So why are housing prices still falling when were supposed to be in a recovery?

Have you heard on the news lately that were supposed to be in the start of a recovery from the recession?  Housing is picking up and people are starting to have confidence in our economy again?  Really?  Then why are existing housing values still in a decline?  Some relators say it is due to the after affects of all the short sales and foreclosures that happened last year and the early part of this year.  They recommend not selling if you can hold off.  I wonder how long the “after affects” will last.  When will consumer confidence rise again?

Some experts would say that the current decline in the housing market is no longer due to valuation problems (overinflation) but mostly due to the supply and demand methodology we all learned about in Economics 101.  We simply have too many houses than the demand requires.  Or too many houses than people can qualify to buy.  Looks like the housing market is still in for another year of losses.  The experts say somewhere in the area of 5% – 10% ouch!

I don’t know about you but it just seems to me that those “experts” keep pushing their date back.  First they reported it would end in 2010, then it was 2011 and now some are saying 2014.  What?!  I have come to believe no one knows we just all have to wait and see.

Tax Deduction for Casualty Losses

The tornados that have wreaked havoc through the South this month are ranking as some of the worst storms this region of the country has ever seen.  The photos are hard to view, with homes & businesses completely destroyed.  Many of these storms have hit in impoverished areas where residents may not even have insurance to help them get back on their feet.  The American Red Cross and other agencies are doing what they can but it will likely not be enough.  If you have been affected by these storms, or any other type of casualty loss, you are eligible to deduct the losses relating to your home, household items and vehicles.  You may not deduct casualty losses covered by insurance unless you file a timely claim for reimbursement, and you must reduce the loss by the amount of any reimbursement.  You also cannot deduct losses for which you received emergency aid assistance.

A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption – although we don’t have to worry about that here in North Carolina.  You cannot deduct losses from normal wear and tear or progressive deterioration.  The amount of the loss you can take for personal-use property is the adjusted basis of your property, or the decrease in fair market value of your property as a result of the loss.  When determining the amount of your loss, you must reduce the total of all your casualty losses on personal-use property by 10% of your adjusted gross income, after first reducing each loss by $100.  The 10% rule does not apply to a federally declared disaster area.

Rules regarding casualty losses are complex and can change so it is best to seek advice from your CPA or financial planner when preparing your tax return.  You can also refer to IRS Publication 547.  And remember to keep documentation of your losses and amounts spent.  Some costs of documenting your loss, such as appraisals or photographs, may also be tax-deductible.

Do you need long term care insurance?

Last month my paternal grandmother celebrated her 97th birthday. She lives independently and still loves to socialize with her friends. She uses a walker to get around these days but her mind is still as sharp as it ever was. I’m convinced she has a better memory than I do. My maternal grandmother, on the other hand, is 93 and lives in a nursing home. She suffers from dementia but her four children always make sure she is being well taken care of. My mother & her siblings are fortunate in that my grandparents saved enough money so that there are sufficient funds to pay for her care. Whenever I see her, I can’t help but wonder whether I need to get long term care insurance for myself. I have looked into it and the premiums are pretty steep. Of course the longer I wait, the higher they will go. For many older Americans the cost of these premiums is already out of reach.

Fortunately, because the government recognizes that they won’t be able to foot the fill for long-term care, federal tax code (and a growing number of state tax codes) now offer tax incentives to encourage Americans to take personal responsibility for their future long-term care needs. These incentives help relieve some of the financial burden of paying the premiums for this type of insurance. A self-employed person can deduct 100% of his or her out-of-pocket expense for these premiums if they have a net profit for the year (up to a certain limit, based on age – see IRS Publication 502). If you are an individual, not self-employed, you can still deduct the expense of your premiums as a medical expense on your Schedule A – assuming you itemize – but remember you can only deduct the amount of medical expenses that exceed 7.5% your adjusted gross income.

Long-term care insurance is a complex product that should be approached with caution. If you are considering buying a policy, you need to consult with a qualified professional to determine whether you can afford this type of coverage and whether the policy you are considering meets your individual requirements. Some policies offer inflation protection. Some of them cover in-home care while others limit coverage to care in institutional settings only. Like any other type of insurance there are many different features that need to be considered. And as with any important decision you make in life, do your research and make sure you only consider financially stable companies that have consistently good ratings.

Life Isn’t Fair

If you have young children then you probably hear it a lot….”it’s not fair!” Even now, it amazes me that my three girls can bicker over such trivial things like who got the bigger scoop of ice cream or whose turn it is to sit in the front seat. I always make sure that each child has the same number of presents under the Christmas tree, even though the total price tag for each may vary greatly. It’s all about perception, and I’m pretty sure they’re keeping track. When my siblings & I were young and complained that something wasn’t fair my Dad always had the same response: Life isn’t fair. Now I find myself countering with the same explanation. It’s certainly much easier to give that standard response than trying to reason with a 6-year old. And maybe it’s not such a bad thing that they start to understand that fact now because life doesn’t get any fairer as we become adults.

Taxes and divorce are two things that come to mind, probably because we help folks with these issues every day. None of us like to see how much of our paycheck is withheld for income taxes. And if you’re not diligent in having enough withheld during the year, you’ll have a tax bill to pay come April 15th. There’s nothing more frustrating than watching one of those news stories about what frivolous programs the government is spending our hard-earned tax dollars on, but we have to remember that our tax dollars also go to support military spending, schools, housing assistance – to name a few.

In a divorce, it’s not too common for both sides to feel like the outcome was fair. The spouse paying alimony may think it’s too much while the spouse receiving it may think it’s definitely not enough. Even the division of property can be swayed by – what else – taxes! You can’t divide a retirement account in half when one spouse is in a higher tax bracket than the other. When the money is eventually distributed, the tax bill will be higher for one than the other, and this needs to be taken into consideration when determining equitable distribution. And if one spouse wants the $200,000 home and the other takes the $200,000 IRA, again the tax bill needs to be considered. The spouse who gets the house won’t have a tax bill if they decide to sell (unless they have a capital gain) but the spouse getting the IRA will have to pay tax on the entire amount at some point in the future. If these issues aren’t addressed before the final settlement, someone is definitely going to be complaining that it’s not fair….somewhere down the line.

I hope none of my children will ever have to go through a divorce but inevitably they will have to pay taxes, a lot of them. I’m sure when they get their first job, they’ll be surprised at how much less their paycheck is than what they thought it was going to be. So I guess it’s not such a bad thing to drill that old adage into them now… life isn’t fair, never has been & never will be, so learn to accept that now, and you’ll be much happier in the long run.

How do we teach our kids about money?

Do our kids think money grows on trees?  Literally, when my son was 4 years old he thought donuts grew on trees so why not money?  I don’t know about yours but mine are always asking me to buy them something.  When I was a kid I remember NEVER asking my parents for money.  If I wanted or needed something I was out working to earn the money to buy it.  When I was too young to have a real job I was shoveling snow, doing yard work or babysitting to earn money.  I think those days are gone, in part due to the increased child safety concerns.  You can’t send your kids out into the neighborhood anymore looking for work for the most part. That being said, how do we teach our kids the value of earning money for something they want?

Here are three ways to teach your children the value of money.

 

  • Make them earn the money you give them. If they have an allowance they should be required to do something to earn that money, i.e. get good grades in school, do household chores without being told.  If they do not accomplish what was agreed on they should suffer the consequence of not getting the allowance for that week or month.
  • Getting a part time job. When your teen turns 15 or 16 allowance should stop and they should be looking at getting a part time job.  Obviously, you have to evaluate whether your teen can handle working and keeping up in school.  Although, you can limit the number of hours they are allowed to work so balancing school and work are easier.  Having them get a part time job also enables you to teach them about payment deductions and budgeting what they make.  Having them open their own checking/savings accounts also teaches money management.
  • Saving money for big dollar items they want. Most teens in our culture go to mommy & daddy when they want something they cannot afford to buy on their own.  When this happens, make a deal with your teen that if they are able to save 50% of the cost of the item, then you will put up 50% to make the purchase with them.  We all know that everyone appreciates something more when they have had to work to get it.  This also teaches them the value of hard work and how much hard work goes into buying something they want.

Ultimately, it is the parents responsibility to teach our kids how to live a successful financial life.  The lessons cannot start early enough!

What do Divorce and Budget Battles have in Common?

Ok, American taxpayer.  You are the paying spouse.  The government is the dependent spouse.  How do we get past this impasse?

Comparing this to a divorce may seem overly simplistic, but often the simple answers are the best ones.  When a couple is going through a divorce and a determination of spousal support needs to be made, two things are looked at:  need and ability to pay.  If there is no need, perhaps the amount is lower.  If there is significant need, but there is limited ability to pay, things have to be sacrificed.

The one advantage the government has over a couple going through divorce, is that they can raise taxes on their paying spouse (you).

Let’s ignore that for now.  I have been in numerous mediations, divorce conferences and individual meetings helping people go line by line through their budgets.  Often there is a shortfall of combined marital money to meet both spouses’ needs, regardless of how much is paid or not paid.  This requires some painful cuts to the budgets sometimes (I’ve seen it where couples have literally had to give away pets that they could no longer afford to keep).

Now, let’s take a look at people not going through divorce.  Let’s assume they have debt and a deficit.  What do they do to climb out?   They have a couple of choices.  One – do nothing (I once had a teacher who said, “you don’t have to do anything but die”).  Two – Get a second job or third job.  Third – Cut expenses.

The first one is not an option for the most part.  The second one can create stress and LEAD to divorce.  But the third one…. hmmmmmm.  We could do that.  Some things are in fact necessities.  Some things are not.

So, back to the divorcing couple.  The dependent spouse is willing to do a compromise of spousal support and cut some of their budget.  The paying spouse (you) will not have any money left to pay your bills if you pay the level of spousal support desired and will thus have to be more productive (read:  work harder).

In this case, what happens?  Well, both spouses have to cut their budgets to a level where the income can work for both.  Kids go to private school?  Not anymore.  Vacations in the Alps.  Done.  Maxing out retirement.  Forget about it.

In order to actually cut the national debt and not run a deficit, the government needs to make some painful cuts to their budget.  The taxpayer already pays spousal support.  Asking for more only increases the taxpayer’s need.

Funny thing.  A happily married couple would find a way to make it work (cutting budgets, finding additional sources of revenue, etc.).  I guess we’ll never be happy with our government.

Dave Ramsey, Suze Orman, Clark Howard, etc.

Not that I don’t think they serve a purpose, but I increasingly tire of their blanket opinions on the recommendations of others.  You’ll notice on this blog that I don’t ever specifically make any blanket recommendations.  I give some opinions, but always ask that you consult an advisor or take some information with a grain of salt. This is by design.  My firm is a Registered Investment Advisor, which means I have an obligation not to give advice only in my interests.

However, when you are a respected financial figure, I believe you have the responsibility… no, the OBLIGATION to be careful about what you say.  I’ve heard it said that it’s entertainment, that it’s to drive ratings.  Whether you watch CNBC or FoxBusiness, or listen to their radio shows, these pundits often have good information.  MORE often, without actually understanding a persons’ situation, they make recommendations out of context.

Now, because they don’t receive direct compensation for that advice, they have no liability (not to mention the really, really long and really tiny print that comes on before and after their shows).  Which means when Dave Ramsey claims that an advisor is a crook or a gambler without knowing the context of the conversation, there is no obligation on his part to be correct.

Dave is not alone.  Suze Orman and Clark Howard make blanket statements about investments, and investments ideas, and investment professionals, all from a throne of misinformation and wrong conclusions.  Now, what is interesting is that I believe they have done some good for people.  But keep in mind that they have a self-interest in bashing others.

What is worse, is that like all media, their shows prey on the average consumer of their information, and advice is given in a vacuum (in Suze’s defense, she does gather some germane information).

There are investments I don’t understand.  When I don’t, I have people that know more than I do educate me.  I don’t automatically say they are bad.  Their are investments I don’t like, for various reasons.  Their are investment professionals I don’t like.

But that is no excuse to bash who and what I don’t understand.  So I refrain from that.

So I would ask all of you (you few!) to take what financial “personalities” say with a grain of salt.

Changing Times

Recently I heard on the news that some kids taking their SAT had an unusual question for the essay portion of the test.  The prompt went something like this:

“Reality-television programs, which feature real people engaged in real activities rather than professional actors performing scripted scenes, are increasingly popular. These shows depict ordinary people competing in everything from singing and dancing to losing weight, or just living their everyday lives. Most people believe that the reality these shows portray is authentic, but they are being misled. How authentic can these shows be when producers design challenges for the participants and then editors alter filmed scenes?”

 

“Do people benefit from forms of entertainment that show so-called reality, or are such forms of entertainment harmful?”

Many students and parents were upset about this question, fearful it would lower their kids chances of getting a good score on the SAT.  These students obviously were not ones who watched reality TV.  Most likely because their parents did not allow it, or simply because they were not interested.  They had better things to do like study (Duh).

If they would have only realized that you did not have to be a reality show watcher to answer the question.  I side with the College Board Chief Laurence Bunin who stated that everything they needed to know to write their essay was contained in the question itself.

The objective of an essay question is to elicit passion for one side or another on the given topic.  Considering the buzz about the question itself it surely pit people on both sides of the fence.  The essay question does not measure your knowledge of the topic only your ability to pick aside and argue to support your position.  It grades your writing skills, not whether you were right or wrong on choosing your position.

I think the SAT question does indicate that times are changing.  Not only do teenagers have to be prepared to enter our society when they leave for college. They need to have some exposure to what is out there and what they will encounter on their own.  The question is how much exposure?  I battle this question all the time with my more liberal friends and I do not have the answer.  I guess only time will tell.  Although, I will use this example for my daughter on how to answer SAT essay questions in the future.

All That Glitters…. Again

Let’s talk about gold again.  With commodity prices rising (anybody notice how much a gallon of milk costs – about the same as a gallon of gas at this point), talk again has turned to gold.  And with bullion trading above $1400, I thought it might be time to discuss it a little again.

I have to ask… GOLD?!  Seriously?

Gold is seen as a great place of safety for people to allocate their wealth.  But I have to question why.

For one thing, gold isn’t nearly as popular as a “shiny object”.  It also has lost it’s appeal as something attractive to look at.  People find it gaudy and showy.

My thought is this:  If the world economies collapsed (a highly unlikely event in my opinion), and you HAD a lot of gold, what would it REALLY be worth?

Or rather, what would you trade it for?  If I was a farmer and someone wanted to buy my crops with some gold, I’d tell him to go fly a kite.  Now, if he had some gas, or some pesticide, or some high speed internet, I’d be all over it.

Resources and assets are priced according to what people will pay for them.  Currently, people will pay quite a bit for gold.  My guess is a lot of this is big investors riding the fear of smaller investors.

So here’s a little comment I thought I might make.  If you TRULY think that the world markets will collapse, you should NOT be buying gold.  Because, what are you going to do with it?

Gold can be a great addition to a portfolio.  But it is not the fix to volatility.

What Is Poverty?

Webster defines poverty as: the state or condition of having little or no money, goods, or means of support; condition of being poor; indigence. For those of you who follow the goings on at WolfBridge Financial you know that last year the owner, Michael Kothakota, decided he wanted to give back to the community in a way seldom done by small businesses.  He decided to hire me to find organizations where I could “volunteer” my time providing education through financial literacy to underserved populations.  I have been fortunate enough to find many organizations needing assistance with financial education and one in particular, where I have been spending much of my time.  SWFCA (Southern Wake Faith Community in Action) is a faith based organization in Fuquay Varina, NC that helps individuals as well as families through financial crisis.  I have seen and spoke to many people who come through the doors seeking financial assistance.  Many are in desperate need, about to loose their homes, have their water or electricity cut off, and/or not able to feed themselves and their kids.  One of the constant populations I see are seniors, defined as over 62 years of age, they are struggling to pay their rent, utilities, get needed prescriptions and eat.  Many have worked hard their whole lives, raised kids, some have even raised grandchildren and now when they need assistance no one is found.  Social Security doesn’t begin to cover even the basics and food stamps are a joke.  Many seniors come in only receiving $8 – $16 per month to eat.  I wonder how they are supposed to eat on that for a month?

 

When will we realize that taking care of our elderly is not only a family’s responsibility but societies responsibility as well.  The elderly in our society are to be held in high esteem, respected for their contributions and above all else loved.  The young can learn so much from someone who has lived through much of our nations history.  Many I have spoken to leave me with a saddened heart and I worry about them in the days to follow, wondering if they are alone and hungry.  Then I think, what a gift this organization is to the community!  They are helping many people in need!  People have a place to go to seek assistance or just a friendly face, a compassionate person to talk.  I have met so many compassionate caring individuals who work to lessen the burden in these people’s lives and we should all be thanking them for caring about those in need.

 

I leave you with this to ponder and take action!  If you are in your 20’s, 30’s, 40’s, 50’s as well as your 60’s.  It is NEVER to early or TOO LATE to start preparing for your retirement.  Start saving now, use any and all options you have to invest for your future.  Do not rely on the government because when you retire, even if it is still there, Social Security will not be enough. That is the reality!

 

I know this has changed the way I look at my life and future.  I am grateful for the experience and the opportunity provided by WolfBridge Financial.

Investing and Age – Selecting the right advisor

A recent article on the dailyfinance.com explains some research made on investing and age.   Specifically that older investors are more prone to make bold and erroneous investment decisions.  Interestingly enough, this is purportedly caused by“daydreaming”.  Which I find interesting as when I was a kid, older folks would accuse younger folks of daydreaming.

The research also found that younger people tend to be very cautious investment-wise, which could be a function of the last two stock market declines in the last ten years.

What I see here is something that has implications far beyond the research.  I have noticed that my wife and I balance each other out.  In some ways, we are very similar (similar values, similar political and religious views), but in some ways we are opposites.  This leads to a happy marriage, in my opinion.

Now let’s apply that to investing and financial advisor-client relationships.  Those relationships should have both sides similar enough that the can get along, but should also have a relationship that is open and honest, in addition to each side being a check on the other.  Two aggressive people managing investments is a recipe for disaster.  Two conservative personalities managing investments is a recipe for running out of money.

While age may play a role, care should be taken with your selection of an advisor.  Be careful not to hire someone who agrees completely with you.  Also be careful not to hire someone who doesn’t listen to you.  The relationship is what matters the most.  If that is taken care of, things will fall into place.

How Soon We Forget

Most of you know I’m not a big bear when it comes to the financial markets.  But I do have to say I think we have forgotten the impact of Japan awfully quick.  Despite the fact that some companies are returning to normal, there is something to be said for the interruption of the supply chain for numerous global manufacturing companies.

Seriously, while long-term things will normalize, the situation with Japan is still very serious.  The markets are responding with a nice little rally, which makes little sense.  I think for the short-term, we’ll continue to see this.  Just remember, April companies will release 1st quarter results.  While they may not be bad now, prolonged disruption of the Asian markets, along with increased overhead (reduction in unemployment from increased hiring), may lead to both lower earnings and profits.

Some will see this as a temporary setback (which it is), but much of the momentum will be lost and valuations may drop.

I urge everybody to be a little cautious.

A Housing Bottom – Maybe

Ok, so I’m hedging my bets here.  But as I’ve said all along, the housing market was grossly inflated (still sort of is, but it doesn’t appear the regulations that make real estate so inefficient are going away anytime soon).  It needed to fall.

How many of you have heard your grandparents talk about how they spent $10,000 for their house.  Not to mention, the mantra of financial advisors trying to sell stocks is to conduct a seminar and use this to talk about inflation:  “How many people in this room paid less for their first house than for their last car” (or some variation of that).

This is intended to get people to think about the declining purchasing power of a dollar as inflation sets in.  But housing prices are inflated simply because our regulations are so geared towards everyone achieving the American dream.  Which apparently, is home ownership.

HGTV and DIY channel fans rejoice!  Because people will probably start buying and renovating again.  Why?  Housing starts are at their lowest in ten years.  Existing home sales are at their lowest in ten years.  Finally the real estate market has done what the much more efficient stock market did two years ago.  It bottomed.

That is – maybe.  People are less excited about real estate than they used to be, but as the prices become more attractive, they may tend to begin getting excited again.

Let’s just hope we don’t again say how much everybody deserves to be a home owner.

How Risky is Your Portfolio?

Interestingly enough, risk is a matter of perception.  So when people talk about “that’s a risky stock”, it depends on the person.  As I talked about in a previous post, financial education is severely lacking.  Thus, the traditional way that advisors measure risk may not be appropriate.  In fact, it may be off to a catastrophic level.

Consider this last recession.  Before 2007, people thought that investing in real estate was perfectly safe.  You couldn’t tell people it was risky.  So if you had asked the question, “how do you feel about putting 90% of your net worth in real estate?” most people would have been comfortable with it.

Real estate however, is a growth investment.  By itself, it doesn’t generate cash flows.

Now if you ask that question, what do you think people will say?  “No I’m not comfortable with it”.  Even though it is still likely either a good chunk of their equity or debt is tied up in real estate.

Risk must be measured in terms of perception of loss and gain.  Likely most people are less risk tolerant than they think (I was more).  So, in honor of a new way to measure risk, I have posted a survey on this blog and on our Facebook page.  Take the (very short) quiz and I’ll post the answers in a week.

Here is the link:

 

http://www.surveymonkey.com/s/MYDZVS6

Do You Need A Divorce Coach?

When going through my own divorce several years ago I had never heard of a divorce coach.  Of course I knew that I could seek therapy with a mental health professional to help sort through the emotional ordeal of divorce but I chose not to.  It seemed like one more thing that I didn’t have the time in my schedule to do.

Then a few months ago, and five years after the end of my marriage, I attended a 3-day training on collaborative divorce.  The full-team model was explained and a real-life scenario was acted out for the participants.  I got to witness how the divorce coach of each spouse was able to help them through the legal, financial & emotional issues of their divorce.  Being able to watch that process and compare it to how my own scenario played out several years earlier really opened my eyes.  For me, decisions were made under stress, or even duress, and actions sometimes out of anger.  I could clearly see that if I had had someone to help me manage my emotions & frustrations, I could have made more clear and goal-oriented decisions.  I attended the training to help me do my job as a financial professional but I walked away from it feeling almost as if I personally had been coached for the previous 3 days, and it was amazingly therapeutic.

While divorce coaching does not provide legal or financial advice, it does help one focus and manage their emotions so that they can make informed decisions regarding such.  Without question, I would recommend obtaining a divorce coach to anyone I knew going through a divorce.  Regardless of whether your divorce is amicable or not, your life is changing and you are faced with having to move forward in a new direction.  Having a coach can help speed up that recovery process and feeling grounded again.  Not all divorce coaches are licensed professionals but most of them are.  I wish I had realized years ago the role & importance of a divorce coach and I would have considered that a necessary part of the divorce process, rather than an indulgence that I couldn’t afford to make time for.

Most Americans Have Just $25k saved for Retirement

Isn’t this a problem?  Here is the link to the CNN article:

http://money.cnn.com/2011/03/15/retirement/retirement_confidence/index.htm

In my profession, it seems you run across two types of people who want to retire.  Those who will be fine regardless of how much planning and investment advice you provide, and those that are out of luck no matter how much planning and investment advice you provide.

The $25k number to me, represents a lack of thinking on the part of the American citizen.  Not that they are stupid.  Just that they aren’t thinking.  Their priorities are messed up.  Perhaps they want that bigger house.  Or the Expedition instead of the Civic.

Perhaps, instead of saving for retirement, they funnel most of their free money into education for their children, or spoil their children by purchasing video games, computers and fancy clothes (I am guilty of this myself).

How many people save for retirement in the amounts they should?  Also not many.  A natural consequence of the Social Security system perhaps.  They are taxed on their earnings and figure that Social Security will just be there when they retire, so why save?

Perhaps that is the problem with Social Security.  Over reliance on it.

But the $25k number is more than that.  It represents a lack of financial literacy by over half of the country.  One hundred and fifty MILLION people (I realize that’s not completely accurate, but I’m taking a little license here) have not put away enough money to live comfortably until they die.

As we clamor about the lack of general education of our children, we need to look to another type of education – that of economic and financial well-being.  Otherwise, we can forget about going to Mars or curing cancer – we’ll be too broke to do it.

Japan Crisis – How will it affect us here?

A huge tragedy is currently unfolding in the island nation of Japan.  The massive earthquake and tsunami to follow has left thousands dead, many more injured and homeless, and Japan’s infrastructure damaged and dangerous.  The nuclear meltdown scenario is the scariest for most, and doubly bad for a country that has had so much tragedy related to radiation exposure.

I have been fairly optimistic in recent months.  The Middle East “revolts” I have shrugged off.  My opinion is that the region there is volatile and protests and problems in that area of the world should not affect world markets that much.

But an unexpected natural disaster of this magnitude can cause disruption in the markets.  It disrupts business, agriculture, education, fishing, manufacturing just to name a few.  There is a big issue with the nuclear situation that can cause long-term ramifications (not just health, but long-term energy issues).  I feel if anything is going to affect the market, it will be something like this.

Because the global markets are so interdependent and connected, we might be seeing the pain from the earthquake in Japan for some time.  While it has still not affected my overall optimism, it does give me a little pause and makes me think a little.  And a little caution never hurt anyone.

The Bachelor on ABC – Reality or Not?

If you are a fan of The Bachelor like me – every season you root for your favorite girl to get “The Guy”.  This time I am rooting for Emily, the sweeter than Carolina Sweet Tea, single mother who lost her race car driver husband (Ricky Hendrick) in a plane crash just days before discovering she was pregnant.  She’s classy, beautiful, and has a stable life with her daughter in none other than Charlotte, NC.

But does getting the final rose really mean happily ever after?  Is it really “reality”?  Out of 14 Bachelors none, yes zero, have found lasting love.  Unless you count Jason Mesnick, who on season 13, picked Melissa Rycroft and subsequently proposed to her.  At the season finale though he broke up with her and proposed to the runner up.  They are now married.  Ok, so 1 out of 14, still pretty bleak.  The Bachelorette’s haven’t had much luck either with 1 marriage out of 4.

I would venture to say the show is called reality although it is just more TV drama and the more drama the better ratings.  A really good English speaking Novela to some degree, anyway I love watching it!

I wonder though what kind of message this sends to the young girls watching the show?  In my job I have been given the opportunity of working with less fortunate individuals within our society.  Teen mothers, single mothers living below the poverty line and families barely scraping by.  They have trouble paying their utility bills and rent on most occasions.  They cannot afford cars of their own, therefore rely on public transportation.  They definitely could not leave their children to go on a “reality” show to find the perfect financially stable man of their dreams.

Unfortunately, many times these type of shows send a message that if you find “love” and subsequently have babies everything will be taken care of.  So teenagers wanting so desperately to be adults before their time, go out and find “love” and have babies, mostly not thinking of the financial implications.  The reality is that they and their children will now spend most of their life under the poverty line struggling to make ends meet.  I sometimes wonder if we could show them what their lives would be 10 years down the road, would their decisions stay the same or would they change the decisions they are making.

So please, if your teenage daughters are watching the latest season of the Bachelor or Bachelorette and dreaming of the perfect man/boy, don’t forget to sit them down and discuss what really happens on “reality” shows.

Which Assets are Best in a Divorce?

Ok, no joking around, and no you can’t keep those!

Think about the things that are most valuable to you, and if you were to split with your spouse, which things would you want to keep for yourself.

Some people pick the house.  Others want to keep their cars.  Some really want to hold on to their retirement account.  Which is the best.

Well, considering what housing prices have done the last few years, I’m not sure many people are looking to keep their house.  It might even be turning into a symbol of a failed marriage.

Regardless, people may be looking at the values of things from a skewed lens.

For instance, let’s take a look at a split of a $400,000 estate.  $200,000 is what the house is worth (we hope).  And $200,000 in a tax sheltered retirement account.

Couple things.  First, that $200,000 in the house is free and clear of any taxes (if it sold for that, and you didn’t have realtor fees and you didn’t pay closing costs).  The $200,000 in the retirement account will eventually be taxed.  But at what rate?  Some states (North Carolina) require that you tax it at your current tax rate.  So if you are in the 28% tax bracket, that $200,000 is actually worth $154,000 – now the spouse with the $200,000 is up and this split is no longer equitable.

But wait, to be fair, this couple is in their 40’s and their retirement tax bracket might be significantly lower – say 15%.  Now the spouse with the house (yes it rhymes, and no I didn’t mean to) is only up by $30,000 (I say only, but I realize it’s a lot).

Maybe it would be fair for the spouse with the house to shift some equity to the person getting the retirement account.

Wait yet again.  What sort of investments are in the retirement account.  Is this account managed like an endowment, where the yield might average as high as 20%?  Or is it managed extremely conservatively, and would earn a rate of return lower than the return on the house?

Further, what are the added expenses associated with the house that reduce the return (cost of ownership such as taxes, replacement of heat pumps, landscaping, etc.)?  How do those factor in?

These are all questions you should ask yourself if you are trying to figure out what you want in property from a divorce.  Be careful not to agree to something that doesn’t make sense for you long-term.

Pain at the pump? Shouldn’t last

Man it’s expensive out there.  Gas prices are getting pretty high.  People are panicking.  People are scared.

Don’t be.  Keep in mind there is always a ceiling on these things.  Oil prices, like all commodities, is in fact scarce.  And the more scarce it becomes, the higher prices go up.

However, even scarce things have a price ceiling.  They don’t go up indefinitely.  The great thing about humans is that we adapt very quickly and we find away to make things less expensive.  I have no doubt, webinars and web meetings will go up, travel will drop, and gas prices will face downward pressure.

Fairly soon I suspect.