Warren Wealth Article Archive
Articles Posted During 10/2009
When Will Interest Rates Rise?
Tuesday 10/27/2009 - 12:28:24 pm
What factors might influence the Fed in the near future?
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
How long can the federal funds rate stay so low? The Federal Reserve has publicly stated that it will keep the federal funds rate between 0% and 0.25% for an “extended period”. Many economists don’t see the Fed raising rates until well into 2010. Yet rates will move north someday. How soon might that happen? And how could the Fed delicately move rates north without hampering the recovery?
The Barron’s argument. On October 19, Barron’s published a piece titled “C’mon, Ben!” in which senior editor Andrew Bary called for short-term interest rates of 2.0%. Why? “Super-low short rates are fueling financial speculation, angering our economic partners and foreign creditors, and potentially stoking inflation.” One concern is that by keeping rates so low for so long, the Fed might risk an asset bubble – recall how the housing bubble was aided by low interest rates. The article called for the Fed to exit the crisis mode policy of the last 12-18 months.
What would raising short-term interest rates to 2% possibly accomplish? Well, the tactic could prove a decisive and wise move to control inflation (CPI is on track to come in at 2% for 2009, so Bary argues that inflation is indeed back) and aid the dollar.2 The downside, of course, is that the move would amount to a right cross to the jaw for the stock market (and possibly the commodities markets).
The challenge for the Fed. The stock market is having a great year; the economy is not, with unemployment currently around 10% and the business and real estate sectors taking a long time to recover. Given this, most economists and market analysts see no incentive for the Fed to make a move. (In fact, St. Louis Fed President James Bullard has cited “jobs growth and unemployment coming down” as a “prerequisite” for increasing interest rates.)3 The challenge for the Fed is how to signal or hint at a move in the coming quarters in a way that seems reasonable or non-disruptive to the recovery.
There are possible hints of inflation here and abroad (renewed strength in emerging market economies, gold prices soaring and the dollar hurting). On October 22, Philadelphia Fed President Charles Plosser told Bloomberg Radio that he felt the time to raise rates would come sooner than most Fed officials believed. The next day, a Bloomberg data survey showed that traders had increased the probability of a federal funds rate hike in 1Q 2010 to 48% from 37% the day before.4
The prevailing notion. TheStreet.com published a rebuttal of sorts to the Barron’s article – a piece titled “It’s Absolutely Not Time to Raise Rates, Ben!” in which author Ron Insana argued that the recovery was too fragile to prompt any notion of raising the federal funds rate. Many analysts feel that a rate increase is simply unwarranted without a demonstrably healthier job market, housing market and banking system.
Out west, San Francisco Fed President Janet Yellen told reporters that she didn’t anticipate a rate increase or any tightening of the Fed’s rescue programs in the next several months.5 So the question remains “when” – and the Fed must move as carefully as ever.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
Citations.
1 online.barrons.com/article/SB125573856421291217.html?mod=BOL_hpp_highlight [10/19/09]
2 theglobeandmail.com/globe-investor/investment-ideas/should-the-fed-raise-interest-rates/article1332498/ [10/23/09]
3 bloomberg.com/apps/news?pid=20601103&sid=aTZcPQocptNo [10/12/09]
4 bloomberg.com/apps/news?pid=20601100&sid=a7TCuN67vo9U [10/23/09]
5 reuters.com/article/pressReleasesMolt/idUSTRE59J6C720091021 [10/21/09]
[Permalink]
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
How long can the federal funds rate stay so low? The Federal Reserve has publicly stated that it will keep the federal funds rate between 0% and 0.25% for an “extended period”. Many economists don’t see the Fed raising rates until well into 2010. Yet rates will move north someday. How soon might that happen? And how could the Fed delicately move rates north without hampering the recovery?
The Barron’s argument. On October 19, Barron’s published a piece titled “C’mon, Ben!” in which senior editor Andrew Bary called for short-term interest rates of 2.0%. Why? “Super-low short rates are fueling financial speculation, angering our economic partners and foreign creditors, and potentially stoking inflation.” One concern is that by keeping rates so low for so long, the Fed might risk an asset bubble – recall how the housing bubble was aided by low interest rates. The article called for the Fed to exit the crisis mode policy of the last 12-18 months.
What would raising short-term interest rates to 2% possibly accomplish? Well, the tactic could prove a decisive and wise move to control inflation (CPI is on track to come in at 2% for 2009, so Bary argues that inflation is indeed back) and aid the dollar.2 The downside, of course, is that the move would amount to a right cross to the jaw for the stock market (and possibly the commodities markets).
The challenge for the Fed. The stock market is having a great year; the economy is not, with unemployment currently around 10% and the business and real estate sectors taking a long time to recover. Given this, most economists and market analysts see no incentive for the Fed to make a move. (In fact, St. Louis Fed President James Bullard has cited “jobs growth and unemployment coming down” as a “prerequisite” for increasing interest rates.)3 The challenge for the Fed is how to signal or hint at a move in the coming quarters in a way that seems reasonable or non-disruptive to the recovery.
There are possible hints of inflation here and abroad (renewed strength in emerging market economies, gold prices soaring and the dollar hurting). On October 22, Philadelphia Fed President Charles Plosser told Bloomberg Radio that he felt the time to raise rates would come sooner than most Fed officials believed. The next day, a Bloomberg data survey showed that traders had increased the probability of a federal funds rate hike in 1Q 2010 to 48% from 37% the day before.4
The prevailing notion. TheStreet.com published a rebuttal of sorts to the Barron’s article – a piece titled “It’s Absolutely Not Time to Raise Rates, Ben!” in which author Ron Insana argued that the recovery was too fragile to prompt any notion of raising the federal funds rate. Many analysts feel that a rate increase is simply unwarranted without a demonstrably healthier job market, housing market and banking system.
Out west, San Francisco Fed President Janet Yellen told reporters that she didn’t anticipate a rate increase or any tightening of the Fed’s rescue programs in the next several months.5 So the question remains “when” – and the Fed must move as carefully as ever.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
Citations.
1 online.barrons.com/article/SB125573856421291217.html?mod=BOL_hpp_highlight [10/19/09]
2 theglobeandmail.com/globe-investor/investment-ideas/should-the-fed-raise-interest-rates/article1332498/ [10/23/09]
3 bloomberg.com/apps/news?pid=20601103&sid=aTZcPQocptNo [10/12/09]
4 bloomberg.com/apps/news?pid=20601100&sid=a7TCuN67vo9U [10/23/09]
5 reuters.com/article/pressReleasesMolt/idUSTRE59J6C720091021 [10/21/09]
[Permalink]
No SSI Increase For 2010
Monday 10/19/2009 - 11:04:15 am
The Social Security Administration (and the IRS) leave
benefits and retirement plan contribution limits unchanged.
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
SSI will remain flat for the first year since 1975. Social Security benefits are keyed to inflation. So what happens when year-over-year inflation becomes negative? No cost-of-living adjustment (COLA) occurs to increase your Social Security income. On October 15, the Social Security Administration announced that there would be no COLA for 2010. (The 2009 SSI COLA was 5.8%, the largest boost since 1992.)1
“What do you mean, negative inflation?” That’s the question some SSI recipients are asking. Aren’t prices seemingly going up at the grocery store every day – and going up everywhere else?
Unfortunately, the federal government doesn’t measure consumer inflation with a price check on aisle six. It uses the Consumer Price Index (CPI), which is really an estimation of the average prices of consumer products we buy. There is also core CPI, which excludes food and energy costs.
From September 2008 to September 2009, overall CPI fell by 1.3%. Across that span, overall food prices actually fell 0.2% and prices on dairy products and fruits and vegetables respectively dropped 9.5% and 6.4%. Food prices only account for about a seventh of CPI, and rents actually constitute about 40% of the “prices” measured by core CPI. In September, rents fell in the United States for the first time since 1992. (We also have a decline in retail gasoline prices from last fall to this fall.)2,3
With year-over-year inflation negative, the SSA has no logical reason for a COLA. Yet roughly two-thirds of America’s seniors live on less than $20,000 a year, some entirely on SSI.1
Another stimulus check? President Obama is urging Congress to authorize one-time $250 stimulus payments to Social Security and Supplemental Security income recipients, veterans, railroad retirees and government retirees. That $250 would equal about 2% of the average annual SSI benefit for a retiree. These checks would be mailed sometime in 2010 to about 57 million people. Recipients could not qualify for multiple checks.4
Retirement plan contribution limits will stay the same. These are also inflation-indexed. On October 15, the Internal Revenue Service chimed in with a statement that 401(k) contribution limits will remain at $16,500 for 2010. The maximum contribution limits for other types of defined-contribution and defined-benefit retirement plans will also remain the same for 2010.5,6
While we’re referencing the IRS, some other important figures aren’t changing next year. The standard deduction will remain at $11,400 and $5,700 for joint and single filers; it will go up $50 to $8,400 next year for heads of household. The yearly gift tax exclusion will stay at $13,000 for 2010, and the value of a personal exemption will remain at $3,650.7
No COLA … but more purchasing power? A former deputy Social Security commissioner who now works for the conservative American Enterprise Institute contends that the average retiree will actually have $725 more in purchasing power in 2010 thanks to falling prices and the freeze in Medicare Part B premiums (which will not increase in 2010 for most Social Security recipients). A senior policy analyst for the non-partisan Center on Budget and Policy Priorities told the Christian Science Monitor that if Social Security income was wholly determined by consumer prices, SSI recipients would have their checks cut by 2.1% next year.8
What can you do in response here? Even if you are really wealthy, your SSI is a big chunk of money. If you were hoping for a COLA and want and need to have more money on hand for 2010, this is the time of year to meet with a financial professional or tax advisor who may work with you and help you plan to find it.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
Citations.
1 baltimoresun.com/business/bal-bz.cola16oct16,0,2468505.story [10/15/09]
2 bloomberg.com/apps/news?pid=20601103&sid=awvcLZFBUdhk [10/15/09]
3 bls.gov/news.release/cpi.t01.htm [10/15/09]
4 latimes.com/business/la-na-obama-seniors15-2009oct15,0,6276604.story [11/15/09]
5 irs.gov/newsroom/article/0,,id=214321,00.html [10/15/09]
6 irs.gov/newsroom/article/0,,id=214321,00.html [10/15/09]
7 google.com/hostednews/ap/article/ALeqM5jva4VYYkvx3LKvGF-2CY81N9q1dwD9BBPJGG0 [10/15/09]
8 features.csmonitor.com/politics/2009/10/16/do-seniors-on-social-security-deserve-that-raise-next-year/ [10/16/09]
[Permalink]
benefits and retirement plan contribution limits unchanged.
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
SSI will remain flat for the first year since 1975. Social Security benefits are keyed to inflation. So what happens when year-over-year inflation becomes negative? No cost-of-living adjustment (COLA) occurs to increase your Social Security income. On October 15, the Social Security Administration announced that there would be no COLA for 2010. (The 2009 SSI COLA was 5.8%, the largest boost since 1992.)1
“What do you mean, negative inflation?” That’s the question some SSI recipients are asking. Aren’t prices seemingly going up at the grocery store every day – and going up everywhere else?
Unfortunately, the federal government doesn’t measure consumer inflation with a price check on aisle six. It uses the Consumer Price Index (CPI), which is really an estimation of the average prices of consumer products we buy. There is also core CPI, which excludes food and energy costs.
From September 2008 to September 2009, overall CPI fell by 1.3%. Across that span, overall food prices actually fell 0.2% and prices on dairy products and fruits and vegetables respectively dropped 9.5% and 6.4%. Food prices only account for about a seventh of CPI, and rents actually constitute about 40% of the “prices” measured by core CPI. In September, rents fell in the United States for the first time since 1992. (We also have a decline in retail gasoline prices from last fall to this fall.)2,3
With year-over-year inflation negative, the SSA has no logical reason for a COLA. Yet roughly two-thirds of America’s seniors live on less than $20,000 a year, some entirely on SSI.1
Another stimulus check? President Obama is urging Congress to authorize one-time $250 stimulus payments to Social Security and Supplemental Security income recipients, veterans, railroad retirees and government retirees. That $250 would equal about 2% of the average annual SSI benefit for a retiree. These checks would be mailed sometime in 2010 to about 57 million people. Recipients could not qualify for multiple checks.4
Retirement plan contribution limits will stay the same. These are also inflation-indexed. On October 15, the Internal Revenue Service chimed in with a statement that 401(k) contribution limits will remain at $16,500 for 2010. The maximum contribution limits for other types of defined-contribution and defined-benefit retirement plans will also remain the same for 2010.5,6
While we’re referencing the IRS, some other important figures aren’t changing next year. The standard deduction will remain at $11,400 and $5,700 for joint and single filers; it will go up $50 to $8,400 next year for heads of household. The yearly gift tax exclusion will stay at $13,000 for 2010, and the value of a personal exemption will remain at $3,650.7
No COLA … but more purchasing power? A former deputy Social Security commissioner who now works for the conservative American Enterprise Institute contends that the average retiree will actually have $725 more in purchasing power in 2010 thanks to falling prices and the freeze in Medicare Part B premiums (which will not increase in 2010 for most Social Security recipients). A senior policy analyst for the non-partisan Center on Budget and Policy Priorities told the Christian Science Monitor that if Social Security income was wholly determined by consumer prices, SSI recipients would have their checks cut by 2.1% next year.8
What can you do in response here? Even if you are really wealthy, your SSI is a big chunk of money. If you were hoping for a COLA and want and need to have more money on hand for 2010, this is the time of year to meet with a financial professional or tax advisor who may work with you and help you plan to find it.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
Citations.
1 baltimoresun.com/business/bal-bz.cola16oct16,0,2468505.story [10/15/09]
2 bloomberg.com/apps/news?pid=20601103&sid=awvcLZFBUdhk [10/15/09]
3 bls.gov/news.release/cpi.t01.htm [10/15/09]
4 latimes.com/business/la-na-obama-seniors15-2009oct15,0,6276604.story [11/15/09]
5 irs.gov/newsroom/article/0,,id=214321,00.html [10/15/09]
6 irs.gov/newsroom/article/0,,id=214321,00.html [10/15/09]
7 google.com/hostednews/ap/article/ALeqM5jva4VYYkvx3LKvGF-2CY81N9q1dwD9BBPJGG0 [10/15/09]
8 features.csmonitor.com/politics/2009/10/16/do-seniors-on-social-security-deserve-that-raise-next-year/ [10/16/09]
[Permalink]
Is America Prepared To Retire?
Tuesday 10/13/2009 - 12:05:40 pm
Two-thirds of us have no financial plan.
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
64% of Americans have no financial strategy at all. That’s right – no plan whatsoever to build wealth or keep it. That finding comes from the 2009 National Consumer Survey on Personal Finance conducted by the Certified Financial Planner Board of Standards, Inc. (The survey collected data from 1,700+ U.S. residents.)1
Only 17% of us have a written financial plan that is updated regularly. So congratulate yourself if you are in that group. The CFP Board found that just 17% of the 36% polled who did have a written financial plan had reviewed it in light of changing times. Notably, 48% said they had benefited from having a written plan.1,2
Just 38% of the 36% having written financial plans retain a financial advisor. The really troubling part: 37% of those with written plans are doing their financial planning on their own. Another 12% of respondents with written plans have consulted a friend or family member who isn’t a financial services professional for advice.1
Why don’t more people have a financial plan? After all, Americans of all incomes and savings levels certainly are free to set financial goals. In the survey, the reasons varied. Some cited the expense of engaging a financial advisor; some said they get along just fine without a financial plan, and others felt their finances weren’t complicated enough to warrant one. Others were hazy about financial services industry qualifications - 40% of respondents had no idea that there were professional credentials or designations for financial advisors.
Syndicated financial columnist Humberto Cruz recently noted that when he told some fellow vacationers in Orlando that he wrote about financial planning, they all asked him if he gave stock tips. He had to explain that he was simply a journalist, not a financial planner.3,4
Defined goals lead to definite plans. If you set financial objectives and plan for them, you vault ahead of most Americans – at least according to the CFP Board’s findings. A written financial plan does not imply or guarantee wealth, of course; nor does it ensure that you will reach your goals. Yet that financial plan does give you an understanding of the distance between your current financial situation (where you are) and where you want to be. Too many Americans, it seems, have little comprehension of their financial situation or their financial potential.
How much planning have you done? Retiring without a financial plan is an enormous risk; retiring with a financial plan that hasn’t been reviewed in several years is also chancy. A relationship with a financial advisor can help to bring you up to date about what you need to do, and provide you with more clarity and confidence when it comes to the financial future.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
Citations.
1 cfp.net/downloads/CFP_Board_2009_National_Consumer_Survey.pdf [7/24/09]
2 reuters.com/article/pressRelease/idUS132983+24-Sep-2009+BW20090924 [9/24/09]
3 sltrib.com/business/ci_13467337 [10/2/09]
4 chicagotribune.com/topic/hc-cl-cruz-bio,0,84843.story [10/9/09]
[Permalink]
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
64% of Americans have no financial strategy at all. That’s right – no plan whatsoever to build wealth or keep it. That finding comes from the 2009 National Consumer Survey on Personal Finance conducted by the Certified Financial Planner Board of Standards, Inc. (The survey collected data from 1,700+ U.S. residents.)1
Only 17% of us have a written financial plan that is updated regularly. So congratulate yourself if you are in that group. The CFP Board found that just 17% of the 36% polled who did have a written financial plan had reviewed it in light of changing times. Notably, 48% said they had benefited from having a written plan.1,2
Just 38% of the 36% having written financial plans retain a financial advisor. The really troubling part: 37% of those with written plans are doing their financial planning on their own. Another 12% of respondents with written plans have consulted a friend or family member who isn’t a financial services professional for advice.1
Why don’t more people have a financial plan? After all, Americans of all incomes and savings levels certainly are free to set financial goals. In the survey, the reasons varied. Some cited the expense of engaging a financial advisor; some said they get along just fine without a financial plan, and others felt their finances weren’t complicated enough to warrant one. Others were hazy about financial services industry qualifications - 40% of respondents had no idea that there were professional credentials or designations for financial advisors.
Syndicated financial columnist Humberto Cruz recently noted that when he told some fellow vacationers in Orlando that he wrote about financial planning, they all asked him if he gave stock tips. He had to explain that he was simply a journalist, not a financial planner.3,4
Defined goals lead to definite plans. If you set financial objectives and plan for them, you vault ahead of most Americans – at least according to the CFP Board’s findings. A written financial plan does not imply or guarantee wealth, of course; nor does it ensure that you will reach your goals. Yet that financial plan does give you an understanding of the distance between your current financial situation (where you are) and where you want to be. Too many Americans, it seems, have little comprehension of their financial situation or their financial potential.
How much planning have you done? Retiring without a financial plan is an enormous risk; retiring with a financial plan that hasn’t been reviewed in several years is also chancy. A relationship with a financial advisor can help to bring you up to date about what you need to do, and provide you with more clarity and confidence when it comes to the financial future.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
Citations.
1 cfp.net/downloads/CFP_Board_2009_National_Consumer_Survey.pdf [7/24/09]
2 reuters.com/article/pressRelease/idUS132983+24-Sep-2009+BW20090924 [9/24/09]
3 sltrib.com/business/ci_13467337 [10/2/09]
4 chicagotribune.com/topic/hc-cl-cruz-bio,0,84843.story [10/9/09]
[Permalink]
Breaking Bad Money Habits
Monday 10/05/2009 - 4:13:17 pm
Changing your behavior may help you improve your financial picture.
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
Many of us plan thoughtfully for all kinds of life goals. Yet many of us spend impulsively, using our money on the moment rather than saving or investing it for the future.
This last recession caused us to take a second look at where our dollars go. If you seem to be making adequate money and yet dollars still appear to be slipping away from you, maybe it is time to break some budgeting and spending habits.
First of all, have a budget. Many people live without one – and that includes many affluent people. This exercise is starkly simple, but might be illuminating: make a two-column chart, with the left column listing your monthly income and the right column detailing your expenses. Detail them as best as you can, type and monthly amount. Include your credit card expenses. This little exercise shows you how much you are spending on essentials and how much of your income you are assigning to comparative frivolities. Perhaps you will find some dollars you could reassign to planning for your financial future.
Distinguish needs from desires. Do you need that material item or merely want it? Slick marketing and advertising leaves many consumers unable to tell the difference. They run up debts to buy what they want, rather than what they need. How many of them understand that by borrowing, they are actually spending away future earnings?
Discern the difference between good & bad debt. Do you know the difference? A bad debt is a debt you incur on a disposable item or a durable good that will depreciate. It is a debt on something that has no potential to gain value. You want to avoid as many bad debts as you can. Of course, there is also good debt – for example, a mortgage, a business loan or a student loan. These are so-called “investment debts” that can potentially create value down the road.
Educate yourself. Some people are very cavalier when it comes to spending and saving money. Others are convinced that they will never be able to build wealth, so they spend their days addressing short-term financial needs and give no thought to the wealth and income they will need in maturity.
In both cases, the root problem is a lack of education. Those who spend money like water don’t understand its value; those who shun financial planning and investing don’t understand its potential. People with greater degrees of financial education tend to be more rational when it comes to financial decisions. (Not always, but often.)
Set financial goals and take them seriously. When people educate themselves about money – the ways to potentially make it, the ways to plan to protect it – they start to see how the financial world “works” and they tend to explore their own financial potential. This exploration may lead them to meet with a financial professional. That conversation can inspire them to set and plan for specific objectives, and get a relationship going - a shared commitment to wealth building. If you haven’t had such a conversation, today is as good as any day for that to happen.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
-------------------------------------------------------------------------------
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
[Permalink]
Presented by Jacob Warren
Content provided by Peter Montoya, Inc.
Many of us plan thoughtfully for all kinds of life goals. Yet many of us spend impulsively, using our money on the moment rather than saving or investing it for the future.
This last recession caused us to take a second look at where our dollars go. If you seem to be making adequate money and yet dollars still appear to be slipping away from you, maybe it is time to break some budgeting and spending habits.
First of all, have a budget. Many people live without one – and that includes many affluent people. This exercise is starkly simple, but might be illuminating: make a two-column chart, with the left column listing your monthly income and the right column detailing your expenses. Detail them as best as you can, type and monthly amount. Include your credit card expenses. This little exercise shows you how much you are spending on essentials and how much of your income you are assigning to comparative frivolities. Perhaps you will find some dollars you could reassign to planning for your financial future.
Distinguish needs from desires. Do you need that material item or merely want it? Slick marketing and advertising leaves many consumers unable to tell the difference. They run up debts to buy what they want, rather than what they need. How many of them understand that by borrowing, they are actually spending away future earnings?
Discern the difference between good & bad debt. Do you know the difference? A bad debt is a debt you incur on a disposable item or a durable good that will depreciate. It is a debt on something that has no potential to gain value. You want to avoid as many bad debts as you can. Of course, there is also good debt – for example, a mortgage, a business loan or a student loan. These are so-called “investment debts” that can potentially create value down the road.
Educate yourself. Some people are very cavalier when it comes to spending and saving money. Others are convinced that they will never be able to build wealth, so they spend their days addressing short-term financial needs and give no thought to the wealth and income they will need in maturity.
In both cases, the root problem is a lack of education. Those who spend money like water don’t understand its value; those who shun financial planning and investing don’t understand its potential. People with greater degrees of financial education tend to be more rational when it comes to financial decisions. (Not always, but often.)
Set financial goals and take them seriously. When people educate themselves about money – the ways to potentially make it, the ways to plan to protect it – they start to see how the financial world “works” and they tend to explore their own financial potential. This exploration may lead them to meet with a financial professional. That conversation can inspire them to set and plan for specific objectives, and get a relationship going - a shared commitment to wealth building. If you haven’t had such a conversation, today is as good as any day for that to happen.
Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810
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These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
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