Friday, October 29, 2010

“Living With Low Growth”

I recently attended an Economic Forecast Luncheon hosted by the Middletown Chamber of Commerce featuring guest speaker Alfred Shepard, Senior Vice President, Chief Investment Officer, First Financial Bank. The topic of Shepard’s speech was “Making Sure the Economy of 2011 and Your Organization’s Financial Plans are Aligned.” I wanted to share some of the main points of his excellent speech:

State of the Economy:

• Economic recovery is on a very low growth trajectory with little margin for error

• Other global economies are in a similar situation…Examples include the euro and dollar as governments are pushing the currency value down and trying to hedge inflation by doing so

• Current federal actions are dictating market results

2010 Projections:

• 1.) Consumer spending will be up

• 2.) Commercial real estate construction will be down

• 3.) Residential real estate construction will likely be up

• 4.) Government spending after the election should flat line down

• 5.) Net exports will be slightly up

These fundamentals affect how the government will forecast the economy.

The U.S. Economy in 2011:

• Consumer spending will show slow growth

• Residential real estate construction will show slow growth

• Business equipment spending will show slower growth

• Commercial real estate construction will show renewed growth

• Government spending will decline

• Net exports can go marginally up or down

Positive Factors:

• Businesses have adjusted to this environment with high margins, high cash values, and rebounding earnings

• Resiliency

• Some stocks have gone up more than usual

Negative Factors:

• Businesses have adjusted to this environment with lower spending, lower investments, and lower job growth

• Businesses have become very dependent on federal actions

• Very low margin for error

Why This Recovery is Different:

• Both consumers and businesses are de-leveraging.

• We are an older country demographically.

• We should look toward countries such as China, Asia, and India to see which way the recovery might be headed. This is the key driver for the investment markets.

Consumer Spending Changes Drive Our Economy’s:

• Income growth

• Wealth

• Borrowing

Expectations Remain Low:

• Lagging factor

• The loss of jobs is still present

• Net job growth may not come until mid 2011

• It could take 20-25 years to return to double digit growth

Likely Actions from New Congress:

• Some tax cuts extended (but NOT all)

• Limited new spending

• New tax credits for business and equipment investing

We must, as a country teetering on a double dip recession, NOT panic! We need to let time heal our economy and come to an agreement that sending out $800 checks to people does nothing but hurt our economic situation and drive up our national deficit. It is important that we remain conservative in our investing.

- Speech by Alfred Shepard, Senior Vice President, Chief Investment Officer, First Financial Bank


Thursday, October 28, 2010

Why It’s Important to Teach Financial Lessons Early…Especially for Girls

Laura Wellington was left in the financial dark when her husband, dean, died in 2002. At age 35, Wellington was a widow with four children; a boy, 9, and three girls aged 3 through 7. She also became the head of her husband’s two small information technology businesses. Like many couples, before her husband’s death, she took care of the day-to-day household expenses, and he handled bigger money issues like insurance and investing.

“I knew a certain amount of what was going on,” she recalled. But the majority of the decision making was left to Dean.

When he was gone, the Ridgewood, N.J., mom had to make sense of everything on her own.

Stereotypes say situations like the Wellington’s usually involve women who lose their husbands late in life, then face financial uncertainty as they puzzle through bank accounts and investments for the first time. But it’s not just older women who leave the big money questions to their husbands. Despite strides in the work force, traditional roles are still common at home. Women as young as their 20s frequently defer financial decision making to their spouses or even their fathers.

I find that still, especially if they’re stay-at-home moms, they’re not in the know, or they don’t have equal say,” said Lyn Dippel, a financial planner with Financial Advantage in Columbia, Md.

With intense study and some professional advice, Wellington has brought herself up to speed. Nevertheless, the experience taught her a lesson. “I will never let my daughters out in the world, or my children out in the world, without a knowledge of money,” said the now 44-year old, who has since had another son and co-founded a new retail business focusing on children’s characters.

Exposure to financial issues is essential to help prepare young people to handle money as adults. Studies show that parents have the single most important impact on financial behaviors and knowledge.

But women tend to get less information- and what they’re taught more often focuses on savings and budgeting than estate planning and the stock market, said Carrie Schwab Pomerantz, president of the Charles Schwab Foundation and a member of the president’s advisory council on financial capability. Few families have frequent conversations about money, and when the topic comes up, they “speak to their daughters differently than their sons,” she said.

As a result, by the time daughters become women, they’re less likely to be familiar with the language of investing, which alone can intimidate. That’s compounded by much of the available information seeming like it’s targeted toward men. “If you watch CNBC, it looks like ESPN,” said Dippel. “It does not speak to women in the way that women want information.”

Another factor is that financial issues can also be very emotional, making it harder for women to take control, said Amanda Gift, a financial adviser at Signature, a Norfolk, Va., wealth management firm. “You couple some level of insecurity or intimidation with huge emotion, and that can make for a daunting task.”

The best way to break down the intimidation factor is to start teaching kids about money as early as possible.

Financial literacy advocates say even toddlers can begin to learn about making choices at the store. By the time kids are in kindergarten, they should be introduced to the concept of money, and within a few years they should have been inside a bank and opened a savings account. Tweens can be taught to balance a checkbook, have some of their own money and be allowed to make choices about spending, saving, and charitable giving. Teenagers should have their own checking account and be introduced to investing issues.

“What’s easiest for parents to do in a busy world is to look for those teaching moments,” said Kathleen Burns Kingsbury, owner of KBK Wealth Connections, an Easton, Mass., consulting company. She suggested having discussions about prices and choices during back-to-school shopping, and using opportunities like watching television to question the money messages being shown.

“If you can make learning about money and learning about finance fun and kind of a game, and start instilling some of these messages early on, it’s going to make a huge difference,” she said.

So can exposure to programs that introduce investing concepts like purchasing cash value life insurance.

Shantia McCarthur, 15, takes part in a program co-sponsored by ING and Girls Inc. that teaches the basics of investing to girls at her Brooklyn, N.Y., school. She was one of 12 girls given a pot of $20,000 to invest in the market in the winter of 2009. “We learned that it’s all about decisions, and your returns depend up the actions that you make,” she said.

The girls have grown their investment by more than 15 percent, and McCarthur hopes that will expand further before she’s ready to take her share to help pay for college. “I think I want to go to Harvard,” she said.

She’s also shared what she’s learned about investing with relatives and friends, and become an inspiration for the fledging investments of the aunt with whom she lives. “I pretty much told her everything I learned,” McCarthur said. “It’s like I’m the girl backstage.”

-Article by Eileen AJ Connelly

AP Personal Finance Writer

Monday, October 18, 2010

Save Money...Plan Ahead

I was recently thinking about the amount of planning and preparation that people put into a vacation or a wedding or purchasing a car or a home in order to make sure that they are getting what they want at an affordable price. Yet, many people do not make any plans for one of the most expensive purchases that they will ever make…their funeral and final expenses. Unless you plan in advance and shop around you are most likely going to have to pay top dollar. The average funeral in the United States costs about $6,500 according to the National Funeral Directors Association. Although the cost of final expenses can vary from state to state, the total sum can easily reach $10,000 according to the AARP.

3 Major topics need to be discussed when considering funeral and final expense funding:

1.) Plan ahead

Talk about your plans with your family members. Be sure to discuss your wishes and find out what is important to them as well

2.) Know your rights

The Federal Trade Commission (FTC) Funeral Rule requires that mortuaries present a price list of services, like a shoppers’ guide, to consumers before their death

3.) Shop around

Make sure that you are not spending too much money. It is a good idea to purchase life insurance to fund this important expense

While families should make decisions about funeral arrangements in advance, they should NOT pay for them in advance. Over time prices may go up and businesses may close or change ownership or a person could change their mind about their desired arrangements.

People who favor a traditional funeral and burial can save hundreds or even thousands of dollars by taking these simple steps. Many people say that they have found great meaning and peace in being able to carry out thoughtful funeral plans that honored their family members in an appropriate and affordable way. Purchasing life insurance is a great way to make sure that you will have the funds to cover your funeral and final expense plans. Be sure to meet with your financial representative to discuss this and all of your important financial needs.

-Tom Newsad

Tom Newsad from Newsad Insurance Services can meet with you. Tom serves Middletown, Franklin, Trenton, Monroe, Liberty Township, Hamilton, Dayton, and Oxford.

Monday, October 4, 2010

Objectives of Estate Planning

The property found in most estates generally falls into one of five categories: personal property, real estate, business interest, life insurance, and government benefits. Unfortunately, at death there is often a great deal of “CONFLICT” due to different ways in which assets pass to the family and other heirs. These conflicts, together with a generally slow probate process, can easily result in a “DELAY” of the estate settlement process of one to two years or more. Considerable EXPENSES may also being incurred if there is a delay in the estate settlement process. However, a custom tailored life insurance strategy can ease the handling of these important financial matters.

Consult a life insurance expert to discuss further.

-Tom Newsad

Tom Newsad does estate planning in Middletown, Hamilton, Trenton, Franklin, Carlisle, Monroe and surrounding areas. Contact Tom at