Category: MoneyCrashers

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Should You Use a Financial Planner or an Investment Adviser?

couple-meeting-financial-advisor-916x516From 1998 to 2013, the number of Fortune 500 companies offering pensions to their employees fell from 60% to 24%, according to The Washington Post. With the decline of unionism and loss of employee bargaining power, corporate managements have aggressively replaced pensions with profit-sharing plans, essentially transferring the risk of retirement planning and investment management to their employees. It is possible that the Social Security program will be similarly transformed, making retirees responsible for investing funds through private accounts. However, the truth is that few people are prepared to manage their own retirement funds – as Howard Gold writes in MarketWatch, “Most investors have no idea of what they’re doing.”
 
In the last half-century, the financial markets have become increasingly complex with new products, new markets, and changing tax laws. Technology makes it possible for investors to remain informed 24-7 about events that may affect their stock positions and to enter trades from the comfort of their home. At the same time, they must compete with robo-trading programs that react to news and market activity faster than any human can. As a consequence, according to Rosalind Resnick writing in Entrepreneur, even people capable of managing their own capital should carefully consider whether a go-it-alone approach to investing makes sense.
 
Whether due to a lack of training, interest, or time, many individuals are turning to professional advisors to help them navigate the perilous waters of personal finance. In some cases, advice covers the entire spectrum of financial services, ranging from budgeting, to creating specialized trusts and estate plans. In others, the consultant’s primary responsibility is limited to a specific need, such as managing a portfolio of investments or developing effective tax strategies.
 
Seeking and finding the perfect advisor is not always easy, especially in an industry filled with confusing acronyms. According to the Financial Industry Regulatory Authority (FINRA), there were more than 160 different professional designations. In addition, terms such as financial analyst, financial advisor, financial consultant, and wealth manager are generic titles and can be used by anyone without registering with securities regulators or meeting educational or experience qualifications. To add further confusion, many consultants add multiple titles and designations to their resumes, making it difficult to determine which services they actually provide.

Do You Need Financial Planning Advice or Portfolio Management Services?

While the terms “financial planning” and “investment advice” are often used interchangeably, they refer to different skill sets. As a consequence, two of the more popular designations – certified financial planner (CFP) and registered investment advisor (RIA) – are regulated under different authorities.
 
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3 Reasons to Attend a Foreign University

college-women-abroad-918x516According to USA Today, the number of U.S. undergraduates studying abroad was almost 290,000 in 2014. In fact, approximately 9% of U.S. undergraduates study abroad at some point. Attending a foreign university can be a life-changing and valuable experience for a number of reasons, not the least of which include developing a better understanding of different cultures and improved communication skills.
 
Recognizing these and other benefits, numerous American presidents have promoted the value of foreign education exchange programs:
 
– President Dwight D. Eisenhower advised on January 27, 1958, that “the exchange of students should be greatly expanded. Information and education are powerful forces in support of peace. Just as war begins in the minds of men, so does peace.”
 
– More than 25 years later in May 1982, President Ronald Reagan said, “There is a flickering light in us all which can light the rest of our lives, elevating our ideals, deepening our tolerance, and sharpening our appetite for knowledge about the rest of the world. Educational and cultural exchanges provide a perfect opportunity for this spark to grow.”
 
– In a joint press conference with Russian President Boris Yeltsin on April 4, 1993, President Bill Clinton confirmed the importance of student exchange programs: “No one who has lived through the second half of the 20th century could possibly be blind to the enormous impact of exchange programs on the future of the countries.”
 
– President Barack Obama has announced two programs – “100,000 Strong” in 2010 and “100,000 Strong in the Americas” in 2011 – to bolster the number of U.S. students studying in China and Latin America, respectively. Speaking about the importance of studying abroad, First Lady Michelle Obama said, “The fact is, with every friendship you make, and every bond of trust you establish, you are shaping the image of America projected to the rest of the world. That is so important. So when you study abroad, you’re actually making America stronger.”

Reasons to Study Abroad

1. Better Employment Opportunities

According to For Dummies, studying abroad enhances your chances for post-graduate employment because employers want “employees with an international knowledge base, as well as foreign language skills.” This finding was reinforced by other studies:
 
– A study published in Frontiers: The Interdisciplinary Journal of Study Abroad suggests that employers with international business place significant value on studying abroad – the longer, the better in programs that feature service learning or internships.
 
– The QS Global Employer Survey Report 2011 indicates that almost half of employers in the U.S. actively seek or value international study experience when recruiting.
 
– A 2012 survey by IES Abroad of recent graduates who had overseas study experience indicates that 89% got a job within six months of graduation, almost half while they were still in school – and earned $7,000 more on average in starting salaries. By contrast, only 49% of college graduates found jobs within a year.
 
Conversely, one study reported on by NAFSA found that very few employers specifically recruit candidates with an overseas educational experience unless cross-cultural skills are required. In other words, companies whose interest is limited to the geographical U.S. are less likely to appreciate the foreign experience. Choice of majors remains the single greatest determinant of employer interest.
 
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10 Best U.S. Cities to Live Without a Car

biketoworkAccording to the 2015 edition of AAA’s Your Driving Costs, the average annual cost to own and operate a vehicle in the U.S. is $8,698. This includes fuel, maintenance, tires, auto insurance, license and registration fees, taxes, depreciation and finance charges – but not the cost of vehicle storage or parking your car at a meter.
 
Even a small sedan like a Honda Civic or Ford Focus can set you back $7,606 annually, while a large vehicle like a Ford Explorer or a Jeep Grand Cherokee has a yearly expense of $11,931. The cost of owning and operating a single car can exceed the monthly food costs for a family of four, while operating two cars in a family can generate costs greater than the average mortgage payment in the United States.

Benefits of Car-Free Living

Aside from the considerable monetary savings of being automobile-free, there are many other advantages:

Less Environmental Pollution

According to the U.S. Environmental Protection Agency, operating automobiles is the single greatest cause of air pollution. Pollution results from the combustion process and spills hydrocarbons, nitrogen oxides, carbon monoxide, and carbon dioxide. According to the EPA, carbon dioxide is considered the primary greenhouse gas contributor to recent climate change. Automobiles are also major causes of of smog and acid rain.

Increased Personal Safety

According to U.S. Census data, there are approximately 11 million automobile accidents each year. The National Highway Traffic Safety Administration states that this results in more than 30,000 deaths, 2.3 million injuries, and, according to a separate report by the NHTSA, an almost $1 trillion cost of productivity and loss of life. Living without a car dramatically reduces the likelihood of death or injury related to cars, as pedestrian deaths are far more unlikely than those of car drivers or passengers.

Better Health

Without an automobile, people increase the time and distance they walk each day when commuting to and from work or when shopping. Health authorities from the American Heart Association to the Arthritis Foundation recommend daily walking as the key to long-term health. The benefits can include weight loss, longer life, better sleep, and reduced Alzheimer’s risk.

Less Stress

MIT’s Sensible City Lab and automaker Audi did a study on driving and learned that stress levels for driving in city traffic and skydiving from an airplane for the first time were about the same. Karl Greco, one of the project leaders, claims, “Certain driving situations can be one of the most stressful activities in our lives.”
 
A 2014 article in TIME magazine noted several studies about drivers who commute more than 10 miles each way to work and the deleterious effects upon their mental and physical health. John Casada, a psychiatrist who specializes in anger issues, says, “Sitting in traffic all boxed up in your car, running late and feeling powerless to improve your situation, is a perfect recipe for stress… As our society spends more time commuting amid more and more traffic, it’s no surprise that rates of aggressive driving and road rage are on the rise as well.”
 
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The Billionaires – Are they different from you and me?

billionaire1In 1916, John D. Rockefeller, the father of the petroleum industry, became the world’s first billionaire. Nearly a century later in 2015, there were 536 American billionaires of a total 1,826 billionaires worldwide, according to Forbes. That number may in fact be low – the Wealth-X and UBS Billionaire Census estimates there were 2,325 billionaires globally in 2014, including 609 Americans.
 
Identifying those who are billionaires from those who have significant wealth can be difficult, since many are reticent about publicly discussing details of their wealth. Also, for many, growing personal wealth is not a goal, but the byproduct of their business activities. In his book “Trump: The Art of the Deal,” Donald Trump, the real estate mogul ranked at number 405 on the Forbes 2015 list, explains that money was never a big motivation for him, except as a way to keep score. “The real excitement is playing the game,” he states.
 
According to the U.S. Census Bureau, in 1916, Rockefeller was the only billionaire of the approximately 102 million people in the United States. Today, there are 320 million people in America with a billionaire for every 600,000 residents. Assuming that the number of U.S. billionaires will continue to increase at its historic rate of 6.49% annually, there will be more than 4,800 American billionaires by 2050, or one billionaire for every 91,000 people of the projected 439 million total U.S. population. Dreams of becoming a billionaire may not be as far-fetched as once believed.

What Is a Billionaire?

Simply stated, a billionaire is a person who has a net worth of $1 billion or more. In other words, if you can sell all of your assets for cash, pay off your debts, and have $1 billion remaining in the bank afterward, you are a billionaire. Having $1 billion in assets with debts of $900 million doesn’t make you a billionaire, although you and your family are unlikely to worry about future college expenses or retirement.
 
A billion dollars, like all large numbers, can be difficult to comprehend. For example, counting to $1 billion at the rate of a one dollar bill per second would be a lifetime career for three men working a standard 40-hour work week. If you hired them at age 21, they would complete the task more than 44 years later, assuming they worked eight hours every day without taking a single sick day. The counted $1 bills would fill a building the size of a football field to a height of 8.3 feet and weigh more than 1,100 tons.
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