Monday, September 28, 2015

Are you sure you can’t afford insurance?

Almost everyone knows someone who’s paying back a student loan. According to, the national student debt total recently surpassed $1.3 trillion. That sounds like a powder keg that could rattle the economy the way the housing market collapse and mortgage crisis did seven years ago.

The presidents of Oakland University and Eastern Michigan University were recently summoned to Lansing to explain large tuition increases. 8.48 percent and 7.8 percent respectively. I believe one of the hot topics of the upcoming election will be the exorbitant cost of higher education and the enormous student debt load that young adults are forced to carry.

I don’t pretend to have a quick-fix solution for the student loan crisis. But I am seriously concerned that it will create an unfortunate domino effect.

When young adults finally complete school, they have to start repaying their student loans. Unless they’re living in their parents’ basement, they also have housing costs. And regardless of where they live, there are car payments and all the other monthly bills that go along with becoming an adult.

Many are also getting married and starting families, so they have significant financial obligations in addition to school loans. And even though it’s another expense, as an adviser, I think it’s very important for a young family to have life insurance.

Sadly, it’s one of the most overlooked aspects of financial planning. Many young people feel invincible and give no thought to life insurance. Nothing bad is ever going to happen to them.

True, some do have insurance through their employer, but in today’s world people frequently change jobs and there can be gaps without coverage.

That’s why I believe it’s vital to actually own your life insurance rather than rely on your employer. Young people, especially those starting a family, need to make certain their loved ones are protected and loans are repaid in the event of a life ending tragedy, especially if there are children involved.

September is Life Insurance Awareness Month and I want to make certain that young adults take note. Life is all about choices. For example, do you really need the newest version of your favorite cell phone the very day it’s released? Is the fastest Internet speed worth paying a higher price? Do you really need a $3 dollar cup of coffee every day?

People need to make financial choices all the time. Unfortunately, too many of them make poor financial decisions or simply fail to look at reality. The difference with young adults is that they often have staggering student loan obligations in addition to everything else.

On the local news, you often see or hear about a fundraiser to help a family after a tragic loss. It’s nice to see so many big-hearted people willing to help them pay bills or perhaps fund a young child’s future education.

But responsibility comes with financial obligations, and if you signed for a loan or have children to house and educate in the years ahead, you owe it to your family to review your life insurance and find a way to include the cost in your budget.

Unaffordable? Consider a little budget juggling to free up enough money to cover insurance premiums. You’ll not only be buying life insurance, but also the comfort of knowing you have additional protection for the future.

Tuesday, September 22, 2015

If you enjoy your work, it’s not a job

Over the Labor Day weekend, a frequent comment I heard from friends and family was, “Where did the summer go?” During the long winter months everyone looks ahead with anticipation to the unofficial start of summer, Memorial Day.

Then the July 4th holiday sneaks up on us and in the blink of an eye it’s Labor Day. It seems like summer comes and goes in about the time it takes to walk the five miles across the Mackinac Bridge.

The purpose of Labor Day, of course, is to salute the American workforce. And my, how the workforce has changed since President Cleveland signed the law enacting Labor Day in 1894.

According to the Department of Labor, there were nearly 18 million American workers in unions in 1983. In 2014 the number of union members had fallen to just over 14.5 million.

As with so many things in our society, people tend to have very strong opinions one way or another about unions. As the auto unions are about to begin contract negotiations we’ll be hearing plenty of passionate opinions, both pro- and anti-union.

I believe that, regardless of union status, American workers are essentially dedicated and hardworking. That being said, I wonder just how many Americans like or enjoy their work.

Without question, the makeup of the workforce and the nature of many jobs in our nation have changed dramatically over the years. Rosie the Riveter during World War II began the influx women into the workforce.

More recently, service sector jobs and technology have dramatically changed the atmosphere and character of a typical workday. In other words, there are no typical workers or typical jobs.

Since Labor Day is the unofficial end of summer and the beginning of the school year, I encourage students to study with the objective of graduating with more than just a job. Work toward finding a field that is rewarding both financially and emotionally.

Find something you’re passionate about and that you’ll love doing day after day. I have encountered many people who are counting the days until they can retire and do something they’ll truly enjoy.

I was recently talking to a retired auto executive client who is passionate about his Corvettes and Corvette Club activities. He was surprised to learn I grew up in an automotive family and my high school and college job was buffing out automobiles.

It was great experience. I liked it, the money was decent and I learned a thing or two. But it was just a job, not a career. Not something I would want to do for 30 or 40 years.

I’ve been extremely fortunate for many years. As a financial adviser, I’m just as enthusiastic about my career as my client is with his Corvette Club. In other words, my work is my passion.

Life, like summer, is over much too soon. If you can find an enjoyable career to make a living, great! A workday does not have to be dull or boring.

Labor Day is an American tradition and a well-earned day off. People get up and go to work every day. As you study and prepare for the workforce, try to do everything you can to put yourself in a position where your work is your passion.

Tuesday, September 15, 2015

Even the military needs help maneuvering through retirement

Over the past few years, I’ve had the good fortune of attending a couple of educational seminars, each of which featured a former Navy Seal as a guest speaker.

One was Marcus Luttrell, the lone survivor of Operation Red Wings and co-author of the book “Lone Survivor.” The other was Robert O’Neill, who was not only part of the operation that rescued Captain Phillips, but also the final assault on the compound where Osama Bin Laden was killed.

Both men shared some truly fascinating stories about their rigorous training and military experiences. At the end of the day, it strengthened my opinion that our nation’s military has some incredible men and women serving our country.

Recently, within a short span of time, I heard from a cousin who is a retired Army officer and I also drove past a military convoy near the National Guard base near Grayling.

It made me realize that, although I work with many people who served in the military, only a small handful actually made the military their career. And just as with so many other occupations, the financial dynamics of a military career appear to be changing.

I’ve previously written that traditional pensions known as defined benefit programs are becoming extinct. The auto industry, state government, educators and most municipalities have eliminated traditional pensions for new hires.

It appears that the military is also going to significantly alter their retirement program, in an attempt to save $1 billion annually.

If approved by Congress, the new program will be a “blended” plan.

It will shrink the traditional pension amounts by roughly 20 percent and implement a mandatory contribution. However, for the first time, those that do not make the military a lifelong career — in other words serve for less than 20 years — will receive some retirement benefits.

If the Pentagon’s recommendations are enacted, the 20 percent reduction in military pensions will be offset by government contributions into a program similar to a 401(k) or IRA. The program is called the Thrift Savings Plan (TSP.)

Within the TSP, Uncle Sam will automatically contribute one percent of basic pay. Military personnel will also have three percent of their pay automatically withheld and deposited into the TSP. The similarity I referred to is that there will be a ten percent penalty if the money is withdrawn prior to age 59.5.

Participants in the plan can opt out of having their three percent withheld if they complete financial literacy training. The greatest benefit of the TSP is for military personnel with more than four years of service. Uncle Sam will match their contribution into the TSP dollar for dollar, for up to five percent of pay.

If all goes as planned, the new military retirement program will go into effect in January 2018. More than likely, there will be a grandfather clause for long-term military personnel to continue with the traditional pension or opt into the new TSP.

Naturally, as these changes move through Congress, I’ll keep my readers posted. Like so many things in our nation’s culture, it is becoming more complex even for military personnel. From private to general, military personnel also need financial advisers to sort through their situation, goals and strategies.

Tuesday, September 8, 2015

The splash heard ’round the world

Thanks to the Internet, we’re living in a world where information travels around the globe at lightning speed.  I recently wrote that when a rock falls into a pond halfway around the globe, we tend to feel the ripples here in the states.

Shortly thereafter, as most of us are aware, an economic boulder fell in China.  It wasn’t just a ripple in the pond; it was an enormous tidal wave.  And no one can say for certain when the onslaught of waves will stop hammering our shores.

Such financial turmoil makes it easy for your emotions to overtake your mind, allow panic to set in, and abandon your investment strategies.

My experience suggests that’s not such a good idea.  Rarely do emotional, panic-driven moves result in a positive outcome.  That’s not only true in the investment arena but also in many matters of life.   

I have written on numerous occasions that investors need an iron stomach to get through difficult times.  What we are now going through is a prime example.  If there’s one word I’d use to describe what we are in the midst of, it’s “extreme.”

I say extreme because we’re seeing investment values plummet one minute and then skyrocket just a few hours later.  These are not insignificant daily changes.  They’re extreme. 

The collapsing Chinese economy ignited a worldwide financial crisis and the European and U.S. markets have been swinging wildly as a result.

Unlike an amusement park, these are rides that can lead to stress.  A recent report estimated that the average 401(k) was down $3,000 in just one day.  In other words, if someone decided to take their money out of the market now, they would be exiting with a substantial loss.

So, how do you not cut your losses and run?  As I’ve written many times, you need to have an iron will and keep your emotions at bay.  When the markets are on a downslope, it’s probably not the time to make major modifications and adjustments to your portfolio.

Over the years I have navigated a great number of clients through financial storms.  That includes the traumatic one-day, twenty percent drop in 1987.  Often, when people panic over pocketbook issues the end result is negative.  I’ve seen it many times.

If you’re nervous or unsure about your portfolio, schedule a meeting with your financial advisor.  Granted, financial advisors don’t have a crystal ball, but reviewing your strategies might remind you why you diversified and selected your investment strategy in the first place.  It might also help push aside your inclination to panic.

Naturally, I can’t see into the future either.  That being said, however, I’m still fairly optimistic that there are sunny skies on the horizon.

Our domestic economy may not be growing at lightning speed, but it is growing.  Once again, you can hear the sounds of construction.  Vehicles are moving out of showrooms.  You need reservations to get into many restaurants.  And businesses are tepidly optimistic.

I believe the focus is shifting from China, the world’s second largest economy, back to our economy.  We have the opportunity to take the baton and lead the world’s economy out of the doldrums.  When this happens, the value of investment portfolios will bounce back and continue to move upward.