Daily Memphian Articles - Rays of Wisdom

Daily Memphian Articles/Rays of Wisdom

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Rays of Wisdom: Top investing strategies

Daily Memphian


Ray’s Take: According to an article in Millennial Money, Americans spend over $70 billion each year on lottery tickets. The average U.S. household spends over $800 a year on these tickets to fantasyland. The article explained that if these people had invested their $800 into the Vanguard Total Stock Market Index Fund for a 10-year period, they would have over $13,000 to call their own. But instead, they find themselves poorer.

Many people avoid investing because they think it’s too complicated or they are just too afraid to lose money. But there are simple strategies that I recommend to get you started that don’t involve scratch-off tickets to bankruptcy.

When it comes to investing, fear and greed are your worst enemies. Too many people get caught up in investment noise and end up making poor choices driven by emotions. If it sounds too good to be true, it probably is. If your friend tells you he made a killing by investing in the hottest new trend, you probably won’t.

Your greatest investing allies are confidence and strategy. You’ll need a plan, a budget, a timeline and patience. I strongly suggest working with an experienced financial adviser on your investment strategy. If you’re not yet ready to hire a professional, then do your research. Please don’t feed into the latest “get rich” schemes being pitched to you by your friends and the media.

My next suggestion is to make an investment allocation that can get you where you want to go and stick to it. Allocation is the key to avoiding fear and greed as it forces you to stick to a discipline. The temptation to deviate can be powerful. Stocks are hard to face in a bear market. Cash and bonds are equally hard to face as bull markets rage.

Last, be sure to keep an emergency fund. Cash helps you avoid making desperate choices at market extremes. You don’t want to be in the position of having to sell low or borrow money for reasonably predictable events. It’s also important to be aware there are “financial advisers” out there selling products, not to help you earn, but to help them earn. Write down the word “fiduciary” and be certain that anyone offering you financial advice is one.

When done with careful thought and sound strategy, investing can be very enjoyable and profitable. Enjoy every sunset and happy investing.

Dana’s Take: Would you consider jumping out of a plane to be fun? If so, you may be a risk-seeker. If jumping out of a plane sounds like a nightmare, you may be risk-averse. Risk tolerance also drives our financial choices.

Most of us could use an independent financial adviser to help us offset our natural financial tendencies. Risk-seekers need help distributing risk more broadly, while the risk-averse seek help balancing safer investments with market risk.

Reflect on your level of risk tolerance and how it’s affecting your financial choices. Consider using an independent adviser to help you achieve a balance between your needs for risk and security.



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Generous giving and your taxes

Generous giving and your taxes

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New Job Can Present Opportunity For More Benefits Than Just Salary

Ray’s Take: Google employees have access to free food, a bowling alley, bocce courts and a fleet of electric cars to drive during work hours. Campbell Soup Company has onsite childcare and kindergarten. Cisco Systems gives employees free acupuncture. L’Oreal employees get access to nap pods.

While most companies aren’t able to offer these fancy benefits and perks to their employees, there are many important legal and financial aspects to consider when offered a new job and asked to sign an employment contract. Contract negotiations can be difficult and stressful. Many times high-level executives use an experienced employment law attorney to assist them in reviewing these documents. You may not be looking for a job at that level yet, but the market is getting tighter shifting more negotiating strength to potential employees.

In addition to the usual salary and benefits, take time to understand your equity grant benefits. Some questions to ask are, “Is the grant tax-advantaged incentive stock options, non-qualified stock options, stock appreciation rights or restricted stock units?” “What is the vesting period for the equity grant?” “If stock options are granted, what is the exercise price?”

If going to a company where acquisitions could be possible, ask about a “Golden Parachute.” These are benefits guaranteed to you in the event you are fired as a result of a takeover of the company. If this happens, are you entitled to terminate employment and receive the golden parachute payment?

You will also want to consider certain liability protection coverage within the scope of your job. Does the company have Directors’ and Officers’ (“D&O”) insurance coverage?

One last thought as the jobs markets further tighten, there’s more to life than cash and benefits. You’ll be spending at least a third of your time working. Now may be the time to negotiate for quality of life. After all, this is not a dress rehearsal.

It’s always a good idea to get help from an experienced attorney when reviewing an employment contract.

Dana’s Take: For parents taking a break from work and recently-retired adults, it’s a tough call whether to re-enter the job market or not. Benefits can tip the scales toward work.

A non-employed spouse may return to work when a self-employed spouse needs family healthcare coverage. Consider part-time work that provides healthcare. A part-time Apple Store employee once told me how shocked he was to receive healthcare benefits. It’s rare but possible.

If a company contributes to retirement savings or matches employee savings, this could be incentive to get back in the saddle. For the recently-retired, re-entering the workforce could also mean delaying tapping into Social Security savings for a bigger paycheck later.

Whether it’s for the employee discounts or a safety cushion of savings, jumping back in the workplace can pay off now and later.

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Should You Lease or Own a Car?

Ray’s Take: According to the Lease Market Report by Edmunds.com, lease volume has doubled in the U.S. in the last five years and the automotive market is on the verge of a fundamental shift in consumer behavior about the value of owning a new vehicle – particularly when the purchase has to be financed.

Deciding whether to lease or buy a car is a personal decision that is usually based on how many miles you drive per year, your credit history and lifestyle.

Leasing is a good option for those who want a low monthly payment, prefer to have a new car every few years and want to avoid repair costs.

Keep in mind that you must have excellent credit to lease and when you do, a portion of the car’s depreciation and financing costs can be deducted on your taxes if you use the car for business purposes.

But leasing can be tricky. Ignoring the fine print can cost you dearly, like early termination penalties, excess wear fees and other hidden costs. Make sure you are clear on the financial commitment you are about to make by getting a detailed written estimate from the dealership with all fees, including monthly payments, down payment, title and registration and delivery charges. Add your insurance cost to that to see the big financial picture.

I recently suggested that a client go a year on Uber rather than buying or leasing. When we did the math at the end of the year, she was better off and loved not having to deal with parking! Transportation is changing. Buying and owning a car was a significant part of the American culture for a long time, but this may soon go the way of the landline.

On a recent family vacation to Chattanooga my son and I took an Uber to Rock City while Dana and our daughter used the car for a show in another city. All went well until I opened the Uber app to go back to the hotel. Nothing. No cars available – at any price. We got a taxi – and I still own a car – for now.

Dana’s Take: I know folks who have leased cars and have not enjoyed or repeated the experience. The additional charges for bumps and scratches were just too annoying and costly.

Searching for a gently used car is one money-smart option. My college friend and I have been looking at electric cars, so we were green with envy when a colleague scored a 2-year-old electric car with only 11,000 miles for about a fourth of the cost of that luxury model new. We will keep looking for a deal like that.

Whether buying new, used or leasing, choose a car plan that fits into your financial goals.

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