Overpaid And Useless: A Profession That Needs To Go Away

Weather forecasters get a pretty bad rap for their accuracy.

However, this post isn’t about ripping on weather forecasters.  In fact, quite the opposite.  I bring them up so that I can compare them to another group of individuals whose profession  should really be brought into question.

You see, meteorologists often get blamed whenever a forecast is wrong.  If it rains on a day when sun was predicted, they get called out for a ruined picnic or day at the beach.  Clouds instead of the predicted sun can put a big damper on an outdoor activity.  The list goes on.

As I’ve gotten more interested in weather and looking at things, I’ve actually become a lot more tolerant of meteorologists.  If you look at what they do, it’s in fact pretty amazing that they get it right as often as they do.   They look at weather as it stands, then look at things that are happening hundreds, if not thousands, of miles away, and make predictions on what’s going to happen hours, and even days, down the road.  There are many things that can change, each with potential impact on what actually happens.  If you’re on the East coast and reading this, consider that your forecast for what’s supposed to happen is based on weather that hasn’t even hit land all the way across the continent.

Read moreOverpaid And Useless: A Profession That Needs To Go Away

The 501c3: What You Need To Know About The Nonprofit

If you wish to start an organization that will be both operated and organized exclusively for a scientific, religious, educational, charitable or public safety purpose, then you may qualify for the 501c3 designation. But how do you go about starting your own non-profit entity?

Establishing your non-profit corporation begins with the completion of an Article of Incorporation. Many non-profit companies operate as corporations, and for many reasons. But incorporation isn’t all that it takes to be an official non-profit.

Tax Exemption

Following the application for incorporation, a company must then go to the IRS for tax exemption status and obtain Form 1023, which is 28 pages in length.  Given the number of documents that the IRS requires be attached to this form, a company applying for non-profit status can very well end up with a package to submit that is as high as 50 pages. But why is there so much to be filled out, and so many documents to attach?

Read moreThe 501c3: What You Need To Know About The Nonprofit

Taking the Risk Out of Trading

Many people believe that being financial independent and in control means that you have to play it safe and not take any risks. However, this can mean that your money will remain safe without ever accruing much wealth. With banks accounts offering little or no real interest nowadays, it is impossible to get rich putting your savings into a bank account. Investing might seem like the better option although it is fraught with risk and, as such, many people are put off. Here are our top tips to take the risk out of trading and investing:

Plan, Plan, Plan

You can never be too careful when you’re investing your own money. There are so many different guides available on investing and trading that you can take advantage of for free. The more you can plan and learn, the lower the level of risk that you are taking. Once you’ve learned the basics, you can begin to look at trading strategies and trading styles. There really is a wealth of material available and, the more you read, the more educated your decisions will become, eliminating much of the risk involved.

Read moreTaking the Risk Out of Trading

What’s New This Week? (Plus A Roundup)

A few updates and random thoughts, followed by some great posts I hope you check out:

  • A few weeks ago I wrote about how our IT department is being insourced.  We have received a few more details.  Our official offer letters should be arriving any day now.  They were promised by the 15th, so if that still holds, I’ll know what’s what in a week.  We did find out that our years of service will be credited from when we started, so I’ll come in with six years of service.  This means I’ll get roughly the same amount of time off as I do today, and has a few implications for benefits and such.  There is a lot of nervousness that they’ll be coming in offering less pay than we make today.  I think that’s just normal jitters, and I’m staying optimistic that it’ll be the same or better as what I am getting today.
  • Did you hear about the Walmart glitch on Wednesday where the website had prices mb-201311mistakeof various items at outrageously low prices?  I sure did.  I found a 55″ TV for $329, and while it was sold out online, it said that my local store had one.  Which, when I called, they confirmed that they did.  But, they were already aware by that point that the prices were a mistake (they had $800 treadmills ringing up for $33, computer monitors for $9, and new release video games for $17), and were not honoring those prices.  I read a few forums where people said they got in and picked up stuff right away, so it sounds like a lucky few were able to take advantage of the glitch, but sadly, we did not find an easy way to replace our damaged TV.
  • As a Ford stockholder, I’m a little annoyed at the activity on the stock.  Ford beat earnings a couple of weeks ago, and hit over $18 per share.  Since then it’s been on a somewhat steady decline, around the mid-$16 range, all on virtually no news.  I think institutional investors want a dividend increase, and are passively letting Ford know that they need to increase the payout.  Hopefully the stock reverses course soon!

Read moreWhat’s New This Week? (Plus A Roundup)

Two Seconds And Why High Frequency Trading Always Wins

Two seconds.  It probably took the average reader two seconds to read this.  Not much can happen in two seconds, right?

Wrong.

It turns out that two seconds can make all the difference in the world in the financial markets.  Enough to make (or lose) a fortune, as it turns out.

Read moreTwo Seconds And Why High Frequency Trading Always Wins

Is It Time To Switch To Roth IRA Contributions

Currently, I contribute all of my retirement contributions via my employer’s 401(k) plan.  I don’t quite max it out yet, though I’m working toward that goal.  However, I’m giving serious consideration to ceasing contributions, and instead contributing to my Roth IRA instead.  Here are a few considerations:

No Match

Right now, my employer doesn’t match anything, so there’s no discernable benefit to contributing even a penny to that plan as far as that goes.  They did a nice match for awhile, but cut it at the height of the recession, and all signs point to a continuation of the ‘no match’ policy.

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Why Higher Interest Rates Will Not Lead To Recession

It’s amazing all the panic I see when reading the news pertaining to higher interest rates.  Mortgage rates have gone up about 0.5% in the last few months, and stock markets have lately been hit by fears that the Fed will not only taper off Quantitative Easing, but will eventually raise the discount rate, which is pretty much the standard rate that many lending activities are based from.

The naysayers proclaim things like:

“Higher mortgage rates are going to kill the housing market recovery.”
“Higher interest rates will pop the housing bubble.”
“Higher lending costs will lead to recession.”

I’m sure you get the point.

Personally, I’m not buying it.

Demand fell.  Let’s look back to the reason that rates fell to the point where they did?  It was the economy.  Basically, companies and people stopped borrowing as the housing bubble popped, people were losing their jobs, and wealth was disappearing in the stock market crash.  All of that meant that credit was simply not in demand, which by the economic laws of supply and demand meant that rates had nowhere to go but down.

Read moreWhy Higher Interest Rates Will Not Lead To Recession

Why The Stock Market Is Not In A Bubble

The big news in the financial sector these days is, of course, the stock market.  With year to date returns already over 15% (and counting), many out there are jumping in and proclaiming that the stock market is in a bubble and proclaiming that the bubble will burst.

I’m not buying it.

Or selling it, I guess would be the right term 🙂

Many of those who think we’re in a bubble use some combination of the following arguments to state their case:

  • The big run in the stock market has taken all opportunity away
  • Unemployment is not falling fast enough
  • Corporate profits are leveling off
  • Europe and Japan are in a recession
  • Our mounting national debt

Here’s my take on each of these.

Read moreWhy The Stock Market Is Not In A Bubble

The True Test Of The Stock Market Lies Ahead

Last week, the Dow Jones industrial average broke through all time highs.  The Dow hit highs in October 2007, but pretty much fell apart after that, spending the next several months in free-fall before beginning a slow recovery that’s taken the last few years to complete.

So, the first thing to keep in mind, is that while a new record is nice, it basically means that the last five years were a wash.  In other words, don’t pop the bubbly just yet.

Good media

Breaking a record always makes for good news.  Whether it was Michael Phelps breaking all the swimming records ever in the Olympics a few years ago, or the chase for the home run record on several different occasions, a ‘new record’ is always something the media loves to latch on to.

Read moreThe True Test Of The Stock Market Lies Ahead

Reviewing Our 2012 Financial Goals

I wanted to take a look back at the financial goals that we had set for 2012 and review how each of the areas that I had targeted actually performed.  The way I handle our financial spreadsheet, the net worth review that we do toward the beginning of the month is how the year is closed out, so even though there’s still some time left in the year, we can give an accurate look at our goals based on how things shaped up with the most recent review.

Here is a summary of each goal as well as how things actually turned out:

  1. Home value increases by 1% – The housing market had begun to show signs of stability at the beginning of the year, but it now looks like an actual recovery is taking place.  The formula which I use to calculate the value of our house takes into account a number of considerations, including Zillow’s reported value, comparable houses sold in our neighborhood and surrounding subdivisions, and a couple of other factors.  I’m happy to report that, based on these calculations, the value of our home went up by 5.7%.  There’s still quite a ways to go before we even reach the point of having it worth what we paid for it, but it’s still a great step in the right direction.  Achieved!
  2. Auto value decrease of 13% – Auto values had been holding relatively steady over the recent years, mostly as a result of an increased demand for cheaper, reliable used cars.  Now that the auto industry is steadily increasing sales and the age of the average car increases, the value of used cars has begun a more rapid decline.  Ours actually went down only by about 8% simply because the decline I forecasted didn’t really start until about mid-year (at least according to Kelley Blue Book, which is my estimating tool for our two cars).  Better than expected!
  3. A 25-30% growth in our investment account – I have a few stocks which I believed were ripe for big gains.  Unfortunately, they didn’t do as well as expected and we only realized about a 6% gain here.  It’s still better than nothing but not what I had hoped for.  Fail!
  4. A 15% increase in our cash holdings – We did OK here, seeing an increase of about 12%.  (Our cash holdings allowed us to pay for items and costs that came up, but if cash is not readily available there are options for quick loans that can get you through in a jam)  I had hoped our side income would be a little higher with various things that we do to earn money on the side, but while it was good, it was slightly less than expected.  Fail! 
  5. A fifteen to twenty percent increase in our retirement balance – This one was right on target and I’m happy to say it was toward the high end, as our retirement account balance increased by 19%.  Achieved!
  6. A five to six percent decrease in our mortgage balance – We did not apply any extra to our mortgage payments this year, but the 15-year 3.375% re-finance we got ourselves into last year helped us pay off 5.3% of the balance.  Achieved!
  7. An eleven to twelve percent decrease in our student loan balance – Again, we made minimum payments (thanks for nothing, employer who still hasn’t given out any raises) but this allowed us to pay off 11.3% of the outstanding balance we have for student loans.  Achieved!
  8. An overall net worth increase of 22% – If I were to have hit on all of the targets above, the end number would have resulted in a 22% net worth increase.  As it was, we hit on five and missed on two.  That’s the bad news.  The good news is that the ones we hit on had a bigger impact than the ones we missed on, namely hitting the high end of our retirement saving goal, and the value of our home going up by a few more percent than I had estimated.  With this we saw a net worth increase of 25%.  Achieved!

Read moreReviewing Our 2012 Financial Goals