Sun Current http://current.mnsun.com Local News for Bloomington, Eden Prairie, Edina and Richfield Minnesota Sat, 20 Dec 2014 18:02:14 +0000 en-US hourly 1 Bloomington company acquired in merger http://current.mnsun.com/2014/12/bloomington-company-acquired-in-merger/ http://current.mnsun.com/2014/12/bloomington-company-acquired-in-merger/#comments Sat, 20 Dec 2014 18:02:14 +0000 http://current.mnsun.com/?p=141260 Video Guidance, a Bloomington-based video conferencing company, has merged with London-based BCS Global Networks.

The new company combines the sales and operations of two leaders in visual communications, creating a global enterprise that links BCS Global’s capabilities in Europe and Asia with Video Guidance in North America. Video Guidance will become a wholly-owned subsidiary of BCS and will retain the Video Guidance name and brand in the United States.

BCS Global identified and sought Video Guidance to complement its product and service offerings and to develop greater sales and operations in North America.

“Video Guidance shares our mission of bringing visual communications to every boardroom, desktop and mobile device, and to make visual collaboration an easy-to-use business productivity tool for any enterprise across the globe,” said Clive Sawkins, who will continue to serve as CEO of the merged company.

Michael Werch, president and CEO of Video Guidance, will continue to lead the sales and operations in North America.

BCS Global and Video Guidance are each 15-year-old organizations that have been exclusively committed to video conferencing.

The combined company will have more than 115 employees in offices throughout North America, Europe and Asia.

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Think Mutual Bank partners with community foundation http://current.mnsun.com/2014/12/think-mutual-bank-partners-with-community-foundation/ http://current.mnsun.com/2014/12/think-mutual-bank-partners-with-community-foundation/#comments Sat, 20 Dec 2014 17:54:09 +0000 http://current.mnsun.com/?p=141253 Think Mutual Bank gave a $30,000 grant to the Edina Community Foundation to show its support of the foundation’s people, programs and the community it serves.

“We’re very pleased to have Think Mutual Bank assume this active partnership with us in bringing together to serve, strengthen and celebrate the Edina community. We sincerely thank the bank for its generous support of our Connecting With Kids and Edina Challenge programs, as well as our Fourth of July Parade and services to dozens of nonprofit organizations,” Foundation Executive Director Dick Crockett said.

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Women’s Club annual fundraiser Jan. 9 http://current.mnsun.com/2014/12/womens-club-annual-fundraiser-jan-9/ http://current.mnsun.com/2014/12/womens-club-annual-fundraiser-jan-9/#comments Sat, 20 Dec 2014 17:53:17 +0000 http://current.mnsun.com/?p=141251 The Edina Federated Women’s Club is hosting its 13th Annual Feds Fest Benefit, “Carnivale – Hot! Hot! Hot!”

The benefit takes place the evening of Friday, Jan. 9, 2015, at the Westin Galleria, 3201 Galleria. The event will include dinner, a live auction, silent auction, mystery gifts and entertainment provide by Patty Peterson & Friends.

Tickets are $100 and benefit the Edina Education Fund and Edina Give and Go. This is the second year the event will benefit the two organizations, and the 2014 event raised $40,000 for the two organizations. The event’s fundraising will also benefit the Edina Arts and Culture Commission.

Tickets/info: 612-708-6576 or Info@EdinaFeds.org.

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Robotics team hosts ‘Bots-For-Tots’ toys, hats and mittens drive http://current.mnsun.com/2014/12/robotics-team-hosts-bots-for-tots-toys-hats-and-mittens-drive/ http://current.mnsun.com/2014/12/robotics-team-hosts-bots-for-tots-toys-hats-and-mittens-drive/#comments Sat, 20 Dec 2014 17:35:52 +0000 http://current.mnsun.com/?p=141201 FIRST Tech Challenge Robotics team #6389 will host a “Bots-For-Tots” toys, hats and mittens drive 11 a.m. to 6 p.m. Sunday, Dec. 21, at the JCPenney Court in the Eden Prairie Center, 8251 Flying Cloud Drive.

Donated hats, toys and mittens are being collected for Toys for Tots and People Reaching Out to People (PROP). U.S. Marines will help organize the drive, and the robotics team will run its “Krazy Kubes” robotics game that is made for all ages to play.

Five team members are Eden Prairie High School freshmen, and one is in 8th grade at Central Middle School.  Thus far, the team has donated more than 850 hours of community outreach and has qualified to advance to the Minnesota State FTC Championship Tournament in February 2015.

Info: lazybotts@gmail.com

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Managing the holidays with a loved one who suffers memory loss http://current.mnsun.com/2014/12/managing-the-holidays-with-a-loved-one-who-suffers-memory-loss/ http://current.mnsun.com/2014/12/managing-the-holidays-with-a-loved-one-who-suffers-memory-loss/#comments Sat, 20 Dec 2014 15:30:49 +0000 http://current.mnsun.com/?p=141378 86801105

The holidays are supposed to be a time of joy when families and friends gather to share each other’s company, revisit fond stories of holidays past and make new memories to last a lifetime. But what if a loved one is no longer able to remember the holidays or the family and friends he has spent them with? What if dementia or Alzheimer’s has robbed a parent or grandparent of the ability to make and cherish new memories?

Comfort First knows that caring for someone with dementia is about providing a safe and secure environment, focusing on personalized, supportive care.  Personal preferences could mean specific sleep schedules, picking out a favorite outfit or enjoying a much loved meal prepared for them.  It is really about involving each resident in a variety of meaningful activities and interactions and filling their day with joyful moments.   This type of care is best accomplished in a small, comfortable setting- which is exactly what Comfort First of St Louis Park has to offer.

Comfort First offers some advice to help caregivers and families navigate the holidays:

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Make sure to visit.

Encourage visits, even if your loved one’s memory loss makes visitors uncomfortable. Socialization is important for people with Alzheimer’s or dementia – and for the people who take care of them. Prepare guests for the changes in your loved one, especially if the visitors have not seen him or her in a while.

Tell stories.

Encourage reminiscing and storytelling of favorite holiday memories and traditions. Often, long term memories are the strength of individuals with Alzheimer’s disease or dementia. Telling stories of childhood and early adult life can help them feel engaged and purposeful during visits with families and friends.

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Keep everyone involved.

As much as possible, involve your loved in in preparing food, wrapping gifts and other familiar holiday traditions. Participating in familiar routines and tasks will promote their self-esteem and provide a sense of purpose during this special time.

Plan gatherings in familiar places.

If possible, plan to have family gatherings and activities at home, in surroundings familiar to your memory-impaired loved one. Holiday travel can be stressful for everyone, but it can be especially confusing and upsetting to people with Alzheimer’s or dementia. Receive visitors early in the day when the person is less likely to feel fatigued, and watch for signs that your loved one is tiring – such as irritability, confusion or agitation.

Coordinate outings in advance.

Eating out is possible, but it’s best to make reservations so you can avoid a long wait, and you should check out the menu online before you go to ensure your loved one has dining options. Avoid noisy restaurants or buffets that offer too many options that might confuse your loved one. Dine in smaller, more manageable groups.

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Be aware of surroundings and their impact.

Avoid situations that can cause confusion or frustration for people with memory loss, such as large crowds of people who will expect your loved one to remember them, loud conversations or loud music, unfamiliar surroundings and lighting that is too bright or too dark.

Take care of yourself.

Caring for someone with memory loss is time-consuming and stressful. It’s OK to accept help, especially during the holidays when you may experience physical and emotional exhaustion. If family members want to help, give them specific ideas for how they can aid you.

Comfort First’s Memory Care Community consists of private suites, including chef prepared meals, holistic activity programming and staff specifically trained to meet the needs of those living with dementia.

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How to Fix Social Security http://current.mnsun.com/2014/12/how-to-fix-social-security/ http://current.mnsun.com/2014/12/how-to-fix-social-security/#comments Fri, 19 Dec 2014 20:30:26 +0000 http://current.mnsun.com/?guid=269ba49afa3e8568083bf62dcb1ea55c We often read reports from the Social Security Administration’s reviews of the status of its trust fund and predictions that in 20 years funding will exist to pay 77 cents on the dollar of promised benefits. So far this revelation produces from policymakers no actual steps to fix the system. What can we do to fix Social Security?

As future recipients of benefits, we can take some actions now to reduce reliance on our eventual benefits. This won’t fix the system’s underfunding problem but may help your own situation.

Push for pensions. As workers, we may enjoy more power than we realize to push our employers to consider offering pensions again. A cost tradeoff for the employer compared with costs of other benefits, a pension can still be an attractive tool for employee retention.

Hard but not impossible to implement, as Connecticut recently proved for the state’s municipal workers.

Increase other retirement savings. Maxing out your 401(k) contributions and choosing proper investment diversification are good ways to supplement a dwindling or reduced Social Security benefit. You can also contribute to a Roth individual retirement account (within limits) and make non-deductible contributions to your 401(k) of some significant amounts (I recently wrote about this).

What policy changes might fix Social Security? Congress can take plenty of actions, including the following few that while tough do stand to resolve Social Security’s underfunding more or less permanently.

Eliminate the earnings cap. Currently only a certain amount of your annual earnings incur Social Security tax: $118,500 in 2015, up from $117,000 this year. Earnings above that limit are not subject to the combined 12.4% (employer and employee) Social Security tax.

Eliminating this limit or cap might pump significant additional funds into the Social Security tax revenues annually. Right now this cap covers approximately 83% of all earnings – leaving up to 17% of all earnings untaxed.

Increase the tax rate. The Social Security tax rate noted above comprises 6.2% from your gross pay and 6.2% from your employer. Any increase in this rate improves the trust fund.

Means testing. Folks with significant other sources of retirement income can often get by very well with reduced benefits or even without benefits altogether. After all, this insurance program supposedly provides benefits to retirees who lack means to completely provide for themselves.

You, like many others, may find it frustrating that saving for yourself potentially puts you in a position to receive reduced benefits. To save all of Social Security, that’s the sort of tough decision we as a society must make.

Increase retirement age. In 1983, the retirement age for Social Security rose from 65 to 66 for folks born between 1943 and 1954, and to 67 for folks born in 1960 or later. It’s not out of the question to gradually increase this age another year, to 68 for folks born in 1966 or later.

At the other end of the spectrum, the early retirement age of 62 dates from when the Social Security program began. Changing this age might likely result in some positives for the trust fund – but leaving it the same also sometimes insidiously produces even smaller benefits for folks who file early.

Probably no steps to fix the system will be pleasant: It’s never easy to give up what you think you paid into and earned. Problem is, if we don’t work to repair Social Security we will all certainly give something up, starting with an estimated at 23% of all our benefits.

Follow AdviceIQ on Twitter at @adviceiq.

Jim Blankenship, CFP, EA, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill. He is the author of An IRA Owner’s Manual and A Social Security Owner’s Manual. His blog is Getting Your Financial Ducks In A Row, where he writes regularly about taxes, retirement savings and Social Security.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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We often read reports from the Social Security Administration’s reviews of the status of its trust fund and predictions that in 20 years funding will exist to pay 77 cents on the dollar of promised benefits. So far this revelation produces from policymakers no actual steps to fix the system. What can we do to fix Social Security?

As future recipients of benefits, we can take some actions now to reduce reliance on our eventual benefits. This won’t fix the system’s underfunding problem but may help your own situation.

Push for pensions. As workers, we may enjoy more power than we realize to push our employers to consider offering pensions again. A cost tradeoff for the employer compared with costs of other benefits, a pension can still be an attractive tool for employee retention.

Hard but not impossible to implement, as Connecticut recently proved for the state’s municipal workers.

Increase other retirement savings. Maxing out your 401(k) contributions and choosing proper investment diversification are good ways to supplement a dwindling or reduced Social Security benefit. You can also contribute to a Roth individual retirement account (within limits) and make non-deductible contributions to your 401(k) of some significant amounts (I recently wrote about this).

What policy changes might fix Social Security? Congress can take plenty of actions, including the following few that while tough do stand to resolve Social Security’s underfunding more or less permanently.

Eliminate the earnings cap. Currently only a certain amount of your annual earnings incur Social Security tax: $118,500 in 2015, up from $117,000 this year. Earnings above that limit are not subject to the combined 12.4% (employer and employee) Social Security tax.

Eliminating this limit or cap might pump significant additional funds into the Social Security tax revenues annually. Right now this cap covers approximately 83% of all earnings – leaving up to 17% of all earnings untaxed.

Increase the tax rate. The Social Security tax rate noted above comprises 6.2% from your gross pay and 6.2% from your employer. Any increase in this rate improves the trust fund.

Means testing. Folks with significant other sources of retirement income can often get by very well with reduced benefits or even without benefits altogether. After all, this insurance program supposedly provides benefits to retirees who lack means to completely provide for themselves.

You, like many others, may find it frustrating that saving for yourself potentially puts you in a position to receive reduced benefits. To save all of Social Security, that’s the sort of tough decision we as a society must make.

Increase retirement age. In 1983, the retirement age for Social Security rose from 65 to 66 for folks born between 1943 and 1954, and to 67 for folks born in 1960 or later. It’s not out of the question to gradually increase this age another year, to 68 for folks born in 1966 or later.

At the other end of the spectrum, the early retirement age of 62 dates from when the Social Security program began. Changing this age might likely result in some positives for the trust fund – but leaving it the same also sometimes insidiously produces even smaller benefits for folks who file early.

Probably no steps to fix the system will be pleasant: It’s never easy to give up what you think you paid into and earned. Problem is, if we don’t work to repair Social Security we will all certainly give something up, starting with an estimated at 23% of all our benefits.

Follow AdviceIQ on Twitter at @adviceiq.

Jim Blankenship, CFP, EA, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill. He is the author of An IRA Owner’s Manual and A Social Security Owner’s Manual. His blog is Getting Your Financial Ducks In A Row, where he writes regularly about taxes, retirement savings and Social Security.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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Is Your Price Right? http://current.mnsun.com/2014/12/is-your-price-right/ http://current.mnsun.com/2014/12/is-your-price-right/#comments Fri, 19 Dec 2014 20:30:24 +0000 http://current.mnsun.com/?guid=50884af6a83f937815b059590adcac7a How long has it been since you evaluated your pricing strategy? If you feel your business is not as profitable as it should be, do a pricing test. It takes some courage, but you might be pleasantly surprised by the outcome.

One of my earliest mentoring clients had a very nice business, but the company just wasn’t making enough money. We spent time looking at the industry and found that my client underpriced his products by about 20%.

All we did was change the pricing policy, and this change alone more than doubled his profits. The company went from being barely profitable to having enough cash to grow. 

However, even if you survey prices of your competitors, you might still not know whether your prices are correct. Your entire industry might be underpriced without knowing it.

There is no rule that says your prices have to be the same as others’. If you provide better products and service than your rivals, you deserve to charge more. Apple is a great example of this. Even though the prices of Apple’s products are significantly higher than those of its competitors, it has no problem getting people to pay extra.

The only way to find out if your pricing is correct is to test it. Value is always in the eyes of the beholder. This means your clients are the ones who tell you whether your service and products are worth the money you charge.

If you don’t have customers saying you’re too expensive, your prices are too low. If you have customers telling you that they can’t believe how much value you deliver, it’s time for you to think about raising your prices. It’s really that simple.

You might be concerned that increasing prices hurts sales. The solution to that is to find ways to add perceived value for your customers. When you work on improving your company’s profitability, I want you to focus on how you can continually increase the value you provide. The more valuable you make your service, the more people will be willing to pay for it.

The value you add should meet the needs of your customers. If you find you have a hard time getting people to say yes, maybe you provide more than they are willing and able to pay for. Make your offering less comprehensive and lower your prices. This helps the bottom line.

Do yourself a favor. Make sure you test your pricing, survey your customers, and better yet, have them pay you more by delivering additional value.

Follow AdviceIQ on Twitter at @adviceiq.

Josh Patrick is a founding principal of Stage 2 Planning Partners in South Burlington, Vt. He contributes to the NY Times You’re the Boss blog and works with owners of privately held businesses helping them create business and personal value. You can learn more about his Objective Review process at his website.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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How long has it been since you evaluated your pricing strategy? If you feel your business is not as profitable as it should be, do a pricing test. It takes some courage, but you might be pleasantly surprised by the outcome.

One of my earliest mentoring clients had a very nice business, but the company just wasn’t making enough money. We spent time looking at the industry and found that my client underpriced his products by about 20%.

All we did was change the pricing policy, and this change alone more than doubled his profits. The company went from being barely profitable to having enough cash to grow. 

However, even if you survey prices of your competitors, you might still not know whether your prices are correct. Your entire industry might be underpriced without knowing it.

There is no rule that says your prices have to be the same as others’. If you provide better products and service than your rivals, you deserve to charge more. Apple is a great example of this. Even though the prices of Apple’s products are significantly higher than those of its competitors, it has no problem getting people to pay extra.

The only way to find out if your pricing is correct is to test it. Value is always in the eyes of the beholder. This means your clients are the ones who tell you whether your service and products are worth the money you charge.

If you don’t have customers saying you’re too expensive, your prices are too low. If you have customers telling you that they can’t believe how much value you deliver, it’s time for you to think about raising your prices. It’s really that simple.

You might be concerned that increasing prices hurts sales. The solution to that is to find ways to add perceived value for your customers. When you work on improving your company’s profitability, I want you to focus on how you can continually increase the value you provide. The more valuable you make your service, the more people will be willing to pay for it.

The value you add should meet the needs of your customers. If you find you have a hard time getting people to say yes, maybe you provide more than they are willing and able to pay for. Make your offering less comprehensive and lower your prices. This helps the bottom line.

Do yourself a favor. Make sure you test your pricing, survey your customers, and better yet, have them pay you more by delivering additional value.

Follow AdviceIQ on Twitter at @adviceiq.

Josh Patrick is a founding principal of Stage 2 Planning Partners in South Burlington, Vt. He contributes to the NY Times You’re the Boss blog and works with owners of privately held businesses helping them create business and personal value. You can learn more about his Objective Review process at his website.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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Plan to Prevent Bad $$ Moves http://current.mnsun.com/2014/12/plan-to-prevent-bad-moves/ http://current.mnsun.com/2014/12/plan-to-prevent-bad-moves/#comments Fri, 19 Dec 2014 20:30:17 +0000 http://current.mnsun.com/?guid=db8b47c7c7ed5f08088f2d4d54965247 When managing personal finances and investments, people frequently exhibit irrational behavior for different reasons. If you’re one of these folks, be fair to yourself: It doesn’t even take a spate of market zigzags like October’s to prod you into questionable decisions.

Everyone makes choices about money nearly every day – how to earn, spend, save, invest and so on. Sometimes you pick wisely, sometimes harmfully. Some decisions, particularly those regarding when and where to invest, whipsaw from wise to harmful and back, depending on when you reached your conclusion and when you took the plunge.

Supposedly, if you can learn more about the cause and effect of your money decisions, and what around you contributes to them, you will improve your financial security. Pinpointing behaviors as either rational or irrational in the middle of the storm comes hard, though. The October market provided a convenient and timely case study to help explain why.

That month, the Standard & Poor’s 500 Index of large U.S. stocks declined 5.6% through Oct. 15 and then gained 8% through the end of the month. If sensitive to market moves, maybe you read the swift early declines and sold big – a flight perhaps revealed as irrational, given the late-October rally that continued into November.

If you sold in mid-October, you likely showed loss aversion – one of many often-irrational money behaviors. Psychologically, people perceive losses (or declines in value of an investment) as much as 2½ times more impactful than gains of a similar size. Watch your investment drop $1,000 and you feel more than twice as bad as you might feel good about a gain of $1,000.

Most people are loss averse; it’s clear why many sell when market prices decline. Is loss aversion irrational? Or sometimes, is it timely clairvoyance?

Rewind to 2007, when from Oct. 9-19 the S&P 500 quickly declined more than 4% – similar to what it  it did in early October this year. Let’s say you were one who sold  Oct. 15 this year (and looked irrational in hindsight). Let’s imagine further that in early October 2007 you also cut back your market exposure under these similar conditions.

Instead of irrational, you would have appeared brilliant. Oct. 9, 2007, was a high point; financial apocalypse reigned for the next year and a half.

What-if situations such as these clearly show that sometimes irrational behavior produces good outcomes. And sometimes well-trained (and often self-proclaimed) experts, applying rational processes to money management, wind up on the wrong side of the intended outcome, especially in the short term. This helps make investing fascinating and, at times, maddening.

Because investment markets are complex and potentially both irrational and efficient, understand well your tolerance for risk. Define what risk actually means in terms of your financial security, and your willpower to handle markets when fear and greed influence decisions.

A written investment strategy can serve as a foundation for your long-term decisions. Your strategy – and your commitment – may also benefit from testing your strategy’s performance hypothetically in past crises.

Since we can’t predict outcomes that depend partially on luck, we plan according to probabilities. For example, rather than focus on the size of your expected returns, know the probability that your investment strategy can support your desired spending rate in retirement or make tuition payments, fund a wedding, cover health-care costs and so on. Your broader financial plan drives your investment strategy, not the other way around.

Ideally, when your goals link directly to your plan, you have a better foundation for dealing with investment uncertainty and Wall Street’s effect on your emotions and decisions.

Follow AdviceIQ on Twitter at @adviceiq.

Gary Brooks is a certified financial planner and the president of Brooks, Hughes & Jones, and a registered investment adviser in Tacoma, Wash. An expanded version of this piece first ran at his blog The Money Architects.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

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When managing personal finances and investments, people frequently exhibit irrational behavior for different reasons. If you’re one of these folks, be fair to yourself: It doesn’t even take a spate of market zigzags like October’s to prod you into questionable decisions.

Everyone makes choices about money nearly every day – how to earn, spend, save, invest and so on. Sometimes you pick wisely, sometimes harmfully. Some decisions, particularly those regarding when and where to invest, whipsaw from wise to harmful and back, depending on when you reached your conclusion and when you took the plunge.

Supposedly, if you can learn more about the cause and effect of your money decisions, and what around you contributes to them, you will improve your financial security. Pinpointing behaviors as either rational or irrational in the middle of the storm comes hard, though. The October market provided a convenient and timely case study to help explain why.

That month, the Standard & Poor’s 500 Index of large U.S. stocks declined 5.6% through Oct. 15 and then gained 8% through the end of the month. If sensitive to market moves, maybe you read the swift early declines and sold big – a flight perhaps revealed as irrational, given the late-October rally that continued into November.

If you sold in mid-October, you likely showed loss aversion – one of many often-irrational money behaviors. Psychologically, people perceive losses (or declines in value of an investment) as much as 2½ times more impactful than gains of a similar size. Watch your investment drop $1,000 and you feel more than twice as bad as you might feel good about a gain of $1,000.

Most people are loss averse; it’s clear why many sell when market prices decline. Is loss aversion irrational? Or sometimes, is it timely clairvoyance?

Rewind to 2007, when from Oct. 9-19 the S&P 500 quickly declined more than 4% – similar to what it  it did in early October this year. Let’s say you were one who sold  Oct. 15 this year (and looked irrational in hindsight). Let’s imagine further that in early October 2007 you also cut back your market exposure under these similar conditions.

Instead of irrational, you would have appeared brilliant. Oct. 9, 2007, was a high point; financial apocalypse reigned for the next year and a half.

What-if situations such as these clearly show that sometimes irrational behavior produces good outcomes. And sometimes well-trained (and often self-proclaimed) experts, applying rational processes to money management, wind up on the wrong side of the intended outcome, especially in the short term. This helps make investing fascinating and, at times, maddening.

Because investment markets are complex and potentially both irrational and efficient, understand well your tolerance for risk. Define what risk actually means in terms of your financial security, and your willpower to handle markets when fear and greed influence decisions.

A written investment strategy can serve as a foundation for your long-term decisions. Your strategy – and your commitment – may also benefit from testing your strategy’s performance hypothetically in past crises.

Since we can’t predict outcomes that depend partially on luck, we plan according to probabilities. For example, rather than focus on the size of your expected returns, know the probability that your investment strategy can support your desired spending rate in retirement or make tuition payments, fund a wedding, cover health-care costs and so on. Your broader financial plan drives your investment strategy, not the other way around.

Ideally, when your goals link directly to your plan, you have a better foundation for dealing with investment uncertainty and Wall Street’s effect on your emotions and decisions.

Follow AdviceIQ on Twitter at @adviceiq.

Gary Brooks is a certified financial planner and the president of Brooks, Hughes & Jones, and a registered investment adviser in Tacoma, Wash. An expanded version of this piece first ran at his blog The Money Architects.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

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Money Smarts: How U.S. Rates http://current.mnsun.com/2014/12/money-smarts-how-u-s-rates/ http://current.mnsun.com/2014/12/money-smarts-how-u-s-rates/#comments Fri, 19 Dec 2014 20:30:13 +0000 http://current.mnsun.com/?guid=b21c2ed9629aff303f0c36200921ef47 We all flip between believing that America leads the world at everything to thinking our nation lags behind foreign powerhouses in every way. Regarding financial literacy, we’re solid in the top five – but far from best.

The recent Visa International Financial Literacy Barometer reports that the U.S. ranks fourth out of 28 countries. If you think sophisticated Europeans edge us out, you’re wrong. The top five nations were Brazil, Mexico, Australia, the U.S. and Canada.

The first question surveyed the 25,500 respondents worldwide about the age at which children need to learn financial literacy. The U.S. came in at around the global average of 11.3 years old. Respondents in Brazil, overall the most financially literate nation in the world, said children need to start becoming financially literate at age 9.

The answers to four subsequent questions helped determined the rankings:

1. Do you have and follow a household budget? The best budgeters were in Brazil, Japan, Australia, South Africa and Canada. The U.S. placed sixth.

2. How many months’ worth of savings do you have aside for an emergency? The best savers were in China, Taiwan, Hong Kong, Japan and Canada. The U.S. placed seventh.

Overall, more than one in three (68%) of respondents had less than three months of emergency savings. A quarter of high-income respondents worldwide have less than three months of savings.

3. How often do you talk to your children (ages five to 17) about money management issues? Parents who talked most frequently about money with children were in Mexico, Brazil, Serbia, Bosnia and Lebanon. The U.S. again placed sixth.

Parents and other adults in the wealthier nations spent the least time talking to children about money.

4. To what extent would you say teenagers and young adults in your country understand money management basics and are adequately prepared to manage their own money? More adults in Vietnam, Indonesia, India, Colombia and Mexico believed kids understood financial basics than in other countries.

More than half the countries surveyed believe the young understand little about finances. America also gave its youngsters low marks here: The U.S. placed 27th.

It’s remarkable we placed fourth when our ranking was lower than that on every individual question. Our final ranking was higher partially because questions that America did better than other nations on happened to count for more toward the final score.

The best financial education begins at home. If interested in educating your children about money, you can try another Visa survey entitled “The Tooth Fairy Tightens Purse Strings.”

In 2014, the Tooth Fairy left American kids 8% less, on average, than in 2013. American children received about $3.40 per tooth.

Ask your children why that might be. Are kids losing more teeth so the Fairy must retrench and pay less? Did the Fairy budget badly? Are some teeth worth more than others (perhaps cavities versus cavity-free)?

The world’s a big place: What do you really learn when you hear that Indonesians talk to kids about money only 5.5 days a year? It’s always easier to learn when your own wallet is part of the subject.

 

Jonathan K. DeYoe, AIF and CPWA, is the founder and president of DeYoe Wealth Management in Berkeley, California, and blogs at the Happiness Dividend Blog. Financial planning and investment advisory services offered through DeYoe Wealth Management, Inc., a registered investment advisor.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations to any individual. For your individual planning and investing needs, please see your investment professional.

Follow Jonathan K. DeYoe on Twitter at @happinessdiv.

 

Follow AdviceIQ on Twitter at @adviceiq.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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We all flip between believing that America leads the world at everything to thinking our nation lags behind foreign powerhouses in every way. Regarding financial literacy, we’re solid in the top five – but far from best.

The recent Visa International Financial Literacy Barometer reports that the U.S. ranks fourth out of 28 countries. If you think sophisticated Europeans edge us out, you’re wrong. The top five nations were Brazil, Mexico, Australia, the U.S. and Canada.

The first question surveyed the 25,500 respondents worldwide about the age at which children need to learn financial literacy. The U.S. came in at around the global average of 11.3 years old. Respondents in Brazil, overall the most financially literate nation in the world, said children need to start becoming financially literate at age 9.

The answers to four subsequent questions helped determined the rankings:

1. Do you have and follow a household budget? The best budgeters were in Brazil, Japan, Australia, South Africa and Canada. The U.S. placed sixth.

2. How many months’ worth of savings do you have aside for an emergency? The best savers were in China, Taiwan, Hong Kong, Japan and Canada. The U.S. placed seventh.

Overall, more than one in three (68%) of respondents had less than three months of emergency savings. A quarter of high-income respondents worldwide have less than three months of savings.

3. How often do you talk to your children (ages five to 17) about money management issues? Parents who talked most frequently about money with children were in Mexico, Brazil, Serbia, Bosnia and Lebanon. The U.S. again placed sixth.

Parents and other adults in the wealthier nations spent the least time talking to children about money.

4. To what extent would you say teenagers and young adults in your country understand money management basics and are adequately prepared to manage their own money? More adults in Vietnam, Indonesia, India, Colombia and Mexico believed kids understood financial basics than in other countries.

More than half the countries surveyed believe the young understand little about finances. America also gave its youngsters low marks here: The U.S. placed 27th.

It’s remarkable we placed fourth when our ranking was lower than that on every individual question. Our final ranking was higher partially because questions that America did better than other nations on happened to count for more toward the final score.

The best financial education begins at home. If interested in educating your children about money, you can try another Visa survey entitled “The Tooth Fairy Tightens Purse Strings.”

In 2014, the Tooth Fairy left American kids 8% less, on average, than in 2013. American children received about $3.40 per tooth.

Ask your children why that might be. Are kids losing more teeth so the Fairy must retrench and pay less? Did the Fairy budget badly? Are some teeth worth more than others (perhaps cavities versus cavity-free)?

The world’s a big place: What do you really learn when you hear that Indonesians talk to kids about money only 5.5 days a year? It’s always easier to learn when your own wallet is part of the subject.

 

Jonathan K. DeYoe, AIF and CPWA, is the founder and president of DeYoe Wealth Management in Berkeley, California, and blogs at the Happiness Dividend Blog. Financial planning and investment advisory services offered through DeYoe Wealth Management, Inc., a registered investment advisor.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations to any individual. For your individual planning and investing needs, please see your investment professional.

Follow Jonathan K. DeYoe on Twitter at @happinessdiv.

 

Follow AdviceIQ on Twitter at @adviceiq.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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Knowing Needs from Wants http://current.mnsun.com/2014/12/knowing-needs-from-wants/ http://current.mnsun.com/2014/12/knowing-needs-from-wants/#comments Fri, 19 Dec 2014 20:30:09 +0000 http://current.mnsun.com/?guid=76516101c63f3ac037ce0ffca76e9fa7 Making more money is not a necessary step to achieve your goals. If you truly wish to save more, you have to know how to identify a want in disguise of a need.

Sometimes, when you save for large goals in the future, such as retirement or a down payment on a home, you may feel that you need to make more money before these things can happen. You think that once your incomes are up to a certain level, you’ll be able to afford to save.

Not true. For many folks, learning to distinguish between wants and needs is enough to get you to your savings goals.

Here’s an exercise I do with my students in the class I teach whenever I hear them say that they “can’t afford” to save. Grabbing a marker, I ask them to tell me what monthly expenses they have and write those down on the board. For example, dining out: $100 per month; car payment: $250 per month; cable TV: $120; and smartphone: $80. Other items include clothes and shoes, getting hair and nails done and playing the lottery.

Then we look at the board and really think about whether these things are needs. This is where the fun begins. Initially, my students rationalize why they need the things they want. A big point of contention is smartphones. Many students say they need them, but in reality admit that smartphones aren’t something they can’t live without. And that’s the point to this exercise – rationalizing. We’re very good at rationalizing what we want, making it sounds like a need when it is not.

If the students can do without the things listed on the board, they can save $550. To hit the $5,500 annual max of contribution to an individual retirement account, they only need $458.33 per month. This means without having to ask for a raise or to get a second job, they can max out an IRA and still having $92 left over to invest.

With my trusty financial calculator, and using the students’ timeline for retirement, I come up with an amount that blows my students away. If they have 40 years to fund an IRA up to the limit until retirement, with a reasonable rate of return in the market of 7%, they can accumulate $1,174,853 in 40 years – all without having to make more money. This was money they are already spending.

For all of us, it boils down to priorities. Once we make our future financial needs a priority, we can change our perception of what we really need versus what we want, and reallocate our money accordingly to fund our goals.

Follow AdviceIQ on Twitter at @adviceiq.

Sterling Raskie, MSFS, CFP, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, IL. He is an adjunct professor teaching courses in math, finance, insurance and investments. His blog is Getting Your Financial Ducks in a Row, where he writes regularly about investments, retirement savings and financial planning.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

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Making more money is not a necessary step to achieve your goals. If you truly wish to save more, you have to know how to identify a want in disguise of a need.

Sometimes, when you save for large goals in the future, such as retirement or a down payment on a home, you may feel that you need to make more money before these things can happen. You think that once your incomes are up to a certain level, you’ll be able to afford to save.

Not true. For many folks, learning to distinguish between wants and needs is enough to get you to your savings goals.

Here’s an exercise I do with my students in the class I teach whenever I hear them say that they “can’t afford” to save. Grabbing a marker, I ask them to tell me what monthly expenses they have and write those down on the board. For example, dining out: $100 per month; car payment: $250 per month; cable TV: $120; and smartphone: $80. Other items include clothes and shoes, getting hair and nails done and playing the lottery.

Then we look at the board and really think about whether these things are needs. This is where the fun begins. Initially, my students rationalize why they need the things they want. A big point of contention is smartphones. Many students say they need them, but in reality admit that smartphones aren’t something they can’t live without. And that’s the point to this exercise – rationalizing. We’re very good at rationalizing what we want, making it sounds like a need when it is not.

If the students can do without the things listed on the board, they can save $550. To hit the $5,500 annual max of contribution to an individual retirement account, they only need $458.33 per month. This means without having to ask for a raise or to get a second job, they can max out an IRA and still having $92 left over to invest.

With my trusty financial calculator, and using the students’ timeline for retirement, I come up with an amount that blows my students away. If they have 40 years to fund an IRA up to the limit until retirement, with a reasonable rate of return in the market of 7%, they can accumulate $1,174,853 in 40 years – all without having to make more money. This was money they are already spending.

For all of us, it boils down to priorities. Once we make our future financial needs a priority, we can change our perception of what we really need versus what we want, and reallocate our money accordingly to fund our goals.

Follow AdviceIQ on Twitter at @adviceiq.

Sterling Raskie, MSFS, CFP, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, IL. He is an adjunct professor teaching courses in math, finance, insurance and investments. His blog is Getting Your Financial Ducks in a Row, where he writes regularly about investments, retirement savings and financial planning.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

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