Waste Not, Want Not

The proverb, “Waste not, want not,” suggests that if you use a commodity or resource carefully, you will never be in need.

As a nation, we’ve seriously enhanced our efforts in the “reduce, reuse, recycle” department over the past 20 years, but we still have a ways to go in some aspects.

[CLICK HERE to read the article, “Everything you ever wanted to know about recycling,” from Marketplace.org, July 6, 2015.]

[CLICK HERE to read the article, “Recycling Industry Created Its Own Mess,” from BloombergView, July 9, 2015.]

Time and money are wasted most when people work at cross purposes and have competing intentions. This is evident in spending at all levels, from the budgets of individual people all the way up to the billions spent by the federal government.

Even attempts to save can ultimately lead to waste. When a department hasn’t spent its allotted budget, it might stock up on things like ancillary office supplies or furniture because if the full budget isn’t spent, the unused amount may be cut the following year.

This is similar to what we sometimes do in our own homes. We might track expenses and successfully reduce our utility or grocery bills, then reward ourselves with a more expensive vacation or splurge on holiday gifts. Perhaps that’s OK if we are saving for that specific purpose, but if the goal of reducing expenses is to save more for college or retirement, then we’re working at cross purposes.

Some waste tactics are specifically deployed for longer-term objectives, but others times we act without forethought or a plan. That’s why professional financial guidance is so important — to keep us mindful of our spending and savings habits and focus on financial goals.

Excessive spending in the U.S. isn’t just limited to consumers. In his most recent “Waste Report,” Representative Steve Russell (R-Okla.) identified 10 wasteful government projects that cost taxpayers approximately $4.2 billion, ranging from “a wacky theater troupe in San Francisco to military helicopters purchased from Russia.”

[CLICK HERE to read the report, “Waste Watch,” from Rusell.House.gov, July 2015.]

Nowhere are competing interests more evident than in Congress. In the summer of 2015 alone, 77 bills were passed in the House and 36 were passed in the Senate, but only 27 of those were signed into law.

When Republicans sponsor a bill, Democrats will often sponsor similar legislation with just a few alterations, and vice versa. This political jostling may benefit one party or the other in the end, but taxpayers are left to pay the excess money it takes to drive two or more similar bills through the legislative system.

[CLICK HERE to read the article, “Congress’s Summer Session — A Recap,” from GovTrak.us, Aug. 18, 2015.]

[CLICK HERE to read the article, “American economy blues: Everything you need to worry about,” from Fortune, Aug. 20, 2015.]

There’s only so much we can do about how the federal government allocates its time and money, but getting the most out of your personal finances is in your control. Call us if you ever have questions about managing your money.

The End of the Material World?

In the 1980s, Madonna sang about being a material girl living in a material world.

Following the economic slump of the 1970s, the ’80s came to be known as “The Decade of Excess,” featuring a sustained period of low unemployment and strong economic growth. It was an era of big hair, big shoulder pads and big spenders.

[CLICK HERE to read the article, “Back to the Future: U.S. Economy In 1985 versus 2015,” from ValueWalk, Jan. 8, 2015.]

[CLICK HERE to read the article, “The US economy isn’t having a ’90s flashback, it’s having an ’80s flashback … and it’s totally rad,” from Quartz, Jan. 6, 2015.]

But recently, there’s been a shift toward more conservative spending — not surprising after the multi-year recession followed by slow economic recovery. Every generation has its reasons for increased frugality.

  • Seniors living longer and wary of outliving their savings.
  • Baby boomers wondering if they’ve saved enough for their own retirement.
  • Increased college tuition and health care spending preventing Generation X from enjoying the traditional growth pattern of “trading up” in houses and lifestyle.
  • Millennials saddled with student debt and a long period of high unemployment.

[CLICK HERE to read the article, “Why millennials and the Depression-era generation are more similar than you think,” from Fortune, April 29, 2015.]

[CLICK HERE to read the article, “The Challenges of the Aging Industry,” from the American Society on Aging, Aug. 13, 2015.]

As your financial professional, we’re here to help you address concerns like these so you don’t have to wonder where you stand financially now and in the future.

Regardless of your position, everyone’s always looking to save a penny or two. But doing so doesn’t mean you have to hole up in your house and cancel your upcoming trips. In fact, it’s quite the opposite.

The past 10 years have spawned an abundance of studies revealing that it’s experiences, not possessions, that bring enduring happiness. In fact, the anticipation of buying something appears to be more satisfying than the actual ownership, and experiential purchases like trips, concerts and movies tend to be more gratifying than material purchases.

That’s not to say people necessarily are spending less money, simply that a shift in what they buy — experiences versus material goods — can lead to greater fulfillment.

[CLICK HERE to read the article, “Buy Experiences, Not Things,” from The Atlantic, Oct. 7, 2014.]

[CLICK HERE to read the article, “Stores Suffer From a Shift of Behavior in Buyers,” from The New York Times, Aug. 13, 2015.]

In July 2015, data released by the Commerce Department demonstrated that Americans are indeed spending more money on things that at least enhance their daily life experiences. This included dining out more, renovating their homes and spending money on sports equipment and beauty aids.

These consumer items may not take up space in our homes, but they do serve to enhance the way we feel about ourselves. And that’s no small thing.

The same can be said for saving more for your retirement. The money you put away isn’t tangible — it won’t be sitting on your mantel or parked in your driveway. But it can definitely make you feel better about the investment you’re making in your future, and provide a sense of confidence that no manner of clothes or electronics can replicate.

We’re here to help you create that sense of well-being and confidence. Call us for a guiding hand.

Gaining Interest in the U.S. Economy

The Federal Reserve doesn’t just raise interest rates on a whim.

While a steady economy and improving unemployment rates have many convinced a rate hike is in order for the United States, there is plenty of reason for the Fed to play it safe before issuing an increase.

Some say low interest rates have helped stimulate recent economic growth by making money cheap to borrow. Companies invest more in their operations, and consumers buy more houses, cars and other large-ticket items.

However, others argue, the more people buy, the more manufacturers believe they can charge, and this can lead to inflation. The Fed tries to pre-empt this from happening by raising interest rates to slow inflation and keep supply and demand in check.

There are positives and negatives to an interest rate increase, and how it affects you depends on your financial situation.

[CLICK HERE to read the article, “September Is Looking Likelier for Fed’s First Rate Increase,” from The New York Times, July 29, 2015.]

[CLICK HERE to read the article, “Jobs report supports a Fed rate hike in September,” from MarketWatch, Aug. 7, 2015.]

One positive of interest rate adjustments is the prevention of artificially cheap capital that might be enticing at the present moment, but doesn’t necessarily increase productivity, and can stunt long-term growth. At least one industry analyst contends that raising rates is necessary to curb excessive borrowing and the allocation of capital into less productive ventures.

[CLICK HERE to read the article, “Rates Must Rise to Avert Next Crisis,” from Guggenheim Partners, July 17, 2015.]

[CLICK HERE to read the article, “Janet Yellen’s Dashboard,” from Hutchins Center on Fiscal & Monetary Policy at Brookings, Aug. 7, 2015.]

A change in the direction of interest rates is likely to impact us all in various ways and to various degrees — affecting everything from mortgages and car loans to credit card debt, investments and savings accounts.

One area of the U.S. economy that has been on the decline, even with low interest rates, is homeownership. The percentage of people who own homes is approaching historic lows, currently at its lowest point since 1967.

The hardest hit demographic is Generation X, which was in a prime position for a first-time home purchase, or to trade-up after having children, when the real estate market crashed. Now, homeownership rates among gen-Xers (ages 35-54) have fallen further than any other age group. Compared to same-aged households 20 years ago, they are 4 to 5 percentage points lower.

[CLICK HERE to read the article, “U.S. Homeownership Drops to its Lowest Level Since 1967,” from Time, July 28, 2015.]

[CLICK HERE to read the report, “The State of the Nation’s Housing: 2015,” from Joint Center for Housing Studies of Harvard University, 2015.]

As evidenced with the surprisingly low homeowner statistics, predicting interest rate and the economy’s effects on the nation as a whole can be difficult. But, as always, our focus is on your individual financial situation. If we can help you understand your financial future, and how the current interest rate environment applies to you, please give us a call.

The Shame Game: How Much Does Peer Pressure Motivate Us?

The globalized age of the Internet has deepened an already uncomfortable fact of human society: shame. Classroom bullying has migrated to text and social media. Business reputation is more Yelp or Angie’s List than word of mouth. But how much does the power of public shame actually affect our behavior?

There is dissent over how much peer pressure can motivate, and, of course, this can include pressures over retirement preparations. In one study, nearly a third of respondents said they made positive financial decisions based on how they felt about falling behind their peers in savings and salary. However, in another study, the same kind of peer pressure demoralized participants. It had the opposite effect; learning they were so far behind the curve made respondents less likely to sign up to participate in their company’s retirement savings plan.

Thankfully, we don’t worry about “keeping up with the Joneses” when we help people craft their retirement income strategies. After all, the success of your planning will be judged against your goals, your expectations and your lifestyle, not anyone else’s. Contact us if you would like our guidance in helping you get on the right track for financial confidence.

[CLICK HERE to read the article, “How peer pressure can help you save for retirement,” from Bloomberg, June 9, 2015.]

[CLICK HERE to listen to the report, “Why Peer Pressure Doesn’t Add Up To Retirement Savings,” from NPR, July 31, 2015.]

So, amid the tools available for manipulating behavior, whether that of an individual, company, sector, country or global initiative, how effective is “naming and shaming”?

At least one customer-service poll indicates, at least at the corporate level, it isn’t terribly effective. In an age when companies known for superior customer service can be few and far between, some companies are better known for their poor customer service than for their products or services. It should be no surprise, then, which companies made this year’s “Customer Service Hall of Shame” in a recent poll by 24/7 Wall St., which was dominated by representation in the cable/satellite and banking sectors. Several of the companies on this list are repeat offenders; some for seven years running.

The fact they don’t improve customer service despite suffering from such a bad reputation begs the question: Does shaming EVER work?

[CLICK HERE to read the article, “Customer Service Hall of Shame,” from Yahoo Finance, July 31, 2015.]

The authors of “Shame and the Motivation to Change the Self” (Emotion, December 2014) would argue it does. They maintain the human experience of shame is associated with a motivation to change, and that it can be a positive factor of personal growth.

For instance, peer pressure can make us more charitable. A study published in The Economic Journal revealed that when asked to give to a charity, donors would investigate others’ past donations to help them determine how much to give. Their contributions had more to do with “keeping up with the Joneses” than how they felt about the charity’s mission. The study concluded large donations served to put pressure on other donors, who were then driven to display their own wealth via similar donated amounts.

[CLICK HERE to read the article, “Shame and Motivation to Change,” from Psychology Today, Jan. 29, 2015.]

[CLICK HERE to read the article, “This Little-Known Tactic Gets People to Donate to Online Fundraisers: Peer Pressure,” from Huffington Post, June 18, 2015.]

Certainly, when it comes to traditional, interpersonal shame (the kind that existed even in the nostalgic days pre-Internet), it continues to be a powerful tool of society. In small villages in a Himalayan valley where people rely on each other to share, cutting off your neighbor’s access to water and power can result in being cast out. Perpetrators are not just cut off from access to the resources they denied their neighbor. The other villagers stop speaking to the offenders altogether. The very power of this shaming tactic is what keeps inhabitants alive and thriving in these hardship areas.

[CLICK HERE to read the article, “The Power of Peer Pressure,” from Slate.com, March 25, 2015.]

Growth: A Product of Planning and Sharing

We all want the magic key to growth. From growing our personal wealth to business growth to national ross domestic product, Americans are obsessed with figuring out the perfect growth formula.

Unfortunately, the reality is there is no magic solution for any of these areas. Numerous factors interplay to contribute to growth, adding up to be advantageous, disadvantageous or neutral.

When considering the best options for growing personal wealth for retirement, one of the biggest factors is planning. While a minority of individuals plan even 10 to 15 years ahead of retirement, studies show planning can make the difference in whether you have enough income in retirement. Those who plan ahead tend to have double or triple the wealth of those who do not.

The concerns of planning for your retirement income are particularly key for several reasons, not the least of which is that centenarians (the population over age 100) are the fastest-growing age group as we are living longer than ever. Additionally, it’s more expensive to retire than it used to be, making the amount of funds you can accumulate for a longer retirement more important than ever. You don’t have to stumble through these kinds of obstacles alone, though. If we can help you put together a retirement funding strategy — or review one you already have in place — please give us a call.

[CLICK HERE to read the article, “How Financial Ignorance Can Ruin Retirement,” from Forbes, July 15, 2015.]

[CLICK HERE to read the article, “A Retirement Age of 100? It’s Coming,” from The Wall Street Journal, Feb. 9, 2015.]

Beyond growth of our personal resources, Americans want to see strong industrial growth. This kind of growth has traditionally been motivated by innovations, spurred by competitors who tried to build on the success of their peers. In the 1990s and early 2000s as globalization peaked, proprietary information trickled through each industry by way of supply chains, as companies saw what others were doing and shared that information with the others they supplied.

However, company growth and productivity in recent decades has been negatively impacted by the trend of proprietary intellectual capital. Also known as “excludability,” the phenomenon is defined as the degree to which a company can prevent competitors from learning its secrets. In recent years, we’ve seen a dramatic increase in patents and other legal maneuvering that thwarts the free flow of ideas. Now, in many cases, sharing information protected as intellectual property is against the law. The net result? Less sharing and less industry growth, according to a study by the Organization for Economic Co-operation and Development.

[CLICK HERE to read the article, “The Secret to a Great Economy,” from BloombergView, July 31, 2015.]

To contrast the slow of industrial growth and productivity, we see sharing as a contributory theme in metropolitan growth. Larger cities (more than 300,000 people) in the U.S. have recovered faster from the economic downturn than smaller ones, according to a new report from the National League of Cities. The report cited an increase in new business start-ups, business expansions and a more robust retail sector as reasons for this organic growth. In other words, the more customers out and about sharing the wealth, the faster these places saw businesses, employment opportunities and general economic recovery signs grow.

[CLICK HERE to read the article, “Economic recovery felt most in big cities,” from The Hill, July 31, 2015.]

Our obsession with growth prompted the Bureau of Economic Analysis to publish a new measurement for it in July. Called the “gross domestic output,” or GDO, the measurement averages gross domestic product (GDP) and gross domestic income (GDI). In theory, the GDP and GDI measure the same thing: the total value of the economy’s output. However, GDP tracks expenditures on final goods and services produced in the United States, whereas GDI tracks the income that those who produce those goods actually receive.

As you ponder national economic growth and how it may affect your personal planning for retirement, a recent report has revealed one of the best ways for a layperson to measure the growth of GDP. Because the transportation sector is the fourth-largest U.S. industry sector (behind housing, food and health care), the number of semitrailers on the road roughly correlates to the number of goods sold and shipped in the U.S. Basically, the more semitrailers you see, the better the GDP is doing. So perhaps the next time you find yourself frustrated at sharing the road with a big rig, perhaps it will help to think about it as sharing the road with national growth.

[CLICK HERE to read the brief, “A Better Measure of Economic Growth: Growth Domestic Output (GDO),” from WhiteHouse.gov, July 2015.]

[CLICK HERE to read the article, “The Trucking Industry Is Delivering Good News for the Economy,” from Time, July 30, 2015.]