Forbes.com columnist Thomas C. Scott reports his experience with a Bernard Madoff investor, and other Ponzi schemes.
Wall Street Journal: "In today's environment, where unemployment is on the rise and where consumers are hung over after a multi-year credit binge, a budget is the very tonic many households need. It doesn't have to be painful if you understand one salient fact: You control your budget; it doesn't control you."
The Christian Science Monitor has an interesting article about how Americans are now focused on paying down their credit cards. The "Catch 22" is that not using credit cards at all apparently can lower your credit score."Whenever consumers lock up or gleefully cut up their plastic, their credit scores drop as they have increased their credit-utilization ratio."
When stock managers or strategists say they are sorry, their apologies are usually cloaked in a language all its own. They blame irrational market sentiment, recalling how suddenly markets have, historically, recovered. There is plenty of humble pie to go around.
Had Jim Cramer followed the advice in my book, he might have avoided making a fool of himself recommending stocks that burned to the ground, urging viewers to sell at the bottom, and no doubt costing his fans their wealth and sanity. Read the sad tale in New York Times.
In 2008, Fortune Magazine rated AIG one of its 10 top stocks. Today? AIG is a ward of the state and its stock has fallen over 90%. In April of the same year, Forbes magazine declared "Merrill in is in fine shape." By September, Merrill was in such bad shape, it had to sell out to Bank of America. In April, Business Week declared "Don't be wary of Lehman." Today, it's gone. Read here about how the media got it ALL wrong.
During the worst banking crisis since the 1930s, when 9,000 banks failed, nervous depositors are overlooking the bank that even the Great Depression couldn’t put out of business--mutual whole life insurance.
Many people would sleep better and be in better financial shape if they remembered the lessons their grandparents learned the hard way. The one financial institution that withstood the economic collapse of the Depression was life insurance.
Those who held what is called “participating” or “mutual” whole life policies, which dominated until the 1970s, had essentially stashed money in their own bank. Policyholders can borrow against the cash value of accumulated premium payments, and the cash value earns untaxed income.Mutual whole life policies have historically earned more than taxable bank CDs, and carry ironclad guarantees: your cash value and the death benefit is secure.
People like to save and hate to borrow. They don’t realize that when you save in a bank, you’re lending it money that it lends to others to make a profit for its shareholders. When you borrow from the bank, the interest you pay is the bank’s profit.
Two of the most confusing words in the financial services industry that cause people to make mistakes that can cost them millions over their lifetimes are “saving” and “loan.” These two words have different meanings when used by these two different financial institutions. People think it’s a cost when they pay their whole life premium, when actually they’re saving cash in historically one of the safest places there is. Then, you can borrow those premiums at will from ‘The Bank of You,’ and when you repay the loan, you’re paying it to yourself. Meanwhile any unborrowed premiums continue to earn untaxed income.
But people get hung up on the idea that they are incurring debt, even when they’re borrowing their own premiums. It’s one of the most difficult ideas to get people to understand and embrace, even though the Greatest Generation understood and benefited from it for decades.
The most influential economist you never heard of, Nouriel Roubini, was featured in a major New York Times piece yesterday that I urge everyone to read. Roubini, who predicted just about all the elements of our current financial mess, says we're facing the worst recession since the Great Depression.
It would be so much easier to plan for retirement if you knew when you were going to die. You can’t know, but that shouldn’t stop you from asking: At what age do I think I'm going to die? Your answer can help you achieve success in your retirement planning. I’ve been asking clients this question for years because I’ve discovered that encouraging people to ponder the imponderable can trigger life-changing conversations that help them make better financial choices.
There is a taboo in American culture about posing a question few people feel comfortable answering. Death is such an anxiety-producing subject that even otherwise sophisticated people with large estates avoid writing or updating their wills, often with disastrous results.
I begin working with clients by asking them to write their full name and the age at which they guess they will die. Then I ask them to write down the five things they wish they had been known for, had accomplished, had achieved, or been doing in the year before they died.
This exercise is often sobering, provoking people into converting secret fears into action so that the financial planning process can be geared toward making sure those five important things happen before they die.
Your state of mind is the hidden element in planning your retirement finances. If you have a lot of relatives and friends who died early, you may have internalized that you will die early too and make poor financial choices believing your time is short. But if you reach age 65 healthy and broke, you may become so despondent you’ll end up fulfilling your prophecy.
Those worried about living to be a hundred and running out of money should have a plan that comes as close as possible to guaranteeing they won’t end up impoverished. Then they can enjoy their retirement with peace of mind.
People should be thinking less about how much money they think they’ll need to live on and focus instead on exploring how their financial lives can help them achieve more of what they value with greater certainty.
