Tuesday, April 21st, 2009
I was just interviewed by a reporter who is writing an article about financial organization; the importance of getting your house in order—especially if you are one of those who feel the pinch of our current economic cycle. And, after all, it is spring. With spring we think of spring cleaning. In addition to the cleaning, it is good to do some clearing, which includes getting rid of old, worn out items, or those things that we never use. It feels so good to sweep through our house carrying all those things that no longer serve us out to the curb, or to a charity. This approach can be applied to our finances, as well.
What things are you hanging onto in your finances that are no longer serving you? What debt can you clean up? What investments do you hold that are such poor performers that they may not rise with the market recovery? What accounts do you have for which you never even open the statements? What about that money you owe someone that makes you cringe to even think bout it? And that credit card debt—do you have a good plan to repay that?
All of these situations in your life are lying beneath your everyday thought and are causing you stress. There is still energy directed toward these issues, even if it is just to suppress them or try to forget them. Suppress this stuff long enough and it can make you unhappy, even depressed.
On the other hand, putting together an action plan—just doing that—will create a sense of relief.
Here are my financial spring cleaning tips:
• List your assets (What you own)
Everything has changed so much in the last two years that your investment accounts could be way out of balance. If you haven’t had them rebalanced, they probably aren’t meeting your original objective. Have an analysis done on the accounts to measure them for risk, costs, and diversification. We will be happy to help with this.
Consolidate small accounts. It is much easier to keep track of them when you don’t have a pile of statements to go through.
Check your life insurance to see if it is still meeting your needs, and if you still need it. If you are retired with a good amount of assets, you might want to convert your life insurance to an income-producing account.
Eliminate those orphan accounts that aren’t doing anything for you. Maybe you inherited a stock that hasn’t done well in years but you keep it for sentimental reasons; or you received a partial account in a divorce and it causes you stress to even think about it. Move that money to an account that will be monitored with careful attention.
Once organized, keep all your financial papers in one spot. Schedule time to review periodically.
• List your liabilities (What you owe)
List them first in size, for example: mortgage(s), car loans, student loans, equity line of credit, and credit cards. Beside each one write down the interest rate you are paying on it.
Current rates for mortgages are under 5%! Weigh the cost and time extension of refinancing, and if it doesn’t make sense for you, try to pay an extra principle payment at least once a year.
• Now you can develop a plan
Look at your income and outflow monthly. I’ll bet you have at least some discretionary spending that you can reduce. Begin paying down that highest interest rate debt aggressively. When it is paid off, begin paying down the next highest, and so on. You are clearing the financial clutter that has caused a drain on you and your finances. As you move forward and reduce debt, increase your contributions to your savings plans.
Taking a few moments to sit down and put this on paper will make you feel better–just like spring cleaning.
Tags: assets, debt, financial housekeeping, liabilities, spring cleaning
Posted in Blog Posts
Tuesday, March 24th, 2009
The television stations, newspapers and other news sources, in their attempt to raise revenue, lead stories with some measurement telling us why this news is important for us to know. It jolts our senses and rivets our eyes to the screen when we hear “This is the deepest stock market drop in 12 years.” or “The unemployment is the highest since 1982.” And “Home prices are the worst in recent history.” All of these stories are designed to captivate your attention so you don’t change the channel, put down that magazine, or leave that web page. The underlying purpose, we tend to forget, is to raise advertising dollars by increasing viewership. The media is a business first. We are lulled into thinking the media’s purpose is to inform and entertain, but that is secondary to making a profit. The stories may indeed be true, some even hopeful (yes, even in these times), but they are carefully constructed out of many calculations.
Headlines deal with breaking news. What these reports lack is the long view. Look back at other times in history when the same indicators were dire, yet as a nation we survived and thrived. During all of the tragic times, recessions, wars, and terrorist attacks, the American people, overcoming the deep emotional component of these events, reinvented themselves as stronger, wiser, and more innovative than ever before. We certainly will again.
What is different this time is the global experience of this recession. So yes, it looks like it will take a bit longer than a US-contained recession, but that doesn’t change the fact that this is a temporary situation. Growth is inherent in the human condition. We can only be down for so long before wise and creative individuals and companies ascend to lead us into the next phase of the now global economy. Small businesses in the US will meet this challenge too, in ingenious ways not yet even considered. A classic example of this is a problem that was getting steadily worse about a hundred years ago, so much so that it drove most observers to despair. This was the great horse manure crisis.
Nineteenth-century cities depended on thousands of horses for their daily functioning. All transport, whether of goods or people, was drawn by horses. London in 1900 had 11,000 cabs, all horse-powered. There were also several thousand buses, each of which required 12 horses per day, a total of more than 50,000 horses. In addition, there were countless carts, drays, and wains, all working constantly to deliver the goods needed by the rapidly growing population of what was then the largest city in the world. Similar figures could be produced for any great city of the time.*
The problem of course was that all these horses produced huge amounts of manure. A horse will on average produce between 15 and 35 pounds of manure per day. Consequently, the streets of nineteenth-century cities were covered by horse manure. This in turn attracted huge numbers of flies, and the dried and ground-up manure was blown everywhere. In New York in 1900, the population of 100,000 horses produced 2.5 million pounds of horse manure per day, which all had to be swept up and disposed of. (See Edwin G. Burrows and Mike Wallace, Gotham: A History of New York City to 1898 (New York: Oxford University Press, 1999).
In 1898 the first international urban-planning conference convened in New York. It was abandoned after three days, instead of the scheduled ten, because none of the delegates could see any solution to the growing crisis posed by urban horses and their output.
The problem did indeed seem intractable. The larger and richer that cities became, the more horses they needed to function. The more horses, the more manure. Writing in the Times of London in 1894, one writer estimated that in 50 years every street in London would be buried under nine feet of manure. Moreover, all these horses had to be stabled, which used up ever-larger areas of increasingly valuable land. And as the number of horses grew, ever-more land had to be devoted to producing hay to feed them (rather than producing food for people), and this had to be brought into cities and distributed—by horse-drawn vehicles. It seemed that urban civilization was doomed.
–Stephen Davis, The Freeman, Sept.2004
We know of course that the automobile replaced horses. This is just one of many examples where doom-sayers did not take into account the creativity of their fellows.
As we hear the news, let’s keep this in mind.
~Invaluable input from our editor, Jana Dieter
Posted in Blog Posts
Tuesday, March 10th, 2009
We know these are very unsettling times, and many people are quite anxious as they listen to media reports and watch stock indexes tumble. We believe governmental stimulus will help investors, but it is not surprising for the market to retreat during the plan’s initial implementation. Furthermore, both measures of money supply (M1 and M2) have surged since late August. Money supply growth and a fiscal stimulus package are a powerful boost to the economy that, in our opinion, will push the economy out of recession.
Economists disagree on exactly when the recovery will occur. Even though the timing of the recovery is unpredictable, the stock market has historically begun its rebound several months before the economy is actually growing again.
It is at times like these when many people feel that they should abandon the markets and wait until things recover. But this is exactly the time, when people are the most scared, to have an objective financial advisor in their corner.
Osprey offers unbiased financial advice. People without access to this type of advice are more likely to make impulsive decisions which lead to unfortunate, long-term financial consequences.
We are here for you. Please don’t hesitate to call or email us with any questions or concerns you are having.
Posted in Blog Posts, Money Management
