TD Ameritrade and they manage your accounts.  For some odd reason, people over 68 years old aren’t eligible to invest with FutureAdvisor.  There is no account minimum for the free service, but the premium service requires at least $10,000.  The management fee is a flat .5% of assets.

My Predictions for Robo-Investing

  • Automated investing will continue to grow at a rapid pace.
  • Traditional investment firms will add automated features (like Schwab), in order to attract investors to their funds and ETFs.
  • Automated investing will begin to displace low-end investment advisors.
  • Younger investors will prefer automated investing to managed investing, the same way automatic transmissions have replaced manual gear boxes.

The Bottom Line

The bottom line is that good financial planning requires a lot more than picking a couple of investments and hoping they meet your goals.  If you lack the time and experience to do your own planning, robo-investing may be the solution.

“An investment in knowledge pays the best interest.”

– Benjamin Franklin

Recommended Reading

Barron’s – When Financial Advisors meet their Robo-Rivals
The Simple Dollar – Betterment vs. Wealthfront
Dough Roller – Betterment vs. Wealthfront

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My Thoughts on Retirement Planning http://hopetoprosper.com/my-thoughts-on-retirement-planning/ http://hopetoprosper.com/my-thoughts-on-retirement-planning/#comments Fri, 26 Jun 2015 18:59:48 +0000 http://hopetoprosper.com/?p=7910 I received an email from one of my readers asking me about my thoughts on retirement planning.

“What did you do successfully in your 20s to prepare for retirement?

What you would have done differently to ensure a better financial future?

What would be your ideal retirement plan?”

My ideal retirement plan would be to [...]]]> I received an email from one of my readers asking me about my thoughts on retirement planning.

“What did you do successfully in your 20s to prepare for retirement?

What you would have done differently to ensure a better financial future?

What would be your ideal retirement plan?”

My ideal retirement plan would be to retire today, but that’s not realistic.  I will very likely retire a millionaire at age 67.  If I run into some money or develop a successful side-gig, I may retire sooner.  I would also love to cut back to 3-4 days a week and semi-retire in my 50s.  Since my house is almost paid off and I love living at the beach, I’ll likely stay here, even though California has high taxes.

What I did Right in my 20s

  • I started investing at age 21.
  • I saved consistently, even with a low income.
  • I did research and learned how to invest.
  • I bought newsletters and found mentors.
  • I wrote down goals and plans to achieve them.
  • I read books and listened to motivational tapes.
  • I followed a career path and chose a great profession.
  • I found side-gigs and invested the extra money.
  • I drove older cars and maintained them myself.
  • I saved for a house and will pay it off before retirement.

What I Would Change if I Could

  • I would have gotten my college degree in my 20s, instead of my 30s.
  • I would have demanded higher pay that was equal to my skills.
  • I carried credit card debt and took out a second to fix up my house.

The Bottom Line

The bottom line is that saving up for retirement isn’t as daunting as some people think.  As long as you start in your 20s, you will have plenty of time to save and invest.  If you wait until your 30s or later, the math becomes a lot more difficult.

“A whole generation of Americans will retire in poverty instead of prosperity, because they simply are not preparing for retirement now.”

– Scott Cook

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Become a Millionaire in One Easy Step http://hopetoprosper.com/become-a-millionaire-in-one-easy-step/ http://hopetoprosper.com/become-a-millionaire-in-one-easy-step/#comments Fri, 19 Jun 2015 00:45:57 +0000 http://hopetoprosper.com/?p=7871 I read an article today that discussed the status of the world’s growing number of millionaires.  This article shared a very enlightening statistic.

Millionaires invest on average 20% of their income.*

*Source: Yahoo Finance

Investing is the Key to Success

Image by Rance Rizzutto

So, it’s pretty much as simple as that.  If you [...]]]> I read an article today that discussed the status of the world’s growing number of millionaires.  This article shared a very enlightening statistic.

Millionaires invest on average 20% of their income.*

*Source: Yahoo Finance

Investing is the Key to Success

Hey You Millionaires

Image by Rance Rizzutto

So, it’s pretty much as simple as that.  If you invest a good part of your income, then within a number of decades you will likely become a millionaire.

Call me Captain Obvious, but “Everybody Knows That”.  The only question is, why aren’t people doing it?

Obviously, I have over-simplified the process of investing and accumulating wealth quite a bit.  I wanted to just concentrate on one simple facet of the entire process.  I want to understand why people fail to invest.  This has confused me for the 30 years I have been investing.  One reason I started this blog in 2007 was to encourage people to get started investing, yet it seems like a fool’s errand.

36% of people in the U.S. have nothing saved for retirement.*

*Source: BankRate.com

Feedback is Requested

If you are one of the people who reads my blog and you don’t invest, I would love to hear the reasons why.  You can leave an anonymous comment, if you don’t want to be identified.  I am searching for creative ways to encourage new investors.

If you don’t currently invest, what is keeping you from doing it?

The Bottom Line

The bottom line is that investing is the most common way to become a millionaire in America.  That’s why there aren’t any posts about clipping coupons or making soap on my blog.  We need the magic of compounding in order to prosper.

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”

– Robert G. Allen

Recommended Reading

101 Centavos – Long-term Investing versus the Quick Buck
Don’t Quit your Day Job – What Type of Investors Perform Best?
Squirrelers – The Snowball Effect of Money

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5 Critical Financial Mistakes http://hopetoprosper.com/5-critical-financial-mistakes/ Fri, 20 Mar 2015 00:29:51 +0000 http://hopetoprosper.com/?p=7833 Nobody wants to make critical mistakes with their finances, but millions do it every day.  Fortunately, these 5 money mistakes are very easy to avoid.

1. Failing to Save

Image by Steve Bowbrick

There is a reason Saving money is number one on this list.  Nobody wants to save money and they have a [...]]]> Nobody wants to make critical mistakes with their finances, but millions do it every day.  Fortunately, these 5 money mistakes are very easy to avoid.

1. Failing to Save

Number 5

Image by Steve Bowbrick

There is a reason Saving money is number one on this list.  Nobody wants to save money and they have a million excuses why they can’t.  Unfortunately, the alternative to saving money can be working your entire life and winding up broke.  If you never save money, you’ll never have any.  Save at least 10%.

2. Neglecting Income

Income is a key component of any financial plan but it is often neglected.  A higher income can lead to greater security and opportunity, provided some of it gets put away.  It is much easier to save, invest and create a secure future with an above-average income.  Work tirelessly to get paid what you deserve.

3. Failing to Invest

A savings account is considered an investment, but it’s a terrible investment for accumulating wealth.  The same can be said for CDs, money market and treasury bonds.  Any deposit yielding less than the rate of inflation is a guaranteed money loser.  The stock and real estate markets are scary and unpredictable.  You can win or lose big with these investment.  However, if you ever want to accumulate wealth, you have to choose investments that grow over the long term.

4. Failing to Insure

Risk is a nasty prospect and a danger to your future prosperity.  Most people underestimate their tolerance for risk, until they are facing a catastrophic loss.  Insurance is never a wise place to cut corners, especially if you have assets to protect.  Make sure you are insured properly, with all of the necessary policies and coverage, by a company you can trust to pay the claims.

5. Relinquishing Control

Never, ever, ever relinquish control of your financial assets.  Never let a financial advisor, investment firm or insurance company control your assets.  If you keep assets in your own accounts, you are considerably less likely to lose them.  The news and financial papers are littered with stories of people who lost everything to unscrupulous firms and advisors.  Millions of others are losing money every day to poor investments they can’t leave, such as annuities and whole life policies.

The Bottom Line

The bottom line is that managing your finances is profoundly easy.  The hardest part is getting started.  The thing that makes you successful is sticking with it.

“Learn from yesterday, live for today, hope for tomorrow.”

– Albert Einstein

Recommended Reading

Len Penzo – 5 Crazy Ideas that Resulted in Million Dollar Paydays
101 Centavos – Long-term Investing versus the Quick Buck
Don’t Quit Your Day Job – Should you Invest Actively or Passively?

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Life is Getting a Lot More Expensive http://hopetoprosper.com/life-is-getting-a-lot-more-expensive/ http://hopetoprosper.com/life-is-getting-a-lot-more-expensive/#comments Sat, 31 May 2014 22:12:39 +0000 http://hopetoprosper.com/?p=7700 I’m constantly telling my kids how I moved out at 19, worked my own way through college and saved up for and bought a house.  I am very proud of this and hoped to set an example for them to follow.  The really bad news for my kids and others in their 20s is that it’s [...]]]> I’m constantly telling my kids how I moved out at 19, worked my own way through college and saved up for and bought a house.  I am very proud of this and hoped to set an example for them to follow.  The really bad news for my kids and others in their 20s is that it’s getting a lot harder to live the American dream.

Student Debt is Stifling

The Graduates

Image by Sakeeb Sabakka

Anyone who is attending college or has recently graduated is painfully aware of the absurd cost.  Even local state college tuition is unaffordable to middle class students, without taking out some pretty hefty loans.

The total amount of student loans now exceeds $1.1 trillion and 66% of students with a 4-year degree now graduate with some student loans.  The average amount per student is now over $30,000.  Student debt has almost quadrupled in the past decade and this falls heaviest on minority and low-income students.

Wages are Stagnant

Wages have been essentially flat for the lowest 70% of workers for the past decade and have declined for the lowest 20%.  Wages are way up for CEOs and the other top 5% of wage earners.  Productivity is way up and corporations are making record profits.  But, they are taking care of their shareholders, instead of their employees.  This trend will continue, so employees need to look for high paying fields and entrepreneurial types may consider starting a business.

Source: Business Insider

Housing Prices are Up

Housing prices across the U.S. rose an average of 10.9% in 2013 and are headed higher this year.  In many parts of the country buying a house is nearly impossible for couples in their 20s.  Combined with student loan debt and stagnant wages, most couples will be lucky to be able to afford a house in their 30s.  Buying a house has always been the next obvious step for young couples.  But, many are starting to consider it an expensive hassle.  That’s a shame, because living in a paid off house makes retirement considerably more comfortable.

Source: Kiplinger

Median Savings is Zero

The typical American isn’t saving anything for the future right now, despite having plenty of income left over after paying their bills.  People are simply choosing to spend all of their discretionary income, instead of saving some.  This is a sad reality, where people are choosing to live paycheck-to-paycheck, instead of saving to get ahead.  Saving in your 20s is one of the keys to a prosperous future.  Waiting until your 30s makes it much more difficult to build a nest egg.

Source: Fox Business

Retirement is Expensive

Anyone who is 20 years old right now could need to save $7 million in order to retire and this would only allow an annual withdrawal of $43,600 in today’s dollars.  That is a mind-boggling amount of money to save, for retirement with a median income.  My original retirement goal in the 90s was to save a million dollars, but I have since decided to at least double that amount.  People in their 20s need to save a lot more and may not get to retire until well into their 70s.

Source: Yahoo Finance

The Bottom Line

The bottom line is that it’s getting much harder to earn a living wage and prosper in the working class.  Those without a plan may join the growing millions of working poor.  In order to succeed, you need work towards a higher income, manage finances wisely, save for the future and invest to outpace inflation.

“Success is liking yourself, liking what you do and liking how you do it.”

– Maya Angelou

Recommended Reading

101 Centavos – Invest in the Higher Cost of Food
Stumble Forward – 7 Things to Know Before you get a Mortgage
Barbara Friedberg – Positive and Negative Impacts of Globalization

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Should you Sell your Stocks in May? http://hopetoprosper.com/should-you-sellyour-stocks-in-may/ http://hopetoprosper.com/should-you-sellyour-stocks-in-may/#comments Sat, 03 May 2014 20:55:41 +0000 http://hopetoprosper.com/?p=7674 It’s the most treacherous time of the year for stock market investors, the dreaded month of May.  This is the time of year when the stock market most often tanks and heads into the summer doldrums.  Most investors will ride it out and take it on the chin, while others will attempt to beat the market by timing it.

Why is May so Bad for Investors?

Your Stock Fortune

Image by Bran Sorem

It’s a well known fact to most traders that the stock market underperforms in the summer months.

According to the Stock Trader’s Almanac, the Dow Jones Industrial Average has risen over 7% on average from November through April, but only 0.3% from May to October.  However, that’s just an average and some summers have been disastrous.

To be fair to May, it’s not usually that bad of a month for the stock market.  The worst month is September and most of the biggest losses come later in the summer.  May is just the start of the flat market season, so it gets all of the attention.  The average S&P drop for May since 1929 is only -0.1%.

Why I am Staying the Course

After trading commissions and tax liabilities, it doesn’t make much sense for me to sell my stocks, in order to avoid a 0.1% drop.  I may put some trailing stops on some of my larger gaining stocks, but I won’t be liquidating my portfolio to run for cover.  Typically, summer is a time when I add to my investments and look for stocks that have been beaten down.  It’s a better season for buying than for selling.

The Bottom Line

The bottom line is that timing the stock market is a fool’s errand.  If you have substantial investments, it could be a good time to take a more conservative position.  It could also be a good time to buy some great stocks at a low price.

“There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor -the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”

– William Bernstein

Recommended Reading

Money Counselor – Best Long Term Investment?
Out of Your Rut – Did the Meltdown Wreck your Retirement?
Squirrelers – 4 Types of Income

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The Great American Money Grab http://hopetoprosper.com/the-great-american-money-grab/ http://hopetoprosper.com/the-great-american-money-grab/#comments Thu, 17 Apr 2014 03:14:55 +0000 http://hopetoprosper.com/?p=7632 With 10,000 baby boomers reaching retirement age every day, there is a scramble to grab a share of the largest money transfer in American history.  Retirees are moving their balances out of the 401k accounts of their former employers and are looking for a safe place to stash their retirement savings.

Every bank, investment house and insurance company wants a piece of this pie.

It’s a Huge Amount of Money

Money Grab

Image by TaxCredits.net

Trillions of dollars will be transferred from 401k and 403b plans over the next 10 years and much of it will be reinvested.  Trillions more will be withdrawn from IRA accounts and there is more money invested in IRAs than 401k and 403b plans combined.  Because of the MRD (Minimum Required Distributions) requirement of an IRA account, people will have to withdraw the money, whether they want to or not.  Starting at age 70 1/2, retirees will have to withdraw a percentage of their IRA balance each year.  The MRD starts around 4% and goes up each year.

Salespeople are Standing By

There are a lot of commercials on TV lately, with retirees flying gliders, buying vineyards and jetting off to Paris.  If you have saved quite a nest egg, you may be contacted by a Wealth Manager.  Wealthy retirees are the Holy Grail for banks and financial companies, who are masters of following the money.  The more assets you have, the more they manage and the more they get paid.

There are also a lot of commercials on TV showing people who have lived to be over 100.  These commercials are put out by companies selling annuities.  Annuities are a fabulous opportunity, for the investment company.  Unfortunately, they aren’t always such a great investment for investors.  Unless you do live to be over 100, you will be much better served by asset based investments.

Retirees are Confused

Some of the people I know who are facing retirement are confused about their investment options.  Often, they have already been contacted by people looking to manage their transition.  Or, they have been steered towards investments by their existing 401k company, as they try to leave.  In any case, the advice they receive is rarely unbiased or in their best interests.  The laws are complex and the penalties steep for making a mistake.  It’s no wonder why they are anxious.

Tips for the Transition

Start Early – Start early researching investments, so you aren’t pressured into making decisions as you leave your job.  Some 401k accounts will allow you to stay invested after you leave the company, while others have a deadline.  The last thing you want is for the plan to send you a disbursement check and withhold 10% of your balance in the process.  Unless you come up with that 10% on your own and reinvest 100% within 60 days, you will get hit with very heavy penalties.

Research Investments – Very few people are comfortable with or capable of choosing a suitable retirement investment, but that is exactly what you need to do.  If you don’t feel you are up to the task, consider hiring a fee-only planner to make some recommendations.  If you have the courage to go it alone, most of the mutual fund companies can really help you out.  Not only do they have target funds setup specifically for retirees, they have associates who can handle the roll-over.

Watch for Fees – Engaging a commission-based financial advisor may seem free, but you will likely pay in the form of higher fees on your investments.  You may also incur redemption fees, which are designed to lock you into your investments until the sales commissions are recovered.  If you want to leave, you will incur a redemption penalty.  For investors with large balances, these fees can add up.

Keep Control – I can’t say enough times on this blog how important it is to keep control of your own assets.  Invest in some quality money manager software for tracking purposes.   If you transfer your 401k into an annuity, you may lose control of your funds, forever.  If you want to change companies or investment types later on, you will most likely be out of luck.  If you transfer it into a self-directed IRA, you can easily transfer to another IRA account later on.

Transfer Direct – Speaking of transfers, you should always have the money rolled-over directly from one qualified investment to another.  If you take possession of the money there may be 10% withholding and some heavy tax implications.  You don’t want to have to prove to the IRS that you reinvested your retirement savings and you don’t want to try to get your 10% back from the 401k administrator.  You are way better off doing a direct roll-over.

The Bottom Line

The bottom line is you may save for many years towards your retirement and you can’t afford to blow the transfer.  Find suitable investments before your last day at work and do a direct roll-over from your old retirement account to your new one.

“Money is always there but the pockets change.”

– Gertrude Stein

Recommended Reading

Don’t Quit your Day Job – Taking the Market’s Temperature
Online Investing AI Blog – Stocks and Retirement
Wealth Informatics – My Retirement Advice

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