My first Father’s Day without my father

A person who probably had a significant impact on your financial attitudes and outlook is your father.  If he was a part of your life, your dad likely played a major role in molding your views of the world, including finances.  He may have taught you directly or perhaps you learned indirectly, by following his example.

Just as with family values, financial values tend to be passed along. Dads have an inherent knack for teaching the importance of money, how to save it and how to spend it. 

For example, at one time or another, most of us heard our father say, “We can’t afford it.”  Whether it was the hard truth or just a teaching moment, it helped us learn the value of money.
   
Many fathers of the World War II generation never attended college.  But how many stories have you heard about dads who worked countless hours in order to save money to send their sons or daughters to college.  No sacrifice was too great for them to provide their children with the education they never had.

Think about it.  During the course of growing up, wasn’t it your dad’s views on money and finances that helped mold yours?  As a financial advisor, I believe the father’s role in teaching the kids finances is seldom discussed.  But it should be.

I was blessed with a dad that played a huge role in my life.  And I feel fortunate just for that, let alone all he taught me.  My father recently passed away, but I continue to carry his wisdom with me every day.

I know the world has changed significantly since my formative years. I’m aware the traditional role of the father has diminished.  But now that my father is gone, it’s become apparent to me that a positive father’s role is more important now than ever, and not just for teaching pocketbook issues.

Don’t misunderstand. I’m not diminishing the importance of other influences in life, particularly mothers, teachers and peers.  But sometimes I think society does minimize the importance of being a good father.

Keeping it personal, I’ve reached the stage in life where I’m attending a lot of weddings, most recently those of my niece and middle son.  It’s very rewarding to see young adults launch their lives together.

Yet I have little doubt that these young adults will have to deal with important financial issues in the years ahead.  There will be a lot of questions.  They may be about purchasing a first home, or refinancing a mortgage, or perhaps about establishing a child’s college fund or saving for retirement.  But there most certainly will be questions.

I’m hopeful that they’ll turn to dad to help with the answers, and equally hopeful that every dad out there can be as helpful to your kids as your dad was for you.

I may be biased, but I believe a good father can and should help his children with a lot of issues, including financially related ones.

I miss my father, and I will never forget him.  I urge everyone to take a moment, in thought or in person,  to thank your dad for all he’s done for you.  And I wish every dad a Happy Father’s Day.

Are you a part of this dangerous trend?

It wasn’t that many years ago that it seemed like every time you heard a radio advertisement it was about refinancing your home.  The idea, of course, was to get a lower interest rate and put your home equity to work.                                                                                                  

On many occasions in this column, I cautioned readers about the potential danger of this strategy.  I warned that using your home as a piggy bank for vacations, college savings and home remodeling could ultimately be a huge mistake. 
                                                                        
It wasn’t uncommon for people to refinance their home more than once, often putting as much as $10,000 or $20,000 in their pockets each time they did so.  After all, home values would continue to appreciate and you might as well get some benefit from your home equity.                                                              

By now, we all know how that strategy collapsed when home values plummeted during the recession of 2008.  Many homeowners found themselves upside down, meaning they owed more on their homes than they could ever possibly sell for in a depressed market.       Consequently, many families lost their homes when their paychecks were reduced or eliminated.  The recession was a difficult period for a lot of families.  And the problems were often exacerbated because of the large debt on the homeowners’ shoulders.              

So, for many, using their home as a piggybank was every bit as dangerous as I had warned.

Unfortunately, recent studies indicate that history is repeating itself, but with a slightly different flavor.  This time, instead of using their home equity as a piggy bank, studies are showing that far too many families are using their retirement savings.                                         

So, once again, I would like to put out the caution sign.

Pulling dollars out of your retirement nest egg today is just as risky as refinancing your home was a few years ago.  The long-term result is very likely to be a future financial disaster.

If you’ve read the rules of your retirement program, you’re aware that reaching the age of 59½ is significant.  With Individual Retirement Accounts, and 401(k) retirement programs, there’s a ten percent government penalty for withdrawals made prior to that magic age.

I was recently stunned by something I read in the well-respected Bloomberg News.  In 2011, the IRS collected an incredible $5.7 billion in penalties as a result of early withdrawals from 401(k) programs.     

Let me do the math for you.  That means $57 billion were taken out of retirement programs prior to the recipients’ retirement.  Clearly, the piggy bank mentality has moved from home equity to retirement programs.

As a financial advisor, I can’t emphasize enough that this strategy is dangerous.  Retirement programs are not intended to be piggy banks.

This trend is a major concern.  In an era when pensions are few and far between, and at a time when the current Social Security trustees express concern about the future of the program, people need to save more of their own money for retirement.

I’m pleased that a large segment of our population is setting dollars aside for retirement.  But I’m concerned that many are not keeping the dollars set aside for their retirement years.

This is an extremely dangerous trend and I strongly encourage my readers not to tap their retirement nest egg until they are truly retired.

Time is your friend; put it to work

Many people around our great state are thrilled that summer has finally arrived. Though it’s not official for a few weeks, evidence is everywhere. Joggers and bicyclists are out on the trails and paths. Ball players and golfers are swinging away in the warm weather. Boats are suddenly appearing on the water and outdoor music festivals are underway at the various venues throughout the area.

Before you know it, we will be talking about the Woodward Dream Cruise and then, just like that, summer will be winding down and everyone will be looking forward to football season.

I mention all this because time has a way of getting away from us. I believe we’ve all heard the expressions, “You’re wasting my time” and “Time is money.” There are a lot of things money can buy, but time is definitely not one of them. But even though we aren’t able to buy time, most of us can improve how we manage it. That’s significant because money management and time management go hand in hand.

People often ask me when they should start saving for their retirement. The fact is, it’s never too early, especially since time has a way of simply getting away from us.

For example, setting taxes aside and using a purely hypothetical growth rate of 6 percent, lets take a look at what could happen with two individuals, both aged 21.

Suppose one begins saving $100 per month. The other delays saving for 10 years and doesn’t begin saving until age 31. In other words, one has a 10-year head start.

Remarkably, the one who began saving at age 21 has nearly double the amount in his nest egg at age 65 than his buddy who waited 10 years. In other words, the disciplined one who began saving at age 21 used time to his advantage.

Mathematicians, economists, financial advisers and bankers all know the amazing value of compound interest. They understand how time tends to enhance the value of money.

The bond market can illustrate another example. A 10-year bond these days would pay you somewhere in the neighborhood of 2.5 percent. But if you could commit your investment to a 30-year bond, you’d get around 3 percent. That may not sound like much, but the difference is substantial.

There’s no such thing as saving too soon or too little. No matter the amount, if you can save on a regular basis, you will be rewarded. And the sooner you start, the sooner you can reap the benefits of two great allies. Compound interest and time.

Remember, time cannot be bought or replaced. Once it’s gone, it’s gone forever.

As life expectancies increase, it’s a challenge to make certain that your income lasts as long as you do. That’s why it’s so critical to do everything in your power to grow a sizeable nest egg. And a good path to achieving that goal is to start early, stay on course and manage prudently.

The earlier you start saving, the more you’re using time as an ally. Seasons go fast, so enjoy them to the fullest. Because once they’re gone, they’re gone forever. No amount of money can bring back time; but time can help you enjoy many more seasons as you go through life.

Veterans fought for you; let’s fight for them

For the first time in a number of years, I recently traveled outside of the United States. As much as I enjoyed my brief trip, I was nonetheless thrilled to return and once again walk on American soil. Being gone for just a few days really opened my eyes as to how truly fortunate we all are to live in this country.

As a nation, we certainly have our share of problems and issues. But at the end of the day, in my humble opinion, it’s still the best place to live in the world. And much of what we tend to take for granted was paid for with the lives of members of our great military.

Lately, there have been numerous reports that the Veterans Administration is not delivering the care that our nation’s veterans need and deserve. It appears to me that the problems have very little to do with a lack of funding. Instead, I believe it’s the layers and layers of bureaucracy that military personnel and their families have to wrestle with before they can even get an appointment, let alone receive the appropriate care.

Pondering this situation got me to thinking about the military from a financial perspective; specifically benefits. Established in 1930, the purpose of the U.S. Department of Veterans Affairs is to provide patient care and federal benefits to veterans and their dependents.

A noble objective, but the Department of Veterans Affairs is, after all, a bureaucracy. The good news is that they have a toll free number: 800-827-1000. I mention this because I sense that many families don’t realize that their aging loved ones may be eligible for supplemental benefits.

For example, a low-income widow of a WWII veteran whose late husband served at least 90 days of active duty could be eligible for a pension as high as $625 per month. To qualify, he or she had to have served at least one of those days during a period of war.

In other words, if you have a veteran friend or loved one who needs care, I urge you to buckle up and begin going through the Veterans Administration forms. Even if you believe there is only a remote possibility they are eligible for benefits. You have nothing to lose and, potentially, much to gain.

The other financial aspect of war I’d like to mention is the cost. Wars are far more expensive than you might think. For example, most history books show the cost of the war in Viet Nam as $140 billion. However, many believe when factoring in benefits to Veterans and their survivors, the true cost exceeds $350 billion.

I recently came across an article that said there is still one survivor from the Civil War receiving benefits. From the Spanish American War of 1898, there are 16 people receiving benefits, and more than 4,000 from World War I.

I say good for them and thanks to everyone that served in all of our country’s wars. I’d also like to remind family members to make certain veterans receive all the care and benefits they deserve. As much as I disdain bureaucracy, fighting bureaucratic red tape is a small price to pay to help veterans and their families receive everything to which they are entitled.

Newly wed means new challenges to face

The warm weather has finally arrived.  Once again, baseball and soccer fields will be surrounded by mini vans filled with youngsters eager to participate with their teammates.         

Spring is also the time when young adults get dressed up to attend their high school’s prom, followed by the pomp and circumstance of high school graduation.

Then comes college, and four years later, an auditorium or stadium full of young adults eager to go out and face the world.  As they sit there and listen to the encouraging and inspirational words of their commencement speaker, they’re hopeful that they can live up to his or her words.

Unfortunately, it may not be easy.  Because the road they must travel is going to be far different from the road my generation and I had to navigate.  Things have changed dramatically over the last few decades, and they will continue to do so.

Take my journey, for example. I no longer have a minivan.  I no longer receive phone calls asking me if I’m willing to chaperone for a high school event or field trip.  And, thankfully, I am finished writing checks for college tuition.  As spring turns into summer, I am officially at that stage of life that I like to call professional wedding attendee.

For the past few years, it seems like I was at a wedding reception almost every weekend.  Today, I’m excited to share with my readers that the next wedding I will be attending is one that my wife and I are hosting. My middle son is tying the knot with a lovely young lady.

From a financial perspective, as with so many other things in life, the cost of getting married is far more than I had imagined.  But, that’s not really surprising.

Looking back, every big-ticket item along my life’s journey cost more than I thought.  Who ever dreamed a new car would cost more than $20,000 or that it would be common for a new home to exceed $200,000?  Who ever imagined that someone could graduate from college with a burden of student loan debts of more than $100,000?

But the reality is everything in the world today is expensive.  A question that I frequently like to ask at our retirement education programs is, “Who paid more for their last car than they paid for the first house?”  Not surprisingly, there ‘s a chuckle and a lot of hands are raised indicating that that is indeed accurate.

Today, all adults tying the knot are facing incredible financial hurdles in their future.  It’s an expensive world that I believe will become even more expensive in the years ahead.  Not only will they face rising costs for big-ticket items, like housing and education, but I believe other significant burdens are also being put onto the shoulders of our young adults.

For example, there’s been a steady shift from corporate retirement programs to individual saving accounts.  More and more of the cost of health care has shifted onto the family.  And, of course, it seems like Uncle Sam’s insatiable appetite for taxes has no limits.

It’s exciting to see all these young couples getting married.  I hope they realize just how expensive their journey together will be.

And that they plan accordingly for what’s to come.

When the going gets tough, talk to Mom

Over the course of a lifetime, we all face various challenges. In the recent economic meltdown that our nation has slowly been crawling out of, we lost an incredible 8.8 million jobs.

This resulted in economic mayhem and personal stress in households throughout the nation. Many mortgage payments went unpaid. And as they lost their jobs or were forced to retire sooner than expected, many felt that the deck was stacked against them. The fact that millions of others were out of the job market was little consolation.

Prior to the recession, the participation rate was already declining due to such factors as globalization, technological advances and changing demographics. As the recession hit, the loss of jobs accelerated.

Only now have we reached the point of recovering the jobs that were lost during the great recession. But we still need significantly more jobs to get the economy to the point where we can say it’s humming along.

But right now, stagnant is a better description of the economy. Our GDP is currently growing at the anemic rate of less than 2.5 percent. The average age of cars on the road is a shocking 12 years. Many experts have referred to this as a jobless recovery.

Why can’t the economy seem to gain any traction? There are many reasons. Without getting too political, reckless government spending and constant Washington bickering play a large role.

Unfortunately, we still have plenty to worry about. Last year, the major sources of economic worry were internal issues like the debt ceiling and budget deal. Now the concern seems to be geopolitical with the possible re-emergence of the Cold War.

I bring these things up because, once again, investors need iron stomachs to climb the wall of worry. Emotions need to be kept on the sidelines. For most investors, in spite of all the worries and concerns, the last two years were pretty rewarding. I have no crystal ball, but I remain optimistic about the future.

I was recently at a conference with some of the best and brightest financial and economic experts you could ever meet. But the one person I most enjoyed hearing was not in the personal finance business. Rather, it was a former athlete now in the entertainment business.

Yes, I had the good fortune to meet former Super Bowl quarterback Terry Bradshaw, now an NFL analyst. Obviously, winning multiple Super Bowls brings a certain amount of fame. But as he pointed out, enjoying the journey and staying on top is the key. Even though he was a famous athlete, like households everywhere, he had severe issues and setbacks, including financial. But his desire to rebound both mentally and financially is what impressed me the most.

As is usually the case, it was his parents who provided constant support throughout all the ups and downs. He described himself as a mama’s boy. And why not? It seems that no matter how many ups and downs we have in life, whether it’s in sports, business or our personal lives, the support and unconditional love we receive from our moms is a given.

I would like to thank my mom and all the mothers everywhere who stand by their sons regardless of life’s circumstances. Simply stated, Happy Mother’s Day.

Want to keep up with technology? Ask your grandkids

Over the years I have been very fortunate to meet and pick the brains of some of the best and brightest financial advisers, economists and financial analysts from all over our country.

I was recently at an educational workshop listening to and taking notes from various presenters. While they may have disagreed on various investment and economic projections, they all agreed emphatically that the world is changing. And I was astonished to realize how rapidly it’s changing.

One speaker pointed out that this is the first time in American history that the elderly are looking to the youth for information. I am a perfect example in that when a son or daughter-in-law comes to visit, it seems I’m constantly asking them to resolve or fix a technical issue on a phone or a computer.

The point is that, while it may be a technological issue for me, it’s basic knowledge for the youth of our nation. For example, my wife recently reminded me that while she was visiting our grandkids, our almost 3-year-old grandson asked her if she brought her iPad. What is often a puzzle for adults is the norm for the youth.

One presenter, Scott Klososky, mentioned that in today’s world telephones are not really phones. He actually referred to them as outboard brains, and I have to admit, I think he’s right on the money.

We’re entering an era where people are trying to find the balance between humanity and technology. Picture a family of four sitting at the dinner table, each of them staring at their smart phones and not interacting with one another. That is a scene that’s out of balance.

On the other hand, a family not utilizing technology is likely to have difficulty climbing the economic ladder. Finding the right blend between the use of technology and social skills is a challenge that lies ahead for many.

Technology is changing the landscape throughout the entire world. In years past, cities and malls were full of record stores. Technology companies like Apple changed the way we purchase and play our music. Kindles and iPads changed the way we read books. These technologies are great, but there are losers as well. Consider the demise of Borders Books and the recent closings of several Barnes & Noble stores.

I’d like to remind readers that just 14 years ago Kodak had one of its most profitable years. At the time, they had many patents in hand for the upcoming change in technology. Unfortunately, they didn’t make adjustments fast enough and went through bankruptcy. Kodak was not alone. There are numerous firms that no longer exist, primarily because they failed to utilize technology. But all is not doom and gloom because technological upstarts such as Facebook and Instagram have taken their place. These companies not only know how to embrace technology, but also how to touch the human side of us all.

Clearly, the world is changing at the speed of light. What people my age need to learn and embrace is simply what the younger generations already know. It’s the norm for them.

Although some companies may lose, I believe technology will ultimately improve our lifestyles and the way we function every day. And, of course, new technology will offer numerous investment opportunities.