Support our Troops (July, 2009)

With the 4th of July near, I felt it would be a good time to pay tribute to the many soldiers that defend our country every day. War is a hot topic these days, but as we all know, freedom does not come free. Whether or not you agree with the current foreign policy, it is important that we all support our soldiers. I've always been grateful for the brave men and women who serve to protect our country. However, "Support Our Troops" took on an even stronger meaning for me when my 19 year old brother shipped off to Parris Island for Marine Boot Camp this past February. He graduated in May, and seeing all those young men in uniform at the graduation committing to protect our country was an amazing experience. I couldn't be more proud of my brother.

Almost everybody knows of somebody who is serving overseas. All too often, we want to help but we're not sure what to do or how we can make a difference. Even something as simple as walking up to a military uniformed person to shake his or her hand and say "Thank you for serving our country" goes a long way. Here are some others ways you can show your support to our troops and their families:

Cell Phones for Soldiers: This is a really neat program started by a couple of kids in Massachusetts. How many of you have old cell phones lying around that you will never use again? A company called ReCellular will take your unwanted phone and turn it into a prepaid phone card with 1 hour of use for soldiers serving abroad. They have drop-off locations all over the U.S. Visit http://www.cellphonesforsoldiers.com/locateDropoff.asp to find one near you.

Letters: This is no new concept, but I don't think we fully comprehend how much letters mean to soldiers. They need to know that we are thinking of them and proud of them. If you know somebody overseas, take a few minutes to tell them how much you appreciate what they are doing. If you don't know anybody currently deployed, there are programs that send your letter to a deserving soldier. Two such programs are www.amillionthanks.org and www.anysoldier.com. If you really want to make them smile, include some funny jokes or comics or a newspaper clipping of positive things they are doing overseas. You can even send emails at www.amillionthanks.org.

Operation Baghdad Pups: This organization's quote "No Buddy gets Left Behind" is a good summary of their mission. While serving overseas, some soldiers come across abandoned dogs with a low chance of survival and decide to raise them. As the soldiers care for the dogs during their stay, a strong bond forms and they can't bear the idea of leaving the dog behind when they return home. If you are a dog lover, it's not hard to understand how comforting the companionship of a dog would be while living in a war zone. To find out how you can help, visit http://www.baghdadpups.com/.

Care Packages: There are a couple of ways to go about sending a care package. United Service Organizations (USO) allows you to sponsor a care package for as low as $25, while each package contains both needed and requested items valued at $75. You can learn more at https://www.uso.org/donate/custom.aspx?id=565&. If you would like to make your own care package, here are some good items to include:
- Beef jerky
- Power Bars (one of my brother's favorites...they get very tired of military MREs!)

- Prepaid phone card
- Instant drink mix
- Lip balm
- Mini games
If you don't have someone in particular to send one too, there are several organizations that will forward your package on to a soldier such as http://www.give2thetroops.org/.

Operation Homefront: While all of the other suggestions have been for the soldiers themselves, they all have families they have left at home. Many of them have gone abroad because it was the best way they knew to care for their spouse and children. Operation Homefront has chapters all over the United States that help military families in need. Please visit http://www.operationhomefront.net/ to find out ways you can help.

I hope everyone has a wonderful, fun-filled 4th of July holiday, but that we also take a moment to honor those protecting us. For the time being, my brother is in San Diego at the School of Infantry and out of harms way, but I know there will be a time when he will be one of the brave men serving overseas. I hope there never comes a day that he asks himself if what he is doing is appreciated.

Iran and Iraq: A Tale of Two Economies (July, 2009)

For the past couple weeks, we have all been captivated by the protests occurring in Iran. It has been difficult to turn our eyes from videos of brave men and women risking their lives to insist that their voices are heard, even as the regime releases violence on its own people. While some people understandably find the news of these peaceful protests and the ensuing government crackdown difficult to observe, I personally find great hope in the displays of bravery, compassion, and determination among the protesters. As the people of Iran finally stand up against one of the most suppressive governments in the world, the rest of the Middle East has been making economic strides, particularly in Iraq. Even though the Iranian protests may not result in any change in the regime in the near future, the government of Iran is on precarious ground versus other Middle Eastern countries making economic progress.

The Iranian government under President Ahmadinejad has grossly mismanaged the Iranian economy. Iran’s Central Bank recently reported the projected rate of inflation to be 23.6% in the next year while economic growth has slowed consistently for the last four years. With a disproportionately young population, the unemployment rate has climbed from 10.5% four years ago to 17% now. The Iranian economy was booming a decade ago, so why are these numbers unexpectedly getting worse, even after the surging oil prices of 2008? The answer may be found in this interesting fact that the United States government may also want to examine before it heads down a socialist path… Ahmadinejad is a pure populist with a policy of spreading wealth as much as possible. His staunchest supporters are the poor since the President has consistently increased government handouts. So as you watch the protests raging in the streets, remember that these protesters are generally the more educated members of Iranian society and the future of that country. Without these people creating wealth instead of Ahmadinejad simply spreading the current wealth around, the country will continue to deteriorate economically and soon there will be very little wealth left to spread to the poor.

The population of Iran has become disenchanted with their government for many reasons, but one major reason may be the Iranian people looking next door to Iraq. As they watch their neighbors have honest elections, reduced violence, and an improving economy, many Iranians may be questioning why they are denied such progressions. The Iraq National Investment Commission announced on May 31 that it expects the country’s gross domestic product to grow by 7% this year, even during a global recession. This positive number is the result of the Iraqi government performing an about-face on many economic issues. For example, the government has opened its six super-giant oilfields for the first time in 30 years, and at the end of June it will auction off foreign contracts to produce crude oil for the next 20 to 25 years from Iraqi wells. For the first time in decades, the government is welcoming foreign investment in its energy industry, and oil companies are clamoring for the opportunity. Also, Iraq has turned its focus to improving infrastructure by approving bigger budgets, but has found that the country lacks engineers to carry the projects out. So on Monday, Iraq urged scientists and engineers who fled the country amidst violence in the last six years to return home to help rebuild the economy. Across the border, engineers and scientists in Iran have already begun wondering why their country does not value them so highly and may start to leave. Unlike Iran, Iraq has finally realized that to keep these entrepreneurs and educated citizens, the economy must function properly. Last year, Iraq’s Finance Ministry began drafting law necessary for Iraq to join the World Trade Organization. The idea that Iraq may join any civilized world-wide organization is a gigantic step forward. With economic recovery and growth, foreign and domestic investment will increase. This was already seen in May of this year as a total of 745 Iraqi companies registered with the Ministry of Trade, which resulted in a 62% increase in the total number of registered firms in the country in only one year. Iraq certainly has its domestic problems, such as a dwindling water supply, but an increase in business is likely to help find solutions to these problems.

While much of Iraq is still in a dire economic situation, investment should help Iraq’s economy find new footing and spur growth. This is in stark contrast to an Iranian economy that continues to slide. This is certainly the tale of two economies, seemingly headed in completely opposite directions. And no one is watching this tale more closely than the protestors in Iran.

CFA and CFP (June, 2009)

The monthly memo was designed not only to share our thoughts on certain issues but also to keep you informed of new developments within our company. In that light, we wanted to share some important things going on at The Alder Financial Group this spring.

All of us here feel it is very valuable to continually increase our industry knowledge. Besides industry seminars, conferences and continuing education workshops, we also strive to obtain specialized credentials. While there are many available designations, this month’s article focuses on the two we feel are the most prestigious: CFP® (Certified Financial Planner) and CFA (Certified Financial Analyst.) These are highly sought after designations requiring substantial dedication to acquire either of them. One of our principals, Alan Gaylor, has held the CFP® designation for many years, and Lori also took the CFP® exam in March. Rachel just took the Level I CFA exam this past Saturday. Studying for these exams has been a very important part of our lives in the past year, so we hope this Monthly Memo gives you some insight into these two important designations that we have been pursuing.

As some of you already knew, I have been studying for the CERTIFIED FINANCIAL PLANNER™ Two weeks ago I received the highly-anticipated letter in the mail informing me of my score. Words can not express the feeling I had when I read the first line: “Congratulations, you have passed the CFP® exam.” All my hard work and long hours of studying definitely paid off! exam which I took in March.

Rachel has also been diligently studying for a difficult exam, the Level I CFA test, which she took on Saturday. There are three levels of exams that must be passed to acquire the CFA designation, so Rachel has a few more years of studying in her future! Since we’ve both been consumed with studying this year, we figured it would be a good time to shed some light on these two designations, what they mean, and their importance in the industry.

CFP®

I’ll start by giving you the basics on what it takes to become a CFP® Certificant. There are six prerequisite courses you must pass to be eligible to sit for the exam. These include Financial Planning, Insurance and Employee Benefits, Investment Planning, Income Tax Planning, Retirement Planning and Estate Planning. It generally takes an individual a year and a half to complete all six. The exam itself is a rigorous 10 hour exam taken over two days. The exam seeks to assure the public that the CFP® Certificant is able to apply financial planning knowledge to real-life situations. Upon passing the exam, you must prove that you have a Bachelor’s degree and 3 years of full-time, relevant financial planning work experience. Every two years you must renew your certification which requires 30 hours of Continuing Education. This assures that CFP® designees are continuously educating themselves in the area of financial planning.

So what is the importance of obtaining the CFP® designation? The key point of the CFP® The amount of time and effort required to achieve the designation ensures that all holders have demonstrated a high level of commitment, ethics, and professionalism. Certification prepares financial planners to meet the ever-changing needs of their clients and focus on long-term relationships. The term “Financial Planner” has recently become very widely and loosely used, but when you see the designation CERTIFIED FINANCIAL PLANNER™, you now know this person is subjected to the standards of the most recognized and respected financial planning organization in the world. designation is to further the knowledge and study of comprehensive financial planning.

I’ll now turn it over to Rachel to describe the CFA designation.

CFA

The Certified Financial Analyst designation is possibly the most difficult certification to acquire in the finance world with at least three years of exams and a passing rate of only 35% for the first level. More than 50,000 financial analysts around the world took the Level I exam this past weekend. When I took the test on Saturday with 700 other candidates, it was definitely nerve-wracking to look around and realize that only about 245 of us would pass! However, after studying for eight months, I felt well-prepared. I am very proud of both Lori and myself for dedicating ourselves so fully to studying, and I know it made all the difference for both of us. The CFA Institute will not release my score until the end of July, so I am beginning the long and anxious wait to find out if I passed!

There are a total of three levels of exams that must be passed to be awarded the CFA designation. For the first CFA exam, there are eighteen subjects that most be known in acute detail. These subjects include Financial Statements, Portfolio Management, Ethics, Fixed Income Investments, Equity Investments, Derivatives, and Economics, just to name a few. The Level I exam is offered twice a year, in June and December. The Level II and Level III tests are only offered once a year, in June, and these tests cover those eighteen subjects and others in even more detail. Since the pass rates for Level II and Level III are also very low, it is rare for a candidate to pass each test on the first try and it is very common for a candidate to need four to five years to pass all three exams. This requirement of constant dedication for numerous years is one major reason for the difficulty of these exams. Candidates must keep their eyes on the prize, even if the prize is many years away!

The CFA Institute maintains a high focus on ethics at each level, and being awarded the CFA Charter means the charterholder is committed to the highest ethical and professional ideals. While the curriculum at each level ensures that the candidate understands complex financial computations, the CFA Institute is more concerned with determining that each CFA Charterholder understands the deeper interpretation of these computations within the context of the individual portfolio, the industry, and the world economy. The CFA exams are comprehensive in scope, and the CFA Institute hopes to assure clients and prospective clients that a CFA Charterholder has committed him or herself to thorough and extensive knowledge of all pertinent financial subjects.

Since acquiring the CFA designation requires years of effort, it will be quite a while before I may join Lori in saying that I achieved my goal. However, I will not let this deter me and I hope to report in two months that I get to move on to Level II! In the mean time, I want to congratulate Lori on her achievement… she showed an uncommon commitment to studying for the CFP® test and all of us at The Alder Financial Group are proud of her for achieving her goal!

Get Away (May, 2009)

The warm weather we have had lately has been a reminder that summer is near! I’ve decided to share some ideas for weekend getaways in the southeast. Everyone here at The Alder Financial Group has contributed to share personal experiences of places we have been and would recommend to you. Here they are in no particular order:

St. Simons Island, GA

http://www.explorestsimonsisland.com/

St. Simons Island is a seaside community located on the Georgia Coast. Of course the beach is the biggest attraction, but the pier is also a great place to spend the day. Many locals fish for shark on the pier and there is a lighthouse and a playground nearby as well. There are several fun shops and restaurants. One of my favorite places to eat is Mullet Bay, but to be honest, I haven’t found one restaurant that I don’t like! For some good southern cooking you can check out Barbara Jean’s, and for quality seafood in a unique atmosphere, make a reservation for the Blackwater Grill. Bennie’s Red Barn is another popular restaurant and has been serving since 1954, making it the oldest privately owned restaurant on the island. After eating, you should stop by Sweet Mama’s candy shop. If gambling is your thing, the Emerald Princess is a casino cruise that goes out into international waters for about 5 hours daily. Lastly, if you like to golf, the island is famous for its beautiful courses run by the Sea Island company, which also runs The Cloister on St. Simon’s sister island right next door.

Fairhope AL

http://www.cofairhope.com/index.php

Fairhope is a city located along the cliffs and shoreline of the Mobile Bay in southern Alabama. It is known as a romantic small town with storybook charm. Downtown you will find many shops, boutiques, cafes and art galleries, and Fairhope is a great place to walk around and shop for antiques. The Fairhope Municipal Pier is a beautiful place to visit and features restaurants, duck ponds and an award-winning rose garden. As far as accommodations go, there are several cottages and guest houses, some on the bay with private piers. If you really want to pamper yourself, the Grand Hotel Marriott Resort, Golf Club & Spa is picturesque and would be a great escape. And very close to the Grand, you will find the Wash House Restaurant, which is in an old wash house building adjacent to a plantation house for a true southern experience. Beyond the experience, the Wash House’s fresh seafood is also outstanding.

Nashville, TN

http://www.visitmusiccity.com/

If you like country music even a little bit, you will love visiting Nashville, TN. Music Row is a street on which you can listen to talented live musicians any time of day. Many country stars began at bars on Music Row, so you may be one of the first to hear a soon-to-be celebrity! The historic Ryman Auditorium, built in 1892, offers interesting tours. The Wildhorse Saloon is a popular spot to stop in for lunch or dinner and maybe stay for a concert. A few minutes away from downtown, you will find Opryland, which is a must-see. The Gaylord Opryland Hotel and Convention Center is more than a hotel, it is a beautiful dome with indoor gardens, shopping and restaurants. There is much more to see in Nashville such as the Country Music Hall of Fame and the General Jackson Showboat, making it impossible to see it all in one weekend. Just pick a couple things that sound good to you and don’t forget to relax at least for a little while!

Gatlinburg / Pigeon Forge, TN

http://www.gatlinburg.com/default.asp

http://www.mypigeonforge.com/

You can rent an amazing cabin secluded in the beautiful Smokey Mountains for a reasonable rate, and many come equipped with Jacuzzis, pool tables and other features you can choose from. There’s nothing like sleeping in and then heading to town for a big pancake breakfast at one of the many pancake houses around town. If you like trout fishing, or would like to try it for the first time, you can fish in the Great Smoky Mountains National Park. In Gatlinburg, there are several distinctive shops, original restaurants and museums on the main strip in the downtown area. Just 15 minutes away, Pigeon Forge is full of fun attractions, especially for kids. If you have kids or enjoy amusement parks yourself, Dollywood features rides, a water park, shows and much more. The Dixie Stampede is a one-of-a-kind dinner attraction that is enjoyable for all ages, complete with special effects and stunts performed with cattle and horses.

Lake Guntersville, AL

http://www.alapark.com/lakeguntersville/

If you enjoy the outdoors, Lake Guntersville State Park, located on the banks of the Tennessee River in Northeast Alabama, would make for a great mini-vacation. Lake Guntersville is the largest lake in Alabama and fishing, boating and eagle watching are all popular sports there. For lodging they have something for everyone: a nice resort, rustic cabins or a scenic campground. If you live in the Atlanta area, stop on the way to Lake Guntersville for an afternoon in Mentone, a small town situated on Lookout Mountain in Alabama. It is a quaint town with bed and breakfast inns, cabins, campgrounds, and breathtaking waterfalls and trails. If you like horseback riding, the Shady Grove Dude Ranch offers a waterfall trail.

Charleston, SC

http://www.charleston.com/

http://www.patriotspoint.org/

For you history buffs, Charleston is right up your alley. As many of you may already know, Charleston is home to the USS Yorktown and other military ships that are now open for tours. The ships are located in an area called Patriots Point. Here you will also find war planes and museums. You can also take a tour of Fort Sumter which is the island fort where the Civil War began, and the ferry ride to get to the fort is also a treat. Charleston is not only a historical town… It’s a great city to walk around, marvel at the beautiful houses and shop. At the beginning of Market Street there is a huge open air market surrounded by great restaurants and shops. Last but not least, there are several spacious beaches characterized by white sand and clean water.

Asheville, NC

http://www.biltmore.com/

By far the most popular site to see in Asheville is the Biltmore Estate, which was built around 1895. Along with the astonishing house, the estate features gardens, a winery, a farm and much more. May is famous for the Festival of Flowers which includes live music, springtime dining specials and shopping. If you can’t make it till July, the Bele Chere festival is one of the biggest outdoor festivals in the Southeast. If you plan your trip in the fall, the Grove Park Inn hosts a gingerbread contest every year, and the winner is flown to New York City and featured on Good Morning America! Asheville has events and festivals planned year-round, so choose one that suits your interests.

Marriott Shoals Hotel & Spa, AL

http://www.rtjgolf.com/resorts/shoals/

If you are a golfer, The Robert Trent Jones Golf Trail in Alabama offers some of the finest public facilities in the South East. The one we want to highlight today is one of Alan’s favorite getaway ideas. Tucked in the northwest corner of the state lies the RTJ course on the banks’ of the Tennessee River in Muscle Shoals. It comes complete with two courses, the Fighting Joe and the Schoolmaster, that are highly ranked by Golf Magazine. The picturesque facility seems like it is in the middle of nowhere, but it is really not that far from Birmingham or Memphis. After a long day of golf, The Marriott Shoals Hotel & Spa complex is just a short drive across the river. One of the resort’s best features is Alabama’s one and only revolving restaurant, the 360 Grille, which offers beautiful views of the Tennessee River and Florence. The resort has two saltwater pools, the outdoor one featuring a cave and water slide for kids. If you still have some free time, the Tennessee River is famous for small mouth bass fishing.

Madison, GA

http://www.madisonga.org/

This historical area is located 1 ½ hours southeast of Atlanta and is the largest historic district in Georgia. It was spared by Sherman’s Army during the civil war because it was the hometown of a pro-Union Senator. There are several unique restaurants downtown along with many shops. Madison is known for its Bed and Breakfast inns that were converted from homes built in the 1800s. There are also some 17^th century homes you can tour such as Heritage Hall. If you like the outdoors, Hard Labor Creek State Park is nearby and offers many trails and a lakeside beach with swimming from May to September.

These are just a few ideas of many for you to consider. I could have gone on for pages on some of these cities, so I encourage you to do your own research as well! And if you decide to check out any of these places, be sure to let us know…. We have many more suggestions for things to do in each town! No matter how busy you may be, I hope everyone can find the time for a vacation this summer, even if it is just a weekend getaway. Bon Voyage!

Spring Cleaning (April, 2009)

As the stock market does some spring cleaning of its own, we wanted to suggest some unique ideas for your spring cleaning this year! Even if you don’t do a complete spring cleaning each year (and I must admit that I do not do a thorough job each spring either), I do have a few ideas for organizing your life. These are easily implemented ideas that really can change your life by making each day a bit easier, and they can help you save money too! Here are ten unique organization ideas:

1) Take your to-do list into the 21^st century with a digital voice recorder. For only $16, you can buy a small Sony voice recorder that will fit in your pocket or purse and will hold 8 hours of recorded notes. These voice recorders are an ingenious way to de-clutter your mind and convert mental notes into messages that you can listen to at the end of the day. You can also record ideas, thoughts, and musings, which can be a very calming practice. (Look for model Sony ICD B120 for a low cost choice.)

2) Have each member of the family choose their favorite color, and stick with it. This is the key to serenity in a house with children… buy each person’s necessary items such as toothbrushes in one consistent color. You will never again wonder whose toothbrush is missing or whose book bag is in the middle of the living room floor! Color coding your family can take a lot of hassle out of your life.

3) Turn mismatched socks into dusters. Every house ends up with socks that have no match, so instead of tossing these socks or saving them in case the mate magically reappears, slip one sock on each hand and start dusting!

4) If you have children or grandchildren, eliminate dust mites or other bad germs living on your kid’s stuffed animals and toys by placing them in the freezer overnight. The germs and dust mites will die, stuffed animals will last longer, and this is good for your children’s health too.

5) Spring clean your PC! Throughout the year, everyone accumulates applications, documents, and programs on their computers that are no longer used. These idle programs slow your computer, steal memory, and clog your desktop space. Instead, try Revo Uninstaller to eliminate unnecessary programs and applications. Revo Uninstaller is free, and it is much more effective and faster than Window’s uninstaller. Also, if you are tired of a slow-booting PC, try Startup Delayer. This is another free piece of software that allows you to choose certain programs to load later, therefore reducing the simultaneous loading of every program on your computer each time you boot up.

6) Post a stain chart in your laundry room or the kitchen. Print this stain-removal chart and keep it handy so you will always know exactly how to treat any type of stain from ink to red wine.

7) Invest in a few unkillable indoor plants. Anyone in this office will tell you that I am a death sentence for plants, and within the first 6 months of working at The Alder Financial Group I managed to almost kill every plant in this office before Charles had to step in and save them. I just can’t seem to keep plants alive! I either water them too much or not enough. But there are a few plants that even I can keep alive, and I have found that the Cast Iron Plant, Philodendrons, and Snake Plants are almost indestructible. They are a great way to brighten up your home for spring.

8) Throw away or give away all but 2 bottles of each kind of toiletry in your bathroom. I am guilty of one major cleaning crime… I insist on keeping every moisturizer, shampoo, and makeup product I have ever accumulated in my entire life. However, once a year I have to throw away all but 2 of each product simply to keep my life sane. I have to admit that there is no need for me to keep 17 half-used bottles of shampoo sitting in my bathroom! Each year, try to purge as many half empty bottles as you can.

9) Set up a paper center near the front door. Every time you bring in the mail, magazines, or paperwork, choose one of three paths: file, shred, or re-locate. Keep a file cabinet with a section for bills, correspondence, and other categories in the same location you typically open your mail. File right then to help de-clutter your life. Also keep a shredder in the same place to get rid of unnecessary paper immediately. If the paper needs to be re-located to another room in the house, such as a magazine for living room reading, go ahead and re-locate it. In such a digital world, the amount of paper coming into the average household is still overwhelming but is manageable.

10) Stand your shirts on end. I tend to wear the same 20 or so shirts over and over, mainly because I cannot see the other shirts I own in the bottom of my drawers! A good tip I have found for eliminating this problem is to fold your shirts in half one more time and then stand them up in the drawer. This way you can see all of them and get to the one you want easily.

I hope these tips help you organize your life this spring. As our economy and the stock market purge unnecessary clutter, it is a great time to do the same in our own lives.

Budget Doesn't Have to be a Dirty Word (March, 2009)

Most people cringe when they hear the word “budget.” They think of words like confining, restrictive and penny-pinching. Like diets, budgets are often started with the best of intentions but are quickly dismissed when the going gets tough. The truth is, a budget is essential to any sound financial plan and it is often avoided simply because we don’t like to think about how much we spend. Sometimes it is mind-boggling to see how much little luxuries like dining out and entertaining add up to over the course of a year. It is important to remember that the object of a budget is not to eliminate all unnecessary expenses, but rather to live within your means.

Maybe a better term for a budget is a spending plan. It is nearly impossible to sit down and plan out exactly what expenses you will have each month. But what you can do is identify fixed expenses that don’t vary much from month to month such as your mortgage, car payment, and insurance premiums. Subtract this number from your net take-home pay and the result is your discretionary income, the money that you are free to spend however you wish. This type of plan is flexible and allows you to adjust your monthly allocations to your changing wants each month. As long as you stay within your discretionary amount of money, you are living within your means. So if the opportunity arises to go on a weekend getaway, it is fine to go, but this means that you need to avoid discretionary spending somewhere else. You must prioritize. People get in trouble when they expect their paycheck to cover everything they want, and when it doesn’t they turn to their Amex or Visa, which is a bad idea.

In fact, overextension of credit is what got our economy in the mess it is in now. Ways to save are on everybody’s mind. We’ve found a few ideas around here that you may find beneficial as well:

1. Home phone - Over the past several years, the use of cell phones has skyrocketed. Even those of us who refused at first to own a cell phone have given in. While we can’t seem to live without cell phones, many of us don’t want to part with your home phone for one reason or another. Did you know that you could be saving hundreds of dollars each year by using Voice Over IP? T-Mobile now offers a service that adds a home phone line (you can keep the same number) to your cell phone bill. Sorry AT&T, your glory days are over. You avoid paying junk fees twice and pay as low as 10 dollars a month for you home line. There are other companies that offer this Voice Over IP service as well. Several of us in the office have been using this and have been very impressed. The quality is no different than a traditional phone line and included are all the calling features of a cell phone (caller ID, voice mail, free long distance, etc.). If you have broadband internet service at home, Voice Over IP is a very good option to consider.
2. Generics – How many of you are apprehensive about buying generic prescriptions because you are worried about the quality? The FDA requires generic drugs to have the same quality as brand-name drugs. Be sure to ask your physician or pharmacist if there is a generic brand available for any medicines prescribed to you. Also, pharmacies at some stores such as Kroger and Walmart have extensive lists of generics for as low as $4, so before you fill your prescription, check to see who has the best price. Publix has a list of 8 antibiotics that you can get for free with your prescription. This “generic over brand” concept applies to over-the-counter medicines as well. Before you buy Excedrin, read the label of the knock-off version and you will see that they have exactly the same active ingredients, for a much lower price.
3. Car Maintenance – Any oil change station will tell you that you should get an oil change every 3,000 miles. The truth is today’s car manufacturers usually recommend oil changes less frequently. Sometimes these can be as long as 5,000 to 7,500 miles. Check your owner’s manual for the recommendation for your car and you will probably be surprised. When it actually is time to get an oil change, almost all of the well-known service centers offer online coupons. When you get your oil changed, 9 times out of 10 they insist on changing your air filter. It is really easy to change your own air filter and save on the labor charge. A final suggestion is to keep your tires inflated at the right pressure to prolong their life, get better gas mileage, and get better control and traction. Also, rotate your tires as recommended in your owner’s manual for longer life. Some national tire center chains will even offer free rotations in an effort to get your business when you do need new tires.
4. Unnecessary fees: With a sound spending plan in place and proper organizational skills, there is no excuse for returned check or overdraft charges. However, mistakes happen and if you do get hit with an occasional fee, try calling the company and charming them with your niceness and remorse for this one-time slip up. Many companies that you have a good history with will waive the fee which is worth the few minutes you spend on the phone with them. One of the benefits of having a long relationship with a business is that they value you as a customer. Many companies such as cell phone, banks and credit card companies depend on have low customer turnover rates. They will often bend over backwards to keep a long term customer. Many of these businesses have a department solely designated to customer retention. If you don’t get the answer you want, hang up and call the 800 number again. You’ll likely find a representative who is willing to help. And speaking of unnecessary fees… if you signed up for a service to get the introductory rate but now that rate is scheduled to increase, call the company and mention that you are considering switching companies. Often, they’ll want to keep you and extend the introductory rate for a few more months.
5. Utilities – A programmable thermostat can adjust the temperature in your house automatically when you’re away or asleep. While you can find them for as low as $70, they will save you twice that much on your power bill each year. Florescent light bulbs can save you $60 in electricity per bulb and last ten times longer than conventional bulbs. Putting weather strips around the frames of your doors can save about $30 per year. With these minor adjustments, not only will you save money, but you will also do your part in going green.

Now that you have new ways to save and possibly a tax refund coming your way, what are you going to do with your excess discretionary income? Hold off on buying the big flat screen that is now 60% off. If you have any credit card debt, eliminating it should be the first thing you do with extra money. If your card charges 20% of your balance in interest, you might as well throw that money in the trash can.

Second, do you have an adequate emergency fund? A family should have between 3 and 6 months of expenses available in cash-like investments in case something unexpected occurs. This fund should be separate from the investments you have saved for retirement or future expenses. Third, how much are you saving? In theory, those working should be saving 10% of your income. Now I know that may seem like a lot and if it’s not possible to save that much, don’t get discouraged. Just save what you can. A good way to ensure that you are saving is to set up an automatic draft and treat it like any other bill.

If you are still looking for productive ways to use discretionary money, paying a little extra each month towards your mortgage or car note really goes a long way. Any extra money goes directly toward principal, reducing the amount of interest you pay and the time it takes to pay it off. For example, on a $100,000, 30 year 5% fixed mortgage, an extra $50 a month will save you over $18,500 in interest and cut your term by 5 years! Prioritize these extra principal payments to the highest interest rate debt first.

Lastly, don’t forget to reward yourself. You work hard and deserve a treat every now and then, just don’t get carried away!

I hope you will find the ideas in this article useful. While budgeting is not anyone’s favorite topic, having financial security and knowing that you are living within your means should go a long way in bringing you peace of mind, even in turbulent times.

Market Flash Commentary

Testing New Lows

As I sit here and write, the major stock market averages are nearing the lows set back in November. There is no mistake as to what is driving this latest down move. For several weeks the markets have been deluged with bad news and uncertainty.

Among those concerning topics are the massive stimulus bill, the second half of the TARP program, unemployment data, near-term deflation, long-term inflation, constrained lending, foreclosures and more. With each new headline there follows some quick analysis in the media. The problem with most news outlets is that each topic is only afforded five minutes or a couple of columns of coverage. It’s important to realize that most of the concepts that are driving the negative market sentiment right now are very complex issues that are well above the head of most reporters and surely take longer to explain than five minutes. In many cases these media reports are highly political publications ripe with misinformation.

In our effort to keep our clients informed, we wanted to take this opportunity to cut through the clutter and share with you our thoughts on the three most important components of the recovery efforts.

The Stimulus Bill

The federal government has just enacted the largest spending bill in the history of the nation. In addition, governments around the world are enacting their own stimulus programs. Ultimately, the goal of any stimulus plan is to fill the void in GDP left by the reduced spending by businesses and individuals. There are numerous problems with these programs.

First, it’s difficult to gauge the appropriate size for a spending package. In theory the level of government interaction should be just enough to offset the private sector shortfall. This is about impossible to measure. You’ll hear a lot of debate about whether or not the plan is too big or too small.

Another issue is that all spending is not alike. Ideally, you would want to inject money in a way that would encourage job creation in the private sector. This is the action that will have a lasting effect. Transfer of payments, where the government simply takes money from one entity and gives it to another, is not helpful in creating sustainable GDP.

The stimulus bill wasn’t written by economists, but instead was written by politicians. As such, there is a lot of wasted money being thrown around. The wasted money, which I estimate to be about two thirds of the package, may have a simulative effect in the short term but once those monies are gone the hole in the GDP will reappear. This is one of the lessons from the New Deal era. Temporary spending will only postpone the inevitable.

Hopefully, the economy will show signs of recovery before much of the money is spent in 2011. We then would have the chance to withdraw that portion. Either way, any benefit from this bill won’t likely be felt until late this year or early next year.

TARP II

The markets are looking for immediate help, and we believe the second half of the bank bailout is where it will come from. The current downdraft in the stock market can be traced back to the latest round of TARP planning, or lack thereof. There has been such an absence of guidance as to how the remaining funds will be used that banks and investors have been left paralyzed.

It is important to understand that this legislation and funding is separate from the stimulus bill. The first round of TARP financing was originally meant to buy troubled debt. As we have written many times in the past year, there is a lot of sound reasoning behind this idea. Removing this debt from the balance sheets of financial institutions and creating an active market in these securities would help the overall markets considerably.

For various reasons, the first round of TARP money ($350billion) was instead directly injected into banks via the purchase of preferred stock of those banks. This action was not necessarily gratuitous but it was not in keeping with the original proposal made to Congress.

Since then questions have been raised about the effectiveness of the first half of TARP funding and what the new administration plans to do next. So far only goals have been announced. We have yet to be shown a plan.

There has been such uncertainty that no one even knows what to call the program anymore. The latest version is the Term Asset Backed Securities Loan Facility (TALF). This name implies that the Treasury Department is refocusing its efforts on jumpstarting the market in asset back securities including those backed by student loans, mortgages, and credit cards.

We believe that of all the recovery plans floating around, this one stands the best chance of really making a difference. For one thing it is the least politically influenced. It is also being crafted by economists in consultation with the private sector.

Hopefully a definitive plan will be announced within weeks. Assuming the market likes what it hears, we would expect a strong short-term rally in equities once a plan is put in place.

Housing Foreclosure Bailout

Dealing with the rising housing foreclosures has also become a hot potato. The debate crosses philosophical, economic, and political lines. Our guess is this aspect of the stimulus debate will ultimately have the least amount of influence on a recovery.

Foreclosures may be on the rise, but still 93% of mortgages are just fine. With nine out of ten people acting responsibly, it’s hard to imagine a bailout of those who are in over their heads to get much political traction. Our guess is that any legislation in this area will be limited in scope.

It is estimated that there are an annual 2 million new homes needed in this country due to demographics. Housing is the one area that will fix itself given time. As prices come down demand will rise. We’re already seeing this in some areas of the country that have experienced the biggest declines in prices.

We don’t agree that everyone who is “upside down” on their mortgage will just walk away from their home. Developers and speculators would be far more likely to default, but they represent a relatively small percentage of property owners.

In Conclusion

Last year we summarized the economic environment as one in which the entire globe was deleveraging. Nothing has changed from then. Virtually every development we’re experiencing today can be attributed to a world downsizing. Individuals and businesses are reducing their debt, spending less, and saving more.

The short-term result is a swift contraction in GDP, and the fallout will be fewer items manufactured and bought. Demand for long-term assets will be temporarily depressed as assets backed by debt are unloaded.

These effects are unavoidable. The government’s job should be to help ease these effects, but they cannot make them go away. We pray that the government’s activities don’t saddle the economy for years to come with the unintended consequences of spending billions of dollars.

We are far less concerned with the Federal Reserve’s activities. While they have greatly expended their balance sheet, the Fed’s actions are far more short-term in nature and can be easily removed as economic conditions improve.

Contrary to the terminology loosely thrown around in the media, the Fed is not spending billions of dollars. They are, in fact, investing billions of dollars or guaranteeing billions of dollars in securities. They are also being paid dividends and interest on those monies. The Fed has openly said that it expects to earn money on its investments. Today Bank of America made a $402 million dividend payment to the government on their TARP preferred shares.

I find it amusing and a little disingenuous to hear politicians talk of “investing” in education, job training, and the like when they are really spending money. But when the government does actually invest in something such as TARP assets, it is referred to as spending.

Unlike TARP, the stimulus bill is plain and simple spending. The only hope to get something in return on those dollars is if the spending spurs developments that will increase future tax revenue. We’ll see.

The media and the government tell us that the American people are causing this “meltdown” by reducing their debt, saving more, spending less, and accumulating cash. Is this really a bad thing? As a nation we are acting more fiscally responsible. We haven’t done that in a long time and it’s a shock to the system. You have to wonder if the solution is for the government to then fill the void by acting irresponsibly.

Yes, this shift towards saving more and spending less has caused short-term economic pain. Let’s try to minimize the current pain while the country goes through rehab, but let’s also hope this responsibility trend continues. We’ll be much healthier in the long run.