How to Strategically Manage Your Debt

Debt. Funny how four little letters can feel so dirty. Most of us have it in one shape or another, but none of us like to talk about it. Debt can get us into trouble, especially if it is unplanned and uncontrolled. And some of us can’t help but feel out of control when it comes to our debt. Whether the debt is big or small, owing money can be uncomfortable and stressful, regardless of your financial status. What we often forget is that debt can also be a tool commonly used to get ahead, whether it is borrowing for education, for business or for a home that we assume will appreciate over time. 

Of course, debt can be extremely dangerous and detrimental to your financial success if you aren’t careful and diligent about managing it. But if you are, debt doesn’t have to be all bad; in fact, it can even help you reap some serious rewards.
There are strategic ways to approach debt so that it works to your advantage, as long as you are disciplined enough to follow the rules. To help you control and leverage your debt -- and not the other way around -- we have highlighted the main categories of debt and some of the key dos and don’ts of using it.

Credit Card Debt

The average household with credit card debt owes just over $15,000. And according to the FINRA Investor Education Foundation, 60 percent of women carry a credit card balance. It is easy to let credit card debt get out of hand if we aren’t mindful about it. But with some simple strategies, you can gain, rather than lose, from your credit card debt. Here’s what you need to do:
— Shop around. Plenty of sites (try creditcards.com or nerdwallet.com) are trying to make money by referring you to creditors and keep you coming back with a variety of resources and information. They also help you narrow down choices based on a variety of criteria you can customize.

— Negotiate with creditors. Yes, it takes a time commitment and potential frustration dealing with multiple representatives, but the benefits (including better rewards, lower rates, waived fees and higher credit limits) can be worth it.

— Leverage the payment cycle. If you charge something the day before your statement closes, you get an interest-free period of 20 to 25 days to pay it off. But if you wait until the day after your statement closes, then you can get an extended interest-free period of up to 55 days.

— Take advantage of store card offers. Big retailers often offer big discounts on purchases if you open a credit account with them and continue to use their card in the future. This can mean serious savings, as long as you pay off the balance in full on time, every time. However, there are more flexible store cards offered by banks that can allow you to get discounts at a variety of retailers instead of just one.

— Use your cards regularly. Doing so -- and making payments on time, of course -- will boost your credit score and encourage your creditors to automatically increase your credit limit, helping even more. It will also help you rack up rewards faster.

— Reap your rewards. Too many people neglect to actually cash in on their available rewards (which can include travel discounts, cash back, concierge services and more). Check your card’s website for details on their particular program and make sure you don’t miss out.

— Consider a balance transfer. If you are currently nearing the end of a promotional rate period and won’t be able to pay off your total balance in time, or if you are already paying high interest on an existing balance, consider transferring it to another card in exchange for a lower rate. This can buy you extra time to pay off your balance and save you a lot in interest payments. Watch out for balance transfer fees, though, and do the math first.
On the other hand, it is important that you never miss a credit card payment and try not to use up too much of your available credit. Missed payments are the biggest threat to your credit score, followed by a high credit-utilization ratio (under 30 percent is ideal). To help avoid potential trouble.

Student Loan Debt

Today, two-thirds of American students graduate with student loan debt, and the average grad leaves school with more than $26,000 of debt, according to the Institute for College Access & Success. Student loan debt can seem overwhelming, especially when the average post-grad job in 2013 only pays around $45,000 a year. However, with its relatively low interest rates and tax-deductible interest, student loan debt is generally considered to be a “good debt.” Here’s what you need to know to manage it strategically:
— Map out career and income goals along with a loan repayment schedule early. Think of it like a business plan with a break-even projection and future profit estimates. This will help you budget accordingly and stay motivated to make that borrowed education pay off sooner than later.

— Pay private loans first and federal loans second, in order of interest rate (high to low).

— Understand your repayment options. You may be able to pay a lesser amount based on your current income or even have your debt forgiven in some cases.

— Teach or serve your community to save. If you are willing to be strategic about your career path, you can have as much as $17,500 of your loans forgiven through the Teacher Loan Forgiveness program or have the balance of your debt forgiven after 120 payments through the Public Service Loan Forgiveness program.

— Take advantage of loan rewards programs. You can potentially pay off your debt faster just by making your regular purchases.

— Remember your tax deduction. You can deduct up to $2,500 (in 2013) or the total amount you paid in student loan interest (whichever is less, as long as your income is below the IRS limits), saving you money on your tax bill.
If you’re looking to simplify and potentially lower your payments, consider consolidating. Be careful, though. If you aren’t going through the government’s loan servicer, you will likely get stuck paying fees that cost you more in the long run. You also might lose certain benefits offered by your original lender. Before deciding, review this consolidation checklist.
Just like with your credit card, missing a student loan payment can result in fees and penalties that make it harder for you to qualify for other loans, like a mortgage. And if you can afford it, don’t defer your payments. It’ll cost you more in accrued interest, and it’ll take you longer to get out of debt. If you’re having trouble making payments, call your lender and explain your situation. They are much more likely to help you if you are proactive and honest.

Mortgage Debt

The average household today owes over $147,000 in mortgage debt, according to the Federal Reserve. And while some argue that the traditional American dream of owning a home is more of an unrealistic fantasy these days, for those who can afford it, homeownership is still one of the best long-term investments, especially with interest rates at historic lows (approximately 3.5 percent for a 15 year and 4.5 percent for a 30 year).
— Keep your housing expense ratio in check. As a general guideline, your monthly mortgage payment, including principal, interest, real estate taxes and homeowners insurance, should not exceed 28 percent of your gross monthly income. To calculate your housing-expense ratio, multiply your annual salary by 0.28, then divide by 12 (months).

— Go with a 15-year fixed mortgage if possible. It will cost you more per month than a 30-year, interest-only or adjustable loan, but you will pay off the debt much sooner and save big money in the long run that you can invest toward other goals.

— Consider an adjustable-rate mortgage (ARM) with a low initial interest rate and monthly payment if you are sure you will only be in your home for less than five years. You can save significant money that can (and should) go towards other goals. If there is a chance you might stay in your home longer, an ARM can be too risky.

— Take advantage of tax deductions. Interest paid on mortgage debt on your primary or second home is tax deductible. Points are also deductible. Check with a tax expert for personalized guidance and to maximize your savings.

— Do the math to see if refinancing makes sense. You might be able to lower your interest rate and monthly payment, but it also means extending the length of your loan and paying thousands of dollars in closing costs in many cases. However, if you plan to stay in your home longer than it takes to break even on a refinance, it can be worth it.


Remember that multiple types of credit inquiries can raise a red flag to lenders, so don’t apply for other loans when you’re home shopping. Once you find the home you love, put at least 20 percent down. Otherwise, you have to pay private mortgage insurance (PMI). If you can’t afford to put down 20 percent, you can’t afford that home and should steer clear of it.






HELOC Debt

A home equity line of credit (HELOC) is an option for homeowners willing to use their home’s equity as collateral in exchange for liquidity. Because homes are typically a person’s greatest asset, only use a HELOC to pay for capital investments that add value, such as home improvements, financing other real estate investments, education or business financing. Here’s how to get the most out of your HELOC:
— Understand the differences between a HELOC and a home equity loan.

— Shop around. A good place to start is with your current lender, but you might be able to research a better deal.

— Read all the fine print on loan fees, interest rate, repayment terms and any potential limitations and risks. Most HELOCs come with a variable interest rate, so you need to be prepared for fluctuating monthly payments. Some lenders offer a low, fixed promotional interest rate for a period of time (that eventually adjusts to a higher, variable rate) or a fixed rate in exchange for a higher monthly payment.

— Know that you have the right to cancel. Federal law gives you three days to reconsider a signed credit agreement and cancel the deal without penalty. You can cancel for any reason, but only for loans on your primary home, not a vacation or second home.
Avoid using a HELOC for emergencies if possible (unless a high-interest credit card is your only other option) and don’t use a HELOC to consolidate debt if you aren’t prepared to stop living beyond your means. In some cases, a HELOC can easily enable more overspending leading to serious trouble, including bankruptcy. Don’t give in to the temptation to use a HELOC to buy things that will likely depreciate in value (cars, vacations, clothes or furniture). And don’t forget  to deduct your HELOC interest up to $100,000 come tax time.

Car Loan Debt

If you’re someone who is tempted to buy cars and wants to maximize your savings in the short term (and ideally invest the difference!), leasing a car is the way to go. But if you’re committed to driving the same car for five or more years, buying may be for you. Here’s what you need to know before taking out a car loan:
— Be armed when going to the dealer. Dealers are eager to make extra money by getting you into a loan through their own lenders and pushing a higher rate on you based on their determination of your credit score. Know your credit score from each of the three credit bureaus and research third-party loan options ahead of time. You can get a free, comprehensive report each year at annualcreditreport.com. Print out your credit report and a few offers to bring with you to the dealer to help negotiate and save money.

— Be wary of add-ons. Remember, dealers make the majority of their money by selling credit insurance, extended warranties and other “extras” that aren’t really necessary.

— Pay more each month if possible. If you don’t have other, higher-interest debt weighing you down and you have a comfortable emergency fund, you should set up automatic, bi-weekly loan payments. Specify that the extra money should be applied to your loan principal rather than future interest.

— Consider gap insurance. From the moment you drive a car off the lot, your car insurance is likely inadequate in the event you suffered a total loss from an accident or theft. If you paid cash for your car or have significant equity in it, you don’t need gap insurance, but in many cases, it can be a smart investment for financial protection.

Though it may be tempting, don’t finance a new car, as depreciation is the greatest in the first few years of a car’s life. And before you take out a car loan, make sure your total debt (from mortgage and credit cards, etc.) doesn’t exceed 36 percent of your gross annual income.
In most cases, refinancing a car loan isn’t a smart bet. Excessive fees typically cancel out any short-term savings. The rare exception to this rule is if you happen to have the means to pay more per month in exchange for a shorter loan term, which can save you significant interest.

Investment Debt

Just as banks can lend you money if you have equity in your home, your brokerage firm can lend you money against the value of certain stocks, bonds and mutual funds in your portfolio. This is known as a margin loan. Here’s what you need to do before taking on investment debt:
— Understand the risks. Borrowing on margin is not for the amateur investor. Margin can result in losing more than your original investment. However, you could also boost your return significantly.

— Only consider margin if your marginable portfolio is diversified enough and large enough (relative to the level of margin debt) to help reduce risk. In this case, margin can be a convenient, flexible and low-cost borrowing tool to leverage your investments.

— Opt for margin over other debt if you can. Margin interest rates are typically lower than credit cards and unsecured personal loans, plus there’s no set repayment schedule with a margin loan. Margin interest may be tax deductible if you use the margin to purchase taxable investments. Consult a tax professional about your individual situation.
Don’t borrow the max. Investors can generally borrow up to 50 percent of the purchase price of marginable investments, but pushing the limits can be extremely risky. A decline in the value of securities purchased on margin can require you to provide additional funds to the lending brokerage firm within a short time to avoid the forced sale of those securities or other securities in your account. And remember to double-check your firm’s margin policies, as they can differ between firms.

10 Ways to Increase the Value of Your Home

In a dour housing market, wouldn't it be nice to know that your remodeling project would pay off when you went to sell the property? Remodeling Magazine evaluated the top remodeling projects, how the cost-to-value has changed since the housing market implosion, and which projects are still worth the investment. Using the magazine's "Cost Vs. Value Report for 2008-2009," let's look at some of the best projects you can undertake and recoup the majority of your cost.

Upscale Projects

• Siding Replacement (fiber-cement or foam-backed vinyl). With the economic slump, home buyers aren't being dazzled by bells and whistles as much as they are improvements that will ensure lower repair and utility bills. Although replacing current siding with fiber-cement has lost value from 2007, it still nets an astonishing 87% ROI. If you prefer a foam-backed vinyl product replacement instead, you can still look to recoup 80% of your cost.
• Window Replacement (vinyl or wood).  Windows are not only an aesthetic feature. For most homeowners, they represent one of the easiest ways to lower home heating and cooling bills. By replacing your current windows with more efficient vinyl or wood ones, you can save on your utility bills, attract future home buyers and net a nearly 80% (vinyl) or 77% (wood) return on your investment.
• Bathroom Remodel.  Depending on the size and amenities of your desired bathroom, you could expect to pay over $50,000 to tear out walls, repair joists and wall studs, change structural elements and make major layout changes, such as switching a toilet and shower. However big the price tag, you can still expect to recoup nearly 71% of the cost (which would be $36,400 if you have a $50K bill) when you go to sell. This project increased its value since 2007, while its sister project – adding a complete bathroom – fell in value.
• Major Kitchen Remodel. Kitchens are typically the most frequently used room in a home, so it makes sense that investing money here is going to pay off when it comes time to sell. While a major kitchen renovation is usually the most time-consuming and expensive home improvement job (averaging more than $110,000), it's also one of the most profitable. Regardless of the size of your financial layout, you can expect to get a nearly 71% ROI.
• Deck Addition (composite product). With families cutting their entertainment budgets, they're spending more time at home, so it makes sense that adding a deck (composite, not wood) is a good investment. You can plan on recouping 63% of your total job cost to boost your home's value by nearly $24,000 if you paid the average job cost of $37,000.

Mid-Range Projects

While all of the mid-range projects dropped in value versus cost since 2007, there are still numerous projects that will net you a significant ROI. Here are a few of the best bets for your money:

• Deck Addition (wood). If your bank balance can't swing the higher price tag that comes with composite decking, you may still be able to afford a wood addition on to your home. While a wood deck would cost you, on average, in the neighborhood of $10,000, the resale value it will add to your home is more than $8,600 – an 81.8% return on your investment.
• Siding Replacement (vinyl). Fiber-cement or foam-banked vinyl are often more preferable siding upgrades, but getting vinyl siding replacements instead is still a good choice. You can recoup nearly 81% of your cost which, if the job cost you more than $10,000, means you could add more than $8,200 to your home's value.
• Minor Kitchen Remodel. With belt-tightening in style, people are turning to minor kitchen improvement projects instead of major overhauls. It turns out that that choice is not only frugal, but financially wise. While major kitchen remodeling jobs can still, on average, return a nice 70% ROI for homeowners, minor kitchen remodeling jobs net an even higher 79.5% return.
• Attic Bedroom.  Anytime you can add bedrooms, you're going to add to the overall value – and listed purchase price – to your home. If your attic's dimensions allow you to convert it to a bedroom, you may want to consider investing the money to do so. You'll add some sleeping space and net a nice 74% return when a new buyer puts your home under contract.
• Basement Remodel. If you're fortunate enough to live in an area with a water table high enough to permit basements, you should think about squeezing all the value you can out of it. By remodeling and finishing a previously-unfinished basement you can expect to get nearly 73% of your investment returned with a higher list price, come time to sell.

Conclusion

If you have savings or access to reasonably-priced credit, it's worth it to consider home improvement projects that will produce the best return for your time and money. Make sure you work with a reputable, licensed contractor (to avoid costly errors or budget overruns), and before you undertake any project it's a good idea to check and see if it could significantly increase your property tax bill.

While it may still make sense in the long-run to undertake the project and add overall value to your home, you may need to make a few budgetary changes so that you don't get caught off-guard when the tax bill comes.

Seven Steps to a Sound Retirement

There are seven keys to a lot of things in life. There are seven steps to heaven and seven types of intelligence and seven habits of effective leaders.

Now we have seven steps to retirement planning courtesy of the Society of Actuaries, which just released a 64-page report with the not-so-consumer friendly title "Segmenting the Middle Market: Retirement Risks and Solutions Phase II Report."

"Retirement financial planning requires a methodical approach that identifies and quantifies each important component that affects the asset accumulation, income management and product selection/investment decision processes," according to the report, which was sponsored by the society's committee on post-retirement needs and risk and written by Noel Abkemeier of Milliman.

Not surprisingly Abkemeier says this approach is especially important for middle income Americans who likely have less than $100,000 set aside for retirement. So what are those steps?

1. Quantify assets and net worth
The first order of business is taking a tally of all that you own — your financial and non-financial assets, including your home and a self-owned business, and all that you owe. Your home, given that it might be your largest asset, could play an especially important part in your retirement, according to Abkemeier.
And at minimum, you should evaluate the many ways you can create income from your home, such as selling and renting; selling and moving in with family; taking out a home-equity loan; renting out a room or rooms; taking a reverse mortgage; and paying off your mortgage.
Another point that sometimes gets lost in the fray is that assets have to be converted into income and income streams need to be converted into assets. "When we think of assets and income, we need to remember that assets can be converted to a monthly income and that retirement savings are important as a generator of monthly income or spending power," according to SOA's report. "Likewise, income streams like pensions have a value comparable to an asset."
One reason retirement planning is so difficult, according to SOA, is that many people are not able to readily think about assets and income with equivalent values and how to make a translation between the two. Assets often seem like a lot of money, particularly when people forget that they will be using them to meet regular expenses.
Consider, for instance, the notion that $100,000 in retirement savings might translate into just $4,000 per year in retirement income.

2. Quantify risk coverage
Take stock of all the insurance that you might already have or need — health, disability, life, auto and homeowners. In addition, consider whether you might need long-term-care insurance, especially in light of the cost associated with long-term care and the very real possibility that you might need some assistance at some point in your life.
According to the report, those households with limited assets, say less than $200,000 in financial assets, may need to spend down their assets and rely on Medicaid, while those with more than $2 million in financial assets can cover long-term-care costs out of pocket. But those households with assets in between $200,000 and $2 million should include long-term care insurance in their plan, according to the SOA. And the best time to buy such insurance is in the late preretirement years.
The SOA also notes in its report the possible need for life insurance, the death benefit of which can be used for bequests or to provide income to a surviving spouse. Life insurance premiums can be expensive if you're getting on in years. That's why the SOA report suggests that you continue "existing preretirement coverages during the retirement period."
Of note, there will soon be many policies that combine long-term-care insurance with life insurance and annuities.

3. Compare expenditure needs against anticipated income
The thing about retirement is that it's filled with expenses, which according to the SOA report "can be thought of as the minimum needed to sustain a standard of living, plus extra for nonrecurring needs and amounts to help meet dreams." What's more, those expenses are likely to change over time.
So, to make your retirement plan work in reality you first have to make it work on paper. You need to compare whether you'll have enough guaranteed income to cover your essential living expenses, including food, housing and health-insurance premiums, at the point of retirement and then compare what amount of income you'll need to cover your discretionary expenses, such as travel and the like (if those are indeed what you might consider discretionary expenses).
Your guaranteed sources of income include Social Security, and possibly a pension and annuity. Your not-so-guaranteed sources of income include earnings from work, income from assets such as capital gains, dividends, interest, and rental property.
No doubt, as you go about the process of matching income to expenses, you might find yourself having to revise your discretionary expenses, especially if there aren't enough guaranteed sources of income to meet essential expenses.

4. Compare amounts needed in retirement against total assets
So here's where your math skills (or your Google search skills) might come into play. Besides calculating your income and expenses at the point of retirement, you need to figure out whether your funds will last throughout retirement. In other words, you need to calculate the net present value of your expenses throughout retirement.
Now truth be told finding the present value of your expenses is a bit tricky, especially since there are many factors that can affect how much is really needed, including the date of your retirement, inflation rates, gross and after-tax investment returns and your life expectancy.
But the bottom line is this: If, after crunching the numbers, the present value of your expenses is greater than the present value of your assets you've got some adjustments to make. And the good news is that there are plenty of adjustments that you can make.
You could, for instance, delay the date of your retirement or return to work or work part-time. Those actions might be enough to offset the difference. In addition, you might consider trimming your expenses or consider a more tax-efficient income drawdown plan.

5. Categorize assets
The SOA also recommends that assets be grouped to fund early, mid and late phases of retirement. Thus, assets for early retirement should be liquid, while mid-retirement assets should include intermediate-term investments such as laddered five-to-10-year Treasury bonds, TIPS, laddered fixed-interest deferred annuities, balanced investment portfolios, income-oriented equities, variable annuities, and the like. And late retirement assets include longevity insurance, TIPS, balanced portfolios, growth and income portfolios, laddered income annuities, deferred variable annuities and life insurance.

6. Relate investments to investing capabilities and portfolio size
This should come as no surprise; the SOA recommends that you invest only in things that are suitable, relative to your risk tolerance, investment knowledge and the capacity of the portfolio to accommodate volatility. "In short, a retiree should not invest beyond his investment skills, including those of his adviser," the SOA report stated.

7. Keep the plan current
This too might be a bit obvious, but retirement-income plans must not be built and set on a shelf. The plan is a point-in-time analysis that must be reviewed on a regular basis.
Consider, for instance, just some of the things that could change in one year, according to the SOA. Health status or health-care costs could change; your life expectancy might change; your investment returns and inflation might be quite different than your assumptions; and your employment status and expected retirement date might change.

What's more, you might suffer the loss of a spouse through death or divorce, or perhaps you might not be able to live independently any longer, or perhaps you might need to sell your house or unexpectedly care for dependents, or change your inheritance plans.

Said Abkemeier: "You want to keep your plan current. You need to tie everything together and go back to the start of the process each year. You want to enjoy retirement, but you don't want to be at rest."

8 Ways Your Upbringing Can Affect Your Money Habits

Whether we realize it or not, how we were raised has a tremendous impact on how we make decisions as adults. Sometimes the results are positive, certainly. But other times the results are detrimental to our well-being, especially when it comes to our financial health. This doesn’t mean that we can just blame mom or dad (or both) for our money mistakes and leave it at that. But once we understand the root of our bad habits we can take ownership of them and make a conscious effort to change them. 

Here are eight common parenting behaviors that can negatively influence your money habits and what you can do to overcome them. Let the therapy session begin.

Your Parents Were Very Frugal

The behavior: Whether they needed to keep a tight budget, were trying to teach you a lesson or were choosing to put themselves first financially, they seemed to deny you of everything you wanted as a kid.
The influence: You overspend to compensate. Binge spending often occurs in response to feeling deprived as a child. Haven’t we all heard the story about the strict parents whose kid rebelled and went hog-wild? Perhaps you are acting out with your money choices because of your parents’ frugality.
The solution: Talk to your parents about the reasons for their choices. There may be more to their decision than you understood when you were young. Regardless, know that your real revenge for childhood deprivation is financial prosperity. Channel that inner rebel as best you can to save instead of spend. If your will isn’t strong enough to stop overspending, force yourself to by setting up automatic savings plans whenever possible.
And don’t let the cycle continue: If you have kids, make sure you include them in the reasoning for being careful with money so that they can learn the benefits of saving and not feel resentful.

Your Parents Spoiled You

The behavior: Perhaps your parents were deprived as children themselves, and in response, they chose to overspend on you. You grew up living a life of abundance and not wanting for anything.
The influence: You feel entitled to have a luxurious lifestyle. Kids who are spoiled can often grow up to expect that they can — and should — still have whatever they want. The problem is that you might not have the income to support your ability to live large, which can lead to racking up unnecessary debt.
The solution: Shift your sense of entitlement from having a lot of “stuff” now to having financial freedom later. Challenge yourself to see what it’s like to live modestly and then put any savings towards more important goals like buying a home, a comfortable retirement or starting a family. Set up automatic retirement contributions to force yourself to make better money decisions for your future.

Your Parents Were Extremely Charitable

The behavior: Perhaps they grew up poor or experienced some kind of trauma firsthand. In response, they chose to invest their time and money in causes that they were passionate about.
The influence: Your heart is in the right place, and so were your parents’. But you may give more money away than you can really afford to out of guilt or obligation. Whether you feel obligated to because of your parents’ experience or want to match their generosity, you can’t seem to say “no” to most charitable appeals. Charity is a wonderful and noble concept, but it is easy to let your emotions get the best of you, which can result in saying “yes” too often and donating more than you can actually afford.
The solution: Decide which causes are most important to you and make a charitable gift budget now that is within your means for next year. This budget should include a little extra room for unexpected appeals that you may want to support. Then set up automatic payments through your bank to the charities of choice, either monthly or annually, depending on what you can comfortably afford, and let the charities know what to expect. This way, you know what you are giving and give ahead of time and you won’t be as tempted to give too much based on emotion and impulse.

Your Parents Never Taught You About Money

The behavior: This is a very common problem and often due to the subconscious perpetuation of their own parents’ lack of financial education. Money has a notorious reputation for being dirty and taboo to talk about. And of course women have a long history of being kept in the dark when it came to the household finances. So generations of parents have avoided discussing money matters with their children out of ignorance or preference.
The influence: You are money foolish — and probably in a variety of ways, whether it is overspending, undersaving or avoiding investing and/or financial planning in general. You have no foundation of knowledge when it comes to money management, so you are left to (hopefully) learn from your mistakes.
The solution: Get educated. Being a DailyWorth subscriber is a great start. You can also take it a step further by hiring an experienced, qualified financial advisor who can offer you personalized guidance, get you on the right track to achieve your goals, and, ideally, educate you at the same time. Get referrals from family and friends and interview several candidates until you find one you like and trust. If you have kids of your own, make it a priority to talk to them about money and involve them in your financial planning activities so they can break the cycle.

Your Parents Badmouthed the Stock Market

The behavior: Whether they lived through the Great Depression, took a big hit during the Great Recession or made bad stock-picking decisions in the past, they have chosen to put their money in the safest place possible … under the bed.
The influence: You avoid investing in stocks altogether. This may seem a safe choice, but the reality is that you need to grow your money as much as possible in order to have a fighting chance at a comfortable retirement. That leaves you with few options other than investing in the stock market and real estate.
The solution: Be careful and strategic with your investing decisions. This means doing sufficient research and asking questions, if necessary, to make sure you know what you’re getting into and whether it’s appropriate for your objectives and risk tolerance. You also need to make sure that your total investment portfolio is well-diversified so you don’t subject yourself to any unnecessary risk.

Your Parents Lived Large

The behavior: Maybe they were compensating for being deprived as kids or they felt the need to keep up with the Joneses. Whatever the reason, your parents spoiled themselves and probably spent more than they should.
 
The influence: You live beyond your means, too. As much as we try to avoid turning into our parents, it often happens. Growing up in a home where your role models lived a lavish lifestyle would make it particularly challenging for you to adopt a modest one. The unfortunate result is that you are likely not just trying to keep up with the Joneses, but with your parents as well.
The solution: If you can’t go as far as physically removing yourself from an environment that tempts you too much to overspend, then you need to put constraints in place to force yourself not to. That means setting up automatic transfers to save money you would otherwise spend and dedicating an account and debit card just for discretionary spending with no overdraft protection.

Your Mother Was Dependent

The behavior: Whether she married one man of means or multiple men, your mom was taken care of and did not have to worry about money. (At least, as far as you know.)
The influence: You too are expecting Prince Charming. Why should you have to struggle if your mom didn’t have to? This subconscious question commonly results in procrastination and irresponsible money behavior because, in the back of your mind, you assume that someone will eventually save you financially.
The solution: Wake up from this unrealistic fairytale! Stop waiting to be saved and instead, save yourself. The end result will be much more satisfying, and you can take pride in being a model of financial independence and inspiration to your own children and others.


Your Parents Divorced

The behavior: This is an unfortunate reality for so many families and a major contributor to all kinds of psychological issues in kids, including those that fuel poor money decisions.
The influence: You are determined to live happily ever after. This isn’t necessarily a bad thing, but it can also lead you to jump into marriage, buy a house and start a family prematurely or for the wrong reasons. That can easily lead to living beyond your means, racking up debt, enduring financial stress — and can ultimately result in divorce. The vicious cycle continues.
The solution: Make a commitment to always be financially independent even if you do marry or are already married. This means maintaining your own separate accounts for spending, saving and investing and making it a priority in your relationship to contribute to your own personal retirement account as much as possible (even if you are not the breadwinner in your relationship or have left the workforce to be a caretaker). If you happen to significantly outearn your potential mate, you may also want to consider a prenuptial agreement as a practical, protective measure.

Could You Cut Your Spending by $1,000 a Month?

As a newspaper columnist in Detroit, Brian J. O'Connor didn't feel like he had much job security. "My paper had been sold, which automatically makes everybody nervous, and clearly Detroit was not doing well," O'Connor says of the bleak period in October 2009 when he launched his money-saving experiment.

That experiment involved cutting $1,000 a month from his budget, largely by focusing on recurring expenses. "Partly I wanted to fail as much as succeed because I wanted to illustrate how tough it can be if you really have to make big cuts in a family budget," O'Connor, 53, says. If parents went to work in the morning and came home unemployed, or suddenly lost overtime pay - as many workers did in Detroit during the recession - then they similarly needed to immediately transform their spending in order to stay afloat, he says.

His series of humorous columns on the experiment were so popular that he turned them into a book, "The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese," which will be released this week.

Trimming $1,000 a month, which he managed to do, might sound overly ambitious, but O'Connor says that's the point. "It had to be a high-wire act, or there'd be nothing at stake," he says, adding that even cutting a grand each month wouldn't be enough for him, his wife and his son to survive if he suddenly lost his job. Still, it would be a start.

Ready to replicate O'Connor's strategy? Here are five categories where you're most likely to gin up some serious savings.

1. Phone, cable and Internet

"The easiest savings I got was cutting the utilities," O'Connor says. After spending an afternoon making a handful of calls to his cable, phone and Internet provider, he slimmed down his bundle of charges by about $140 per month. Part of that was removing services he didn't need, such as a $15 monthly charge that allowed him to use his cellphone as a modem (he forgot to cancel that service after a vacation), and a third-party voice messaging service on his home phone.

He trimmed down his cable service to a 200 channel package, which generated about $30 in savings. When he similarly downgraded his Internet service based on the amount of data his family actually used, the provider rebated him for the previous two months, since he had been paying for a more expensive data plan than he needed.

The total savings came to $140 a month plus $653.80 in refunds, temporary discounts and a $200 gift card. "That's more than a month's worth of groceries plus ongoing savings for just a couple hours on the phone," O'Connor says.

"Some of it was just dumb, which is a recurring theme in the book," O'Connor says. In other words, if he had paid attention to his bills, he would have had the charges removed long ago. But it's easy to never get around to it, or to overlook those superfluous expenses. That's why O'Connor recommends taking a close look at every household bill once a month, so you can eliminate the services you don't even realize you're paying for.

2. Unusual expenses

Do you have an oddball expense that's eating away at your bank account each month? For some people, it might be an expensive hobby; for O'Connor, it was his 30-year-old boat. It was costing him several hundred dollars in repairs some months. He saved almost $100 a month by creating a separate annual fund that served as a cushion for boat-related expenses, instead of scrambling to come up with the money whenever something broke.

3. Child care

If your employer offers flexible spending accounts, you can set aside pre-tax dollars to pay for health care, child care and commuting costs, up to certain limits. O'Connor saved more than $100 a month by paying for his son's speech therapy through a flexible health spending account. He points out that for two working parents, taking advantage of child care flexible spending accounts can also make a big dent in monthly expenses.

4. Home

Refinancing when interest rates are low can help reduce monthly mortgage payments. When O'Connor refinanced, he opted to slightly increase his monthly payment so he could switch to a 15-year mortgage and make sure his home was paid off prior to retirement. For monthly savings, O'Connor drilled into his home maintenance spending. He cut $60 a month by stopping maid service and an extra $10 from regular home maintenance.

5. Groceries

Food shopping is an area ripe for savings, since it's easy to overspend on name-brand pasta sauce, organic apples and prepared meals. O'Connor invested some time into comparison shopping and coupon hunting - on his first trip under his new regime, he spent 2.5 hours at the grocery store -- but it paid off. "You spend 10 minutes walking up and down the frozen meat aisle looking for the special on frozen turkey breast," he says.

Subsequent trips, though, did not take nearly as long because he developed his system (and gained familiarity with the store's placements). He saved about $40 for the month, and he didn't feel like he was sacrificing much. "Store-brand tomatoes don't feel any different to me than premium," he says.

Still, it's hard to spend the time to maximize deals every week, O'Connor acknowledges, especially with two working parents. He and his wife have to skip their coupon-maximizing efforts some weeks, especially when one of them is traveling for work.

The biggest takeaway from O'Connor's $1,000 challenge is to focus on recurring expenses, because when you cut them once, you keep them off the books the following months, too. So if you do nothing else this month, make a few calls to your cable, Internet and phone provider.

Top Performing CEOs

Five Questions Investors Should Ask When A CEO Returns

One of an investor’s most challenging decisions is how to handle the news that a former chief executive officer returns to power. Buy or sell or hold? The development should prompt several timely questions.

Professional investors often gauge a company's fortunes by measuring the CEO's individual experience, strategy and frame of mind. After all, this top executive will call the shots on a company's strategy when it comes to such critical management decisions as making acquisitions, rolling out new products and adding branch offices around the world.

Assessing a CEO’s value and potential can be particularly thorny when the leader returns to the company that he or she had previously run. As mutual fund literature invariably reminds us: Past performance is not always indicative of future results.

For example, A.G. Lafley came back to run Procter & Gamble (NYSE:PG) last May 23. On Aug. 1, a Reuters article proclaimed: "P&G Appears Back on Track with CEO Lafley's Return," referring to a favorable 2014 forecast for P&G. Yet the company's stock has slightly lagged the benchmark Standard & Poor's 500 Index by a few percentage points since his return.

Granted, it is too soon to reach any conclusions about P&G. But given how widely respected Lafley is, the data underscores just how challenging it is even for a very well regarded chief, such as Lafley, to impress Wall Street right from the get-go.

U.S. corporate annals are filled with high-profile examples of CEOs who returned to glory. The roster includes Lafley, Mike Ullman of J.C. Penney, Charles Schwab of the brokerage firm bearing his name, Howard Schultz of Starbucks, Michael Dell of Dell Computers and Steve Jobs of Apple.

Here are five questions investors should ask when a CEO returns:

1. What is the state of the company that the CEO is taking over?

Exactly how is the company doing? If an entity is utterly downtrodden, no leader can work miracles, no matter how glowing the track record or promising the stated growth strategy.

“Investors must ask if the company has greatly suffered or has it been on the rise?” says Betsy Billard, a private wealth adviser at Ameriprise Financial. “Visionaries really are few and far between so investors have to take each example on a case-by-case basis.”

The condition of a company is crucial because it will give a hint as to how long it may take the returning CEO to put his or her stamp on a company. “I would want to know if the company is innovating. Or, is it hiring and therefore expanding?” Billard points out.

2. Why did the CEO leave in the first place?

As Sam Hill, a CEO consultant and the author of “Radical Marketing: From Harvard to Harley, Lessons from Ten That Broke the Rules and Made It Big,” said in an interview: “CEO gigs are the modern equivalent of dukedoms, extremely privileged positions. Typically, people leave them for a small handful of reasons, one of which is they’re exhausted by the job. Whenever a CEO returns, I’d like to make sure she or he has the energy and enthusiasm to take the job back on.”

Long-term investors in particular may want to monitor some aspects of the incoming CEO. “That’s particularly true when the CEO is older, like A.G. Lafley is now,” Hill noted. “As much as I respect Procter and the incredible job (that) A.G. did the first time around, I’d be watchful this time. He’s a 66-year-old man who left the position to write books and give speeches. Is he back enthusiastically or reluctantly?”

3. How has the returning CEO exhibited personal or professional growth in the time away?

The most famous case of a CEO returning to the old stomping grounds involved Steve Jobs coming back to Apple (Nasdaq:AAPL). His case is worth examining because, given his notoriety over the years, he can serve as the totem for returning CEOs. Upon his return, he demonstrated self-awareness and maturity, factors that would encourage even skeptical investors to conclude he has grown.

Jobs co-founded Apple, driven by a vision for changing the world through computers. This was the message he conveyed to John Sculley, then of Pepsi-Cola (NYSE:PEP) when he beseeched Sculley to be CEO of Apple. But when the two leaders engaged in a power struggle, the Apple board sided with Sculley and Jobs left the company as a defeated man.

Jobs founded NeXT Inc. in 1985, with $7 million. It was not a noteworthy success partly because the NeXT computers carried huge price tags. He also acquired The Graphics Group, later called Pixar, from Lucasfilm for $10 million. The first movie he rolled out was "Toy Story," a big success that spawned sequels and changed the animation-movie scene.

But what Jobs learned about life and himself proved to be even more important. When Jobs addressed Stanford University in 2005, he acknowledged this. He told his audience that getting fired was the best thing that might have happened to him. He said, "The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me up to enter one of the most creative periods of my life.”

What he learned about himself helped to pave the wave for Apple’s remarkable growth in the 21^st century. “I’m pretty sure,” Jobs said in the speech, “none of this would have happened if I hadn’t been fired from Apple. It was awful-tasting medicine, but I guess the patient needed it.”

4. Do you trust the incoming CEO’s growth strategy?

Ultimately, you have to go with your gut when you’re investing your money. You have to feel assured that the individual has the experience, savvy and understanding of the marketplace to do whatever will be required.

One returning CEO who changed the company’s fortunes for the better was Howard Schultz of Starbucks (Nasdaq:SBUX). “When Schultz came back to Starbucks (in January 2008), he revived the company,” says Anton Bayer, the chief executive of UpCapital Management, a registered investment advisor in Granite Bay, California.

Schultz, upon his return, worked to revitalize the “experience” of going to a Starbucks shop. He had disapprovingly noted in a memo in February 2007, a full year before he came back to the company, that Starbucks had experienced a “commoditization” of its brand by creating “efficiencies.”

He instilled a sense of purpose in the company’s 10,000 store managers by bringing them to New Orleans for a meeting. He also innovated smartly with technology by employing social media as a way to further Starbucks’ branding efforts.

Schultz also instituted e-payments, allowing customers to send one another e-gifts. When you walk into a Starbucks these days, you can’t help but notice how many people pay for their coffees with nifty apps on their iPhones. This makes the payment process more convenient for customers and advances Starbucks’ image as a company that is in tune with the attitudes of its young customers.

As a corollary to the question of what to do when a CEO returns, how should investors deal with the development when a CEO comes in from outside the cocoon?

Sometimes, as it turns out, the devil you know is ultimately better than the one you don’t. Look at what happened at the giant retailer J.C. Penney (NYSE:JCP).

The company hoped to shake up its stodgy image by recruiting Apple veteran Ron Johnson, who was widely praised as the architect behind the successful Apple-store concept. In November, 2011, Johnson succeeded Ullman as J.C. Penney’s CEO.

But Johnson turned off long-time Penney customers who had grown accustomed to such practices as heavy discounting and welcomed those coupons and sales. He exited unceremoniously last April and was replaced by Ullman, his predecessor.

“Ron Johnson made a lot of changes without making any tests,” Hill says. “In retail, you can test everything, such as a store layout or even the hours it is open. Maybe at J.C. Penney, maybe he felt he a sense of urgency and didn’t have time to test. Sometimes these changes take time.”

5. Do institutional investors trust the CEO’s strategy?

No matter how successful or charismatic a CEO has been, he or she will need to have professional investors, who often determine the direction of a company’s shares.

“You want to have the assurance that the institutional managers are confirming the incoming CEO’s strategy,” Bayer said. “They sit down with the CEO and we (investors) don’t get a chance to do that. A company can’t hide from how the stock is doing and what the institutional buyers are doing. No CEO can hide behind a ‘great story’ if those investors are running away.”

I asked Bayer how his investment firm conducts research into a company before he buys its shares of stock. “We look at annual reports and company announcements. Then, we combine the fundamental analysis with technical analysis.”

The Bottom Line

Clearly, the return of a CEO brings formidable investment challenges. It helps to check the investment research that is readily available. It is wise to consult a professional investment strategist. But ultimately, it’s your money and you have to trust your gut. As Bayer succinctly put it about a returning CEO’s arrival: “Do you believe in the story? If so, invest in the company.”

3 Of The Best Traders Alive

While all investors must trade, a "trader" by profession does not technically make investments. According to Benjamin Graham, a founding father of the value investing movement, an investment must promise "safety of principal and an adequate return." Investors make informed decisions after careful analysis of the business fundamentals of a company. Traders, on the other hand, use technical analysis to place bets engineered to profit on short-term market volatility.

In the early 2000s, it was not uncommon for people to quit their jobs, empty their 401(k) plans and actively trade for a living from the comfort of their homes. Fueled by massive stock market and real estate bubbles, it was hard to lose money. However, this golden age has come and gone. The year 2007 brought with it a global recession and subsequent proliferation of financial regulation. High-frequency trading, carried out by computers running incredibly complex algorithms, now account for between 50 and 70% of trade volume on any given day of trading.

Traders frequently lose large chunks of money over the course of a single day of trading, hoping that their gains will offset their losses over time. They must also overcome significantly higher transaction costs and competition with super-computers. While the cards are stacked against traders in general, there are a handful of traders with enough brains, boldness and capital to take on the odds.

Paul Tudor Jones (1954-Present)
The founder of Tudor Investment Corporation, a $12 billion hedge fund, Paul Tudor Jones made his fortune shorting the 1987 stock market crash. Jones was able to predict the multiplying effect that portfolio insurance would have on a bear market. Portfolio insurance, a popular risk management tool, involves buying index puts to lower one's portfolio risk. Thus, in a bear market, more and more investors will choose to employ their put options and drive the market down even further. Jones' bet paid off big: on Black Monday of 1987, he was able to triple his capital from his short positions. Jones is worth roughly $3.6 billion today and is currently managing his hedge fund.

George Soros (1930-Present)
George Soros is arguably the most well-known trader in the history of the business, known as "The Man Who Broke the Bank of England." In 1992, Soros made roughly $1 billion in a bet that the British pound would depreciate in value. At the time, the pound had been introduced into the European ERM rate - an exchange rate mechanism designed to keep its listed currencies within a set of defined parameters to increase systemic financial stability. With the help of his associates at his hedge fund, the Quantum Investment Fund, Soros noticed that the pound was not fundamentally strong enough to stay in the ERM, and built up a short position to the tune of $10 billion. Soros is currently worth an approximated $19 billion and is retired.

John Paulson (1955-Present)
Praised by some for executing the "greatest trade ever," John Paulson made his fortune in 2007 by shorting the real estate market by way of the collateralized-debt obligation market. Paulson founded Paulson & Co. in 1994 and was relatively unknown on Wall Street - that is, up to the financial crisis that began in 2007. Foreseeing the asset bubble in real estate, Paulson's funds made a reported $15 billion in 2007, while Paulson himself pocketed a tidy $3.7 billion. For profiting stupendously while the global economy staggered, Paulson came under intense scrutiny of the U.S. federal government during this time. Today, Paulson continues to manage Paulson & Co. and is worth roughly $11 billion.

The Bottom Line
Jones, Soros and Paulson all have one thing in common: their most lucrative trades were highly leveraged shorts. The conflict of interest is clear. Traders have every incentive to profit off of an imbalanced financial market, often at the expense of every other market player. Furthermore, their actions tend to prolong and exacerbate the initial financial imbalance, sometimes to the point of complete and total market failure. Should they have this capability? Well, that's for legislatures to decide.

The 10 Choices Smart Men Make About Their Retirement

Retirement may seem like a long way off to you -- maybe that’s why you minimize the importance of planning for retirement today. But here’s another thought: How expensive are your day-to-day living expenses going to be when you retire?  
Consider this: In 1963, a retiree had to pay $0.22 for a loaf of bread. In 2013, it’s close to $2. A gallon of gas in 1963 ran you about $0.30. Today, you’re paying over $3.50. And in 1963, if a retiree wanted to see the the Rolling Stones in concert he’d probably have to shell out a couple of bucks.Today, it will cost him more than a couple of Benjamins unless he wants to sit in the nosebleeds.  

The fact that the Stones still tour may be due to the increased health and vitality of all seniors. That’s the good news. If you’re financially secure in your golden years and you stay in good physical shape, you’re going to be able to golf, jog, hike and travel the world for a very long time.  

Of course it might also mean that Mick and Keith didn’t make the best retirement planning decisions. You don’t want to be punching a clock in your 70s like them do you? No. So take a second and review these 10 smart choices you can make today to put yourself in great shape for retirement.  

1. Choose To Put 10% Of Your Paycheck In Your 401(k) Plan
 The Nile River isn’t as long as the list of excuses you have for not doing this.  You’re trying to pay off student loans. You’re trying to save for a house. You’re saving for a car, a wedding or a pair of Google Glasses as soon as they hit the market.

The fact is your employer-sponsored retirement savings plan is still the most convenient, powerful way to save for retirement. If your company offers a matching contribution then you should be contributing at least enough to get the maximum from them. Then try to increase your contributions a little bit every year. Remember, these are pretax contributions so the government is helping out by contributing some of the money you would have had withheld anyway. Talk to anyone who has been in a 401(k) plan for a long time and they’ll tell you two things: 1) You won’t miss your payroll deductions as much as you think you will; and 2) There is no way you’ll accumulate a sizable nest egg any other way.  

2.  Choose To Design A Suitable Investment Portfolio
 Deciding how much to save is the easy part. Choosing where to invest your money gets a little trickier. Just remember this, it’s not about finding the hot funds or getting a good tip on a stock. If real estate is about location, location, location, then retirement investing is about diversification, diversification, diversification.

Most companies who provide investments or 401(k)s provide what are called suitability or risk-tolerance quizzes. You answer a few questions and then they’ll give you some sample portfolios; guidelines to follow when deciding how much to put in which funds. More recently, many mutual fund companies offer “target date” funds. The idea behind these funds is that you pick one fund based on a year close to when you’ll retire (say 2040) and that company will diversify your assets for you and gradually adjust your holdings to make them more conservative as you get close to your target retirement year. If you’re working with a financial advisor on other aspects of your financial life (life insurance, disability insurance), they might also be a good resource for helping make sure your portfolio is appropriate for you.

3. Choose To Meet With A Financial Professional
 If you have a scratchy throat or a slight pain in your lower back, it’s OK to check WebMd to see if you can diagnosis your condition by yourself.  But if your symptoms persist for more than a week, then there is a good chance you’re going to consult a doctor.

Q:  How long is your retirement going to last?
A:  Much longer than a week. Much, much longer.

Don’t be intimidated to sit down with someone whose living is to help people prepare for a comfortable retirement. Talk to your friends and family first. Find out if anyone knows a financial representative who is experienced and trustworthy. Or just contact a Farmers agent and ask about their financial planning services and they’ll help you with anything you need. Some financial instruments are complicated and you should have an experienced professional explain them to you.

4.  Choose To Purchase A Suitable Amount Of Life Insurance
 Think life insurance isn’t part of retirement? Think again. Many people are discovering the flexibility that permanent life insurance offers to a well thought-out retirement plan.

Unlike term life insurance, which is typically designed to expire in your retirement years, permanent life insurance stays in force. That kind of guaranteed death benefit allows you to spend your retirement savings freely without worrying about leaving no estate for your children or grandchildren.

Furthermore, the cash value of your policy can be accessed on a tax-favored basis, giving your some added flexibility in retirement. 

5. Choose To Open A Roth IRA
 The beautiful thing about saving with your employer’s 401(k) plan is that it allows you to save pre-tax money and accumulate investment gains on a tax-deferred basis. That’s pretty powerful. The downside to all of that is that Uncle Sam is going to collect taxes on every dime of that money at some point. If you do a really nice job of saving you might find yourself worrying about getting hit with a huge tax bill when you start to withdrawal from your 401(k) or traditional IRAs in retirement.

A Roth IRA is a good way to hedge your bets. If you’re eligible, you can contribute after-tax dollars to a Roth IRA and your investment earnings will accumulate tax free. If you have a long time to go to retirement, that’s a lot of years and a lot of tax-free money that can build up. That will give you some flexibility in retirement; the ability to withdrawal a large lump sum without having to worry about the tax implications. And you may not need that money right away in retirement, so it can stay invested and continue to accumulate tax free. If you pass away, you can pass it on to your heirs tax free. I’m sure they’ll be grateful.

6.  Choose To Live Within Your Means
 Start this habit today. It is the foundation of every prudent financial plan for everyone, everywhere at all times. The fact is that every person -- man or woman, rich or poor, young or old -- can get themselves into huge financial trouble when they spend more than they earn. Google "Nicolas Cage" and "bankruptcy" if you don’t believe me. Just look at the awful movies he’s had to make to dig himself out of the hole made for himself by spending too much.

This concept takes on heightened meaning for retirees. Most people in their 80s don’t have much earning power. If you spend too much in your early years of retirement and run out of savings, then you run out. Then you’ll be calling your kids for money and how demeaning will that be? Start sticking to a budget now.

7.  Choose To Understand Annuities
 Sometimes annuities get a bad rap from celebrity financial gurus with really bad hairdos. Like a lot of financial instruments, however, annuities sometimes make sense and sometimes they don’t.

They can come in handy when it comes time to start withdrawing from your retirement accounts. A big worry many retirees have is that they’ll outlive their life savings. To prevent that, you can purchase an annuity that will give you a lifetime stream of income. That’s real security and peace of mind.  This isn’t something you want to shop for on your own, however. You’ll need a financial advisor to explain them to you.

8.  Choose To Read Your Social Security Statement Every Year
 Think the government will take care of you in retirement? The next time you get a social security statement in the mail, take a minute or two and read it. What’s that? You haven’t received a social security statement in the mail recently. Yes, because the government stopped sending them out a few years ago. It seems they couldn’t afford the postage. And you thought the social security system was in good shape?

In fact, social security should be around for you in some form when you retire.  (Hard to imagine the politician who would risk taking that benefit away.) But don’t be surprised if the full retirement age gets pushed back. Currently it’s 67 for anyone born after 1959. You can go on the social security website, set up an account and view your estimated monthly benefit. The average payment in 2012 was $1,230 per month. Ask yourself if that amount is enough to live on in retirement. Then go and increase the contributions you make to your retirement plan.

9. Choose To Rollover Your Retirement Account When Changing Jobs
 These days people change jobs much more frequently than in years past. With most employers offering defined contribution pensions (like 401(k)s) many workers have to make a decision about what to do with the amount they’ve accrued when they do take on a new position.

Here’s what you should not do: Cash it in. It’s very tempting. You might have some bills you’d like to pay off or you might think it’s a good idea to use your 401(k) money towards the purchase of a new car, but there are big downsides to doing that. First of all, you’ll pay income taxes and a 10% penalty on the amount you take out of your retirement plan (if you’re younger than 59½.). So, a lot more of that money will go to the IRS than you think. Then you’ll miss out on any future earnings that money would generate. Many people are finding themselves in the middle stages of their career, woefully behind the eight ball with regards to their retirement savings because they cashed in their 401(k) savings in their younger years. A direct rollover to an IRA or your new employer’s retirement plan will help you avoid that big tax bill and keep you on track for retirement. 

10. Choose To Keep Your Cool When The Stock Market Takes A Dive
 Do you remember way, way back in those crazy days of the latter part of 2008?  Seems like just yesterday, doesn’t it? The U.S. economy teetered on the edge of a cliff. The headlines were unthinkable (Lehman Brothers going out of business? Seriously?) and the stock market dropped. Then it dropped some more. Then it kept on dropping.

And the people who really got hurt were the ones who were within a few years of retirement and had too much of their savings in the stock market. It was not unusual for a $300,000 401(k) account balance to drop below $200,000. Many near-retirees were looking at working a few more years than they wanted to. The other people who really got hurt were the people who moved their money out of the stock market after it took that dive. This was especially the case if they didn’t get back in to enjoy one of the sharpest rebounds the market has seen ever seen -- between March and September of 2009.

Today the market is at an all-time high, but I predict it’s going to drop again. Then it’s going to go back up. Then it’s going to drop. Don’t ask me when and how much. Just know that if it does take a dive and you have more than 10 years to go until retirement then you don’t need to panic. Riding that roller coaster is still the best way to enjoy long-term growth in your retirement account.

What are the five most important lessons NOT learned in business school?

1. Personal integrity is all. While there are courses in Business Ethics in all business schools, they generally deal with larger, corporate, strategic and tactical issues. What I'm talking about here are personal ethics, which turn out to be the single most important thing affecting a person's business career.
2. People are absolutely key. Whether it's investing in an entrepreneur, taking money from an angel investor, or hiring a senior manager, A-caliber people are worth 10x those of B-caliber.

3. Cash is king. Lots of time is spent in business school looking at cash flow statements and analyses, but typically from a larger corporate perspective. But the one lesson that—one way or another—gets seared into the brain of every single entrepreneur is that the presence or absence of cash is completely deterministic for a business. Remember the Golden Rule of early stage finance: "the person with the gold makes the rules."

4. Keep everything in perspective. Bad stuff happens in every company, in every field, to every person. When one is young and starting out, it can seem like every setback is the end of the world. The more experience one has, the more one realizes that nothing is permanent except death. Perspective helps one 'do nuance', and makes it easier to not sweat the small stuff.

5. Technology is changing exponentially. This certainly wasn't taught when I was in business school, and it isn't taught in many places today. But it's the key tenet of Singularity University (where I founded the Finance, Entrepreneurship & Economics program) and it fundamentally affects every single business today that wants to have any hope of surviving, let alone thriving.

7 Things We Learned About Success From The Steve Jobs

Would you take career advice from a shoeless man with long scraggly hair and no college degree? Probably not. But what if we told you that same man invented the personal computer and founded a visionary tech company, which is now the leader in its field?

Steve Jobs was an oxymoron like that, and this has never been more evident than it is in Jobs, the brand new biopic about his life. The movie paints Jobs as a laid-back tech visionary who didn't work well with others, and may have stepped on a few friends and colleagues on his way to fortune and fame. It was habits like this that got him pushed out of Apple -- the brand he built -- in 1985. But when Apple's stock was plummeting, the company realized they needed the passion and focus that got Jobs shafted in the first place. They brought him back as CEO and he brought the brand back with products like the iMac and iPod. Clearly, the man was indispensable, which is proven by the fact that you are most likely reading this on your iPhone or iPad right now.

Steve Jobs provided us not only with gadgets that changed our lives but lessons that can change our careers. So how can you build a business like his? Take a few tips from the man's many mistakes and successes shown in this film. Study up. Then go off and invent something.

1. Strive For Innovation
“You can’t look at your competitor and say, 'We are going to do it better.' You have to look at your competitor, and say, 'We’re going to do it differently.'” Wanting to surpass his competition was never enough for Jobs, which is why he was often late to jump on a bandwagon. What mattered to him was putting out a product that was innovative. What was the first MP3 player to come out and what was the most innovative one?

2. Watch Your Back
Jobs learned the hard way that even when you are at the top of a company, you are never safe. Even if you go out of your way to bring someone into the company, that person can turn around and get rid of you. It happened to Jobs, and he also did it to others. Don’t get too comfortable.

3. Everything Is A Pressing Issue
Steve felt very strongly about seeing each task as equally important. If you didn't feel like that, he reasoned, why would you bother completing anything but the most pressing one? We learned from the film that if he hadn’t been so adamant about this, we wouldn't have as many fonts to choose from. We know you can’t part with Comic Sans MS. 

4. Simplicity Is Okay
You don’t need to work out of a fancy office or wear an expensive suit to be taken seriously. In fact, you don’t even need shoes. What you do need is confidence in a product that is actually good. Just look at Apple; it started out as a handful of deadbeat-looking guys working in a garage barefoot, but it was their idea and passion that sold the brand. 



5. You Only Need One Person To Be Onboard
When Jobs and Wozniak first presented their product to a room full of techies, only one man showed a semblance of interest. While it was disheartening, they only needed one first customer. When Jobs called hundreds of people to try to find investors, and only one man answered, he became their first investor. Don’t get discouraged when only one person shows interest; it only takes one person to help you get past that first step. 

6. Have Smart Friends
Friends who will buy you beers and let you crash on their couch are great, but will they be able to help you when you are on a deadline to fix a video game and you have no idea how to do it? We didn’t think so. Steve surrounded himself with brilliant people, including Steve Wozniak, who was his partner in inventing the personal computer. Surround yourself with minds who will inspire you to create and do great things. When you’re in a bind, you’ll be grateful to have a guy like Woz around. 

7. You Don't Need An Ivy League Degree
We learned from Mark Zuckerberg that you don’t have to graduate from Harvard to become a success. But not only did Jobs drop out of college, he dropped out of a small liberal arts school. And after that, he invented Apple. Ivy League, schmivy league. 

Dampak Ditutupnya Pemerintah Amerika

Pemerintah Amerika kembali ditutup untuk pertama kalinya sejak 1996, seiring tidak tercapainya kesepakatan di Kongres semalam, di mana Partai Republik menolak usulan untuk menaikkan batas utang atau debt ceiling. Sebagian kantor pemerintah dan layanan umum terpaksa ditutup, karena pemerintah Amerika tidak lagi sanggup membayar biaya operasional dan gaji para pegawainya.

Berikut adalah berbagai dampak dari kegagalan tercapainya kesepakatan di Kongres Amerika semalam:

1. Sekitar 700.000 pegawai negeri Amerika diberi cuti karena negara tidak bisa membayar mereka untuk sementara waktu.
2. Para pekerja di bidang militer juga tidak akan mendapatkan gaji, namun mereka akan tetap menjalankan tugas-tugasnya
3. Taman-taman nasional, seperti Grand Canyon dan Yellowstone akan tutup sementara waktu, wisatawan tidak bisa mengunjungi tempat-tempat tersebut.
4. Museum dan kebun binatang tidak lagi beroperasi, termasuk tempat-tempat wisata terkenal seperti Patung Liberty di New York dan Independence Hall di Philadelphia.
5. Pemberian kredit untuk rumah dan juga usaha kecil untuk sementara waktu akan dihentikan, hal ini dikhawatirkan akan membawa dampak susulan di kemudian hari.
6. Ijin untuk alkohol, tembakau dan senjata api akan sulit didapat, karena birokrasi yang menangani perijinan tersebut akan tutup untuk sementara waktu.
7. Tunjangan untuk pensiunan, termasuk pensiunan militer, akan ditunda untuk sementara waktu.
8. IRS (Internal Revenue Service) akan libur untuk sementara waktu, bantuan bagi para pembayar pajak tidak akan tersedia hingga mereka kembali beroperasi.
9. CDC (Centers for Desease Control) berhenti beroperasi, pencegahan dan pengawasan terhadap penyebaran penyakit menjadi terhenti dan kesehatan masyarakat akan terganggu.
10. Petugas kebersihan dan penjaga parkir tidak akan bekerja untuk sementara waktu, fasilitas umum yang masih berjalan saat ini hanya sekolah dan transportasi umum.

Market Outlook – 3 Oktober 2013

USD masih terus berada di bawah tekanan, menyusul penutupan pemerintahan Amerika. USD terlihat melemah terhadap mata uang lainnya, EUR/USD sukses naik menembus 1,3600 dan GBP/USD tampak kokoh di atas 1,6200. Sedangkan harga emas juga turut meroket, kembali di atas $1.300 setelah sebelumnya sempat terputuk ke kisaran $1.280.

Sesi Asia hari ini hanya memiliki satu data ekonomi saja yang dijadwalkan rilis, yakni Non Manufacturing PMI China pukul 07:55 WIB tadi. Data ekonomi selanjutnya baru akan dirilis di sesi Eropa, dimulai dengan angka Halifax HPI Inggris (konsensus 0,6%) pukul 14:00 WIB, disusul serangkaian Services PMI Eurozone oleh Markit, dimulai dari Spanyol (konsensus 50,9) pada pukul 14:13 WIB,Italia (konsensus 49,1) pada pukul 14:43 WIB, dilanjutkan Perancis (konsensus 50,7) dan Jerman (konsensus 54,4) berturut-turut pada pukul 14:48 WIB dan 14:53 WIB. Sementara Services PMI Eurozone sendiri akan dirilis 5 menit setelahnya, dengan konsensus sebesar 52,1. Angka Services PMI Inggris akan dirilis pukul 15:28 WIB, dengan perkiraan sebesar 60,0, sedikit di bawah angka bulan lalu sebesar 60,5. Angka Retail Sales Eurozone juga akan menjadi sorotan pada pukul 16:00 WIB, dengan konsensus sebesar -1,5%.

Di sesi New York, ISM dijadwalkan akan merilis Non-Manufacturing Index Amerika pada pukul 21:00 WIB, dengan konsensus sebesar 57,2. Sementara beberapa data ekonomi Negeri Paman Sam, seperti Unemployment Claims, Construction Spending dan Factory Orders tampaknya akan ditunda perilisannya, karena tidak beroperasinya sebagian besar kantor pemerintahan di sana.