Monthly Archives: February 2011

Build wealth not Debt- America Saves Week

Test Your Savings Knowledge

Savings Quiz
Taking the following savings quiz will reveal how much you understand about the realities of saving in America.
Q. How much loose change is available for Americans to save?

A. The U.S. Treasury says that Americans hold about $15 billion in loose change.

Q. What is the typical amount of emergency savings that Americans need?


A. According to one recent survey, the typical amount Americans spent last year on unexpected expenditures was $2000. Surprisingly, lower-income households in the survey cited the same amount.

Q. What are the two most important types of emergency expenditures?

A. According to the same survey, two-thirds of unexpected expenditures were related to medical care or motor vehicles.

Q. How long does it take to completely pay off a $1000 credit card balance if monthly payments are 2% of this balance and there is a 24% penalty interest rate?


A. One will never pay off balance. All payments pay off only interest owed.

Q . About how much more do families with a savings plan save than those without such a plan?

A. According to one study, if family incomes are the same, those families with a plan save about twice as much as those who do not have one.

Q. What is the only free money for savings that is available to many Americans?

A. An employer’s match to a contributory workplace retirement plan such as a 401(k). Some employers, up to a certain level, will match each employee dollar contributed, thus guaranteeing at least a 100% yield on this savings.

Q. If they have no other income, how much must someone who retires at 65 have saved in order to be assured of an annual income of $50,000?


A. For a male at age 65, he should have $620,000 saved to ensure an average income of $50,000 a year for life, for a female at age 65, she should have $665,000.

Q. What percentage of elderly individuals depend entirely on Social Security payments for income?


A. In 2006, 25% of individuals age 65 and older relied 100% on Social Security payments for their income.

Q. What is the most effective way to save $100,000?

A. Tell your employer or bank to transfer, each month, as much of your paycheck as possible automatically to a savings or investment account. This is a far more reliable way to acquire $100,000 than to buy lottery tickets or wait for an insurance settlement.

Q. If one saves $200 a month with a 5% annual yield, after 30 years how much savings will have accumulated?

A. Over $170,000 will have accumulated, and most of this amount will represent interest earned and compounded.

Q. What represents the most effective way lower-income families have built assets over the past several decades?

A. Through buying a home and paying off the mortgage in full. Over four-fifths of the assets of lower-income homeowners represent home equity.

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Talking Finances Keeps Cupid In Charge On Valentine’s

Talking Finances Keeps Cupid In Charge On Valentine’s



By PAUL KATZEFF, INVESTOR’S BUSINESS DAILY

Posted 02/04/2011 05:46 PM ET

Valentine’s Day is nearly here. It can be a happy occasion for people who are already married as well as those aspiring toward the altar.

Either way, you hope for an enduring relationship. And one way to boost your prospects is to avoid money disputes.

Couples who disagree about finances once a week are more than 30% likelier to divorce than couples who disagree just a few times a month, according to research by Jeffrey Dew, an assistant professor at Utah State University.

“Stress, tensions and distress lead to breakups,” said Heather Battison, education director of the credit bureau TransUnion.

Discussing finances with your significant other can be scary and awkward, she adds. But being open and honest about your individual finances can help you avoid issues that lead to breakups.

Discussing your financial goals and dreams is key. This is just as important for longtime couples as it is for those in relatively new relationships. That’s because it goes to the heart of what your major spending goals are and how you expect to pay for them. “If you are open about those two things, you can avoid painful misunderstandings down the road,” said John Ulzheimer, president of consumer education for the credit monitoring site SmartCredit.com.

Discussing goals and how to reach them dovetails with additional conversation about the nuts and bolts of reaching goals. How much will each of you contribute? If only you kick in, will you expect your spouse to contribute in some other way? Paying for a larger share of, say, your routine household expenses? Or do you both want a traditional setup, where one spouse is the breadwinner and the other runs the home and watches the kids during the day? “That should be part of an overall family planning talk,” Ulzheimer said.

And couples should discuss how they will cope in worst-case scenarios. If your wife becomes a mother, the family can lose half or more of its income. And your expenses will almost always be higher than you expect. You may need to hire a nanny. What if your child has special needs?

Joint Accounts

Couples also need to decide in advance whether they will have joint checking, savings and investment accounts. Many couples decide to have joint accounts to pay for household expenses and big-ticket goals, Ulzheimer says. But many people want their own checking account for discretionary spending. If that’s what you and your spouse decide, it’s probably a good idea to figure out two other related points. First, how much is each of you allowed to sock away in your personal account? Second, what’s the maximum you can spend without having to tell your spouse?

What’s the best way to make such decisions? It boils down to one word: negotiate, Ulzheimer says. Several of these decisions require planning. You can’t set goals and personal savings rules until you clarify total household income and expenditures.  That means making a budget. Identify your routine ongoing expenses first. That will show how much is left from your income to play with. Then you can figure how much you can afford to earmark for major future goals. Those should include everything from paying for a wedding to building nest eggs for your retirement and Junior’s education, a down payment for a home and buying that fishing boat you want.  Almost inevitably, you and your spouse will disagree about some of your goals.
The solution? Again: negotiate.

Some goals may require borrowing money. Before you apply, check your credit report and score. If there are errors or problems, the sooner you know about them the sooner you can do something about it, TransUnion’s Battison notes. Exchanging credit reports and scores is also a good idea early in a relationship — and especially before marriage. It’s a show of good faith. It’s a way of putting all your cards on the table.
One spouse may have serious credit or debt problems, perhaps involving an ex-spouse, Ulzheimer says. Better to find out before the knot is tied. Big enough problems can be marital deal-breakers.

Forget Prenups
Don’t count on prenuptial agreements to protect you. First of all, they don’t apply to your creditors or the IRS. “And Tiger Woods’ experience is an example of how prenups are almost irrelevant,” Ulzheimer said. “Just because you’ve got one in writing does not mean it is enforceable. It can be challenged in court. And it can be expensive to defend.”

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Clients’ kids don’t have to go to four-year college, Harvard says

Todays Investment News Daily reports Clients’ kids don’t have to go to four-year college, Harvard says

Research shows plenty of jobs will be available for grads of two-year and occupational programs

February 2, 2011

The U.S. is focusing too much attention on helping students pursue four-year college degrees, when two-year and occupational programs may better prepare them for the job market, a Harvard University report said.

The “college for all” movement has produced only incremental gains as other nations leapfrog the United States, and the country is failing to prepare millions of young people to become employable adults, said the authors of the Pathways to Prosperity Project, based at the Harvard Graduate School of Education in Cambridge, Massachusetts.

Most of the 47 million jobs to be created by 2018 will require some postsecondary education, the report said. Educators should offer young people two-year degrees and apprenticeships to achieve career success, and do more to ensure that students who begin such programs complete them, said Robert Schwartz, academic dean at Harvard’s education school, who heads the Pathways project.

“For an awful lot of bored, disengaged kids who are on the fence about completing high school, they need to see a pathway that leads them to a career that is not going to require them to sit in classrooms for the next several years,” Schwartz said yesterday in a telephone interview.

If young people don’t have a degree or credential that helps them begin a career, the U.S. will continue to lag behind in educational attainment and preparing the next generation of workers needed to keep the economy strong, Schwartz said.

About 14 million new job openings by 2018 — or about half of all positions for people with postsecondary education — will go to those with an two-year associate’s degree or occupational certificate, the report said, using a job estimate from the Center on Education and the Workforce at Georgetown University in Washington. These “middle-skilled” jobs include registered nurses, dental hygienists, construction managers and electricians.

Demand is “exploding” in health care, while construction, manufacturing and natural resources will provide about 2.7 million jobs that require a postsecondary credential, the report said.

Two studies released in the last two months raised concerns that the nation’s students aren’t prepared to compete in the global economy. In January, the U.S Department of Education said fewer than half of U.S. students are proficient in science. In December, the Organisation for Economic Co-operation & Development, which represents 34 countries, released the 2009 Programme for International Student Assessment in December, showing 15-year-olds in China, Korea, Singapore, Hong Kong and Japan outperformed the U.S. in a test of reading, science and math.
 
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Political Upheaval in the Middle East and Africa

By: Michael Pidhirsky, SEI Global Fixed Income Investment Strategies

Summary

Recent political developments in emerging markets, particularly in North Africa and the Middle East, have caused emerging market sovereign bond yields to climb and prices to fall. Equity markets have been significantly impacted as well, and Egypt’s stock exchange has been closed for several days. While SEI’s Funds have little direct exposure to the countries involved (generally around 1%), our portfolio managers are following the crises closely. An overview of the developments in the region and an examination of the holdings of a representative example from SEI’s Funds provides insight into SEI’s due diligence process and active management approach.

Our View

The direct exposure of SEI Funds to securities in the Middle East and Africa amounts to such a small percentage on both an absolute and benchmark-relative basis that the current crises in those regions are not a serious concern for our portfolios. Our Funds’ largest regional exposures are generally to Asia and Latin America, while their EMEA exposures are primarily in Russia, which has been largely unaffected by the crises, and South Africa, where the FTSE Johannesburg Index is down 2.24% versus declines of 13% in Tunisia and 21% in Egypt.

Of course, this perspective is focused at the micro level of regional holdings. From a broader perspective, global markets run the risk of the contagion spreading to other countries. If such an outcome were to occur, we believe that any resulting security price declines would be driven by technical rather than fundamental factors. For example, bonds in a relatively stable country or region could decline in value not because anyone fears an overthrow of the government, but rather because of a shift in sentiment towards “risk off” among emerging market investors. In that type of scenario, we believe any technical moves would be likely to reverse as fears recede and fundamentals once again drive pricing. We would also expect our Funds’ managers to respond opportunistically to these kinds of situations, as that is the essence of active investment management.
 
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