What Your Children Should Know About Money

financial growth concept. plant in coins over whiteWhat Your Children Should Know About Money

A recent T Rowe Price survey shows that 71% of parents are reluctant to talk with their kids about money. As I have always said, if we don’t teach our kids about money, the world will. That should place a spirit of urgency into every parent who wants nothing more than their kids to view money through the lens of prudent stewardship and not the lens of the materialism and consumerism.

When I come across a good resource, I want to share it. Kiplinger Magazine’s Personal Financial Editor Janet Bodnar came on the show yesterday to talk about her article “10 Things Every Kid Should Know About Money By Age 18” – I would encourage you to read it. These are great tips.

The one thing that struck me that I myself overlook are teaching moments. I think we avoid talking about money because of a presumed time commitment. It is the notion that we have to sit down and have an intentional talk with our kids. Then we battle with the question – When are we going to squeeze that in?

When in fact, everyday you have small teaching moments where you can teach something about money.  For instance, when you tithe, incorporate your kids into the process. When you go to the grocery store, take your kids along and initiate their help in the process of finding the best deals, using coupons, and effective grocery shopping. There are tons of teaching moments. You just have to be looking for them.

I will say it again (and yes I am saying it to myself). If we aren’t teaching our kids about money, the world will….and there are incredibly messed up worldly beliefs when it comes to money!

Is the 401 K Plan Broken and Should It Be Replaced?

Couple FinanceIs the 401 K Plan Broken and Should It Be Replaced?

Dr. Teresa Ghilarducci is on a mission to make the 401 K plan obsolete. I had the opportunity to interview Dr. Ghilarducci on my radio show. I found her to be a very interesting and delightful person. Her reputation isn’t very flattering.

She has been referred to as the most dangerous woman in the world. It was rumored that she was the person who was pushing the idea of the Government confiscation of 401 K plans. I always thought that it was a rumor and untrue. I have followed her story very closely through the years. In our interview, she confirmed that to be the case. IT was a made up rumor.

She thinks the retirement system is broken. She proposes a mandatory retirement plan that provides guaranteed accounts which acts somewhat like a social security II. Mandatory, guaranteed, government based retirement accounts fits the socialist model which seem to be her leanings.  So once again, it is up to the government to get more involved in our lives.

Is the 401 K plan really broken? Is the retirement system broken? Should the government get involved?

There are several issues I have with Dr. Ghilarducci’s argument.

First, I don’t believe the 401 K plan is broken. I believe the educational system is broken because of the refusal to graduate financially literate students from high school. It is just as important to teach money skills in high schools as it is history. Financial illiteracy is the problem. People don’t understand how to effectively invest and use 401 K plans.

The financial services industry is the next problem. They force feed self serving beliefs on the public insisting that these beliefs are the foundation for how investments work. The reality is those beliefs only make the industry richer and investors more prone to investment mistakes. Investors would see that if they had a good solid education on money.

Second, the reality is that people don’t save for retirement. That is their choice. The government has no business forcing people to save money.

Finally, guaranteed accounts produce marginal returns which is going to produce a paltry benefit. People are going to mistakenly think that this government program is going to cover their retirement.  That will be far from the truth.

I agree that there is a problem. Getting the government involved is not the answer. However, people relying on themselves and getting an education on how money works would go a long way. How about we make that mandatory?

20 Minutes of Guidance – A New Prudent Money Resource

Are You In Need of Financial Guidance – The 20 Minute Conversation – No Cost to A New Prudent Money Resource

There are three main objectives of Prudent Money. First, to challenge what you believe about money and make sure that you develop beliefs that are firmly rooted in your values and not the agendas of others. Second, to help you stay on that road of Prudent Stewardship. Finally, to provide the tool and resources to help as many people as humanly possible make effective financial decisions.

We have the risk survey, the Ask Bob resource, the e-letter, and now the 20 minute conversation. I am reserving time on Fridays from 11:30 AM to 1:30 PM to help point you in the right direction. There are six 20-minute time slots available for you to chose from. The bottom line is that there will be time available so that you can get some detailed direction.

All you have to do is either email Judy Parrish at Judy@prudentmoney.com for a time, call the office -972-386-0384 or text 20talk to 77978 and we will reply back with the available time slots.

A Strategy for Getting into College

collegeA Strategy for Getting into College

I get the opportunity to interview many different authors. Sometimes, I come across a book that I strongly recommend. College is such an investment and you have to approach it differently. Greg Kaplan has written a great book on how to do just that. It is called Earning Admissions.  Here is a link to the podcast and the website is www.earningadmission.com.

In the book he talks about marketing your student and how to go through that process. He explains that the competition is tougher than ever. Over 1,000,000 students from other countries are flooding the markets. What sets your student apart? More importantly, what value do they bring to the college? Can you believe we are asking these questions? Things have really changed.

He talks about how to build the perfect application. He stresses it is about creating a theme and carrying it out through the whole process. I would probably call it branding. It is all the same thing. He takes the reader through a step by step process. The all important SAT and ACT tests are merely a baseline test. He says that there is a massive supply of students with good test scores. What sets your student apart? What should you be doing when your student is a Freshman?

Yes, the game has changed.

I will be facing this process within 3 years or so. Before the interview I dreaded the process. Today I look forward to it. Greg makes you look at the process much differently.

I highly recommend this book! To purchase the book, click here.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

 

Obamacare and the Next President

Healthcare Financial 1Obamacare and the Next President

Obamacare is a hot campaign topic and only on the chopping block if Donald Trump is elected. However, it is unlikely that he is going to be able to do anything about the biggest drawbacks of Obamacare. The problem is the current structure of the plan.

Insurers such as United Health Care are exiting. Blue Cross Blue Shield has dropped the PPO and only offering a horrible HMO. Finally, even Humana is talking about exiting the insurance exchange. This means lower quality of care and choice.

Most importantly, monthly premiums are unsustainable and going to get more and more expensive. The co-pays, deductibles, etc. seems to be getting more expensive along with the rising premiums. A recent study from the Kaiser Family Foundation shows deductibles rose about eight times faster than wages in the past 10 years.

Insurance companies are losing massive amounts of money. Thus, they are either dropping out of Obamacare or raising their premiums excessively. So, this raises a couple of questions about the election.

Will Donald Trump benefit from the Price Increases in November?

Unfortunately for the Democrats, the premium increases will be announced in October right before November’s beginning enrollment period. All of this will be right before the elections. Ever increasing price increases could really motivate voters to vote for change. After all, a Clinton Presidency means 4 or 8 more years of destructive socialistic policy.

If elected, will Donald Trump really repeal Obamacare?

I think that this whole notion of repealing Obamacare is nothing more than a soundbite and campaign fodder. Yes, they can probably change a few things. The problem is that the train has left the station. There are two major problems at stake.

First, you can’t all of the sudden bring back pre-existing conditions and start denying coverage. You can’t go from offering the sick healthcare and then take it away. We are stuck with universal healthcare.

Second, the next problem is with the subsidies. Some say he will take them away. If so, then you will really have a problem because the subsidies barely make it affordable. Without them, it definitely will not make sense and the numbers enrolled in Obamacare will plummet. You can’t even begin to make it work without the numbers.

Sure there are some things that can be changed to make things easier.  However, you can’t remove the two biggest problems with Obamacare.  Once you go there you can’t go back. Republicans have been using that threat as if they really can repeal Obamacare. The reality is that it will take a Republican House and Senate, and a Republican in the White House to create any change. Even then, it will be the same horrible plan with some adjustments to it.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Don’t Make the Same Mistake as Prince

maxresdefaultDon’t Make the Same Mistake as Prince

Before he died, Prince had an estimated estate of $300 million. In addition, he had a whole library of unpublished music and future royalties that has an unknown net worth. Most people who have an estate that large typically have a complex estate plan that minimizes taxes at death and details out how the estate is to be distributed. At the very least, people have a basic will.

Prince had nothing…..no estate plan and not even a simple will.

Now it is up to a judge to figure out and determine who gets what. I am sure that there will be people coming out of the woodworks to get their piece of the estate. It will probably be one big ugly fight.

You probably don’t have an estate problem as complex as Prince. However, everyone has an estate of some type and everyone needs a plan.   This is especially true if you have children. It goes way beyond the assets you might leave if something happened to you and your spouse. Most importantly, it is about the welfare of the kids.

Most parents think that getting a will in place will do the job. The problem is that a will doesn’t completely do the job in the worst case scenario and you always have to plan for the worst case scenario. What if something happened to both spouses leaving the kids without parents? Grant it, the probabilities are very low. However, since probabilities remain, you have to plan for it.

Think of a will as a wish list. You write in the will what you wish to happen for your family hoping that a probate judge agrees. After all, your will has to be approved by a probate judge. Also the probate process leaves your estate open to a challenge from an interested party that disagrees with your wishes.

If you take one additional step, you can eliminate these potential liabilities for your kids. Setting up a trust fixes that problem. AT the risk of making an attorney cringe, think of a will as a wish list and a trust as the final word.

When a trust comes into play, everything transfers to the trust. It becomes a private matter and avoids probate. You appoint ahead of time someone to administer the trust. You can go into detail what you want to happen in the event that the worst case scenario occurs. You can elect guardians. You can dictate how and when you want the money to be distributed and for what reason. Said another way, you can protect the kids from themselves by giving them access when they are more mature to handle it.

This is even a good step to take if you have adult children. I know of too many stories where adult kids would get into fights after the remaining parent has passed. With the trust, you can remove all questions as to where assets are to go.

The process is easy. It takes very little time to set up. A few appointments with an estate planning attorney will get the job done. For the sake of your family, this is one thing you don’t want to neglect to do.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Subscribe to the Prudent Money E-Letter

Subscribe to the Prudent Money E-Letter

Join our mailing list to receive the latest Prudent Money news and helpful advice.

Thank you for subscribing to the Prudent Money E-Letter.

Subscribe to the Prudent Money E-Letter

Subscribe to the Prudent Money E-Letter

Join our mailing list to receive the latest Prudent Money news and helpful advice.

Thank you for subscribing to the Prudent Money E-Letter.

Facebook

Twitter

LinkedId