August 2008 Edition

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eFinPLAN.com Taking the Mystery Out of Financial Planning Newsletter

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This Issue…

Home Budgeting Economics       Financial Planning                                        Ideas from other sites

-Loan Reduction Strategies         -Teaching children about finances Book  -Blogs

-Gas Cost Calculators                   -Investing in Turbulent Times Part 2         -Affiliates

Home Budgeting Economics

Loan Reduction Strategies

For many people over the past decade, financial planning has meant finding the latest way to juggle debt. Many of us have refinanced homes, switched and consolidated credit cards to new credit card companies, and consolidated debt into home equity loans. Now that interest rates have trickled up and home prices have decreased, there are fewer options today to lower payments, other than the old-fashioned way of just paying them off.

If you find yourself in this situation, by now you have heard the advice such as to lower expenses, get and stay on a budget, get a financial plan, consider a second job, reduce debt, and save for emergencies. We love Mary Hunt’s Rapid Debt Reduction calculator (debtproofliving.com) for creating an efficient debt reduction schedule.

More people today have debt payments so large from student loans, credit cards, mortgage, and home equity loans that they are falling behind on their payments. In this kind of environment, you start to see advertisements from companies promising legal ways to erase your debt, and improve your credit rating – for a fee. Here we have highlighted a few of the methods:

·   Contacting Your Creditors: Contact them now if you are having difficulty making payments. Try to work out a plan to reduce your payments to a more affordable amount, but don’t wait until they have turned you over to debt collection – by then it may be too late.

·   For profit, debt reduction companies. These companies promise that they will reduce your debt and your monthly payments by negotiating with creditors on your behalf, lower interest rates, lower debt amounts and lower monthly payments. Be very cautious about doing business with these firms. The fees for these services vary; some charge an upfront fee, a monthly fee and a percentage of the outstanding loan amount. Many such firms take advantage of people during an emotionally vulnerable time. The legality of these firms will vary from state to state. In my home state of Ohio, a few firms have been shut down because they had illegal practices. I think most people should run from these firms no matter how legitimate their advertising sounds. Always check out firms with your state Attorney General’s office.

·   Consumer Credit Counseling Agencies. These firms are usually not-for-profits that will help you get financially organized, establish a budget, and negotiate terms with lenders. Some firms are very good and legitimate and others ‘not so much’, so be careful. Do your research and obtain full information, including fees before signing contracts. Call your state Attorney General’s office and look for firms that are accredited by the National Foundation for Credit Counseling, Better Business Bureau, and Association of Independent Consumer Credit Counseling Agencies. 

·   Bankruptcy is considered the last resort. There are two types for individuals. Chapter 13 allows retention of property if you have an income stream. The court approves a 3- to 5-year repayment plan. Chapter 7 involves liquidation of all non-exempt assets to be turned over to your creditors. 

If you decide to seek counseling or bankruptcy, be forewarned; your credit rating will take a huge hit. Some of this information was obtained from the Federal Trade Commission. You can find more information at this Web site:

Home Budgeting Economics

Gas Cost Websites

Planning a road trip this summer? It may be a good idea to plan ahead. With the cost of gas hovering around $4 per gallon, make sure you estimate how much it is going to cost to get to where you are headed and back. Be sure also to estimate how much gas you might use after you get there.

AAA has a fuel cost estimator at fuelcostcalculator.com. If we were going to travel from Columbus, Ohio, to Nags Head, North Carolina, the site estimates a round trip of 1,360 miles, and a fuel cost of $221.36. Round that up to about $250 to cover gas during the visit. The site estimates using the starting city, destination city, vehicle model and year.

gasbuddy.com is an interesting Web site that allows you to search for the cheapest gas in your area. If you are planning a trip, you can search major metropolitan areas, counties and cities. Using this to plan would take a lot of advanced planning, such as knowing when and where you will need gas. They have a Map Gas Price chart that could be useful as well. AAA estimated my fuel cost usage at 59 gallons, so a 10-cent difference in gas would have saved me only about $6; I’m not sure this would be useful for a trip. Besides, even though I am a guy, it is possible that I could get lost trying to find the right gas station. The Web site would be a good reference to use for everyday driving. 

Financial Planning - Book Review

Book Review – The Ultimate Allowance, Elisabeth Donati  By Laura Irwin 

“Elisabeth Donati is the Founder of Creative Wealth Intl. (formerly The Money Camp) and creator of the totally unique financial paradigm shifting programs Camp Millionaire, Moving Out! Creative Cash for Kids, Creative Cash at Schools, Creative Wealth Intensive and Creative Wealth for Women Events as well as Co-creator of the all new Wealth Rules! Financial Wisdom for Youth seminar for teens and parents.”

Are you at a loss regarding teaching your kids and teens about money? Have you given them money for doing chores or have you ‘paid’ for grades only to find they still ask you for more? You will find a well thought out and practical approach to teaching finances in The Ultimate Allowance – ‘How to teach your children the ‘wealth’ rules they need to grow up happy, healthy, wealthy and wise’ By Elisabeth Donati. You will also find a lot of information that could help you in your own finances and how you view money. This 220 page e-book details a program to help you keep your child from becoming a debt-laden statistic.

“The following are a few of the most basic financial principles your kids will learn by using the Ultimate Allowance:• Life is a direct result of the choices we make.• Our choices are influenced by our belief systems.• You are the CEO of your own life.• Money is a tool to reach your dreams.• Pay yourself first.• Save early, save often, invest wisely.• Put your money to work for you.• Great money habits create financial freedom.• If you can’t afford it in cash, you can’t afford it at all.• It’s better to tell your money where to go than ask it where it went.• Passive income is the key to financial freedom.” Pg. 25

Donati gives details on how to use 6 money jars for Living, Freedom, Savings, Education, Play and Donation. She also has a great section to show teens or adults who are too old for jars to translate this system to bank accounts on a spreadsheet. The Saving & Spending Plan or SSP (budget) section gives information on how to save for an item, needs versus wants, and actual spreadsheets that you may write on and use. All of the information is written in a format that would be wonderful for helping a parent educate a child or a teen, but no one will read it without learning something new or revealing about how they view money, and ways they can change their own finances and attitudes.

If you have tried to teach your kids about money, you may have several stories about the successes and failures of your approach. Or, if you are like me, you may have started a new system only to forget how much you were supposed to pay for a chore or how much to deduct for a missed chore or misbehavior. The book has many excerpts from stories of parents about issues they have dealt with regarding their kid’s allowance. The following sums up the advantage of using ‘The Ultimate Allowance’ method: “Many parents feel that the toughest part of being a parent is saying NO. But what if rather than telling your child NO, you simply said, “Yes, when . . .” or, “Yes, if . . .” or even, “Yes, as soon as . . .”? The Ultimate Allowance system allows you to use this technique so your child always feels empowered. If your son or daughter wants something or wants to do something (aside from buying a gun or jumping off a bridge, of course), you can simply say, “Sure, when you’ve got enough money in your Play Jar.” or, “Absolutely, as soon as your Education Jar has that much money in it.” What makes this program so effective is that your child will continually have hands-on learning experiences that you couldn’t begin to think up if you tried.” pg.114

There is not enough room in a newsletter to discuss all of the areas covered in the book, but I leave you with this final thought. Several years ago I determined to teach my kids about money and I read a huge stack of books on the subject. Most were simple and straightforward, some were a little guilt laden, and most were also very forgettable. This book is not like any of the others. I believe it is because these concepts are tried, tested and perfected in her ‘Camp Millionaire’ camps. If you would like to obtain and read this book, click here. 

Financial Planning

Investing in Turbulent Times

– Times are always turbulent

This is a follow-up to last month’s newsletter article “Investing in a Bear Market.” I want to clarify — actually we are not really in a Bear Market. A Bear Market exists when there are more losers on average than winners. This may be true some days; however, what we are experiencing is more of a mixed market, not really a bear or a bull market.

It is possible that this could turn into a bear market — no one knows. The ‘glass-half-full’ folks could look at the positives, such as relatively low interest rates and low un-employment. On the other hand the ‘half-empty’ folks would look at the negatives, such as low savings rates, high debt, banking industry difficulty, and high energy and health care costs. At the end of the day, the stock and bond markets always go through cycles, and that shouldn’t alarm us.

I have been alive for almost 5 decades. During each decade of my life and my parents’ lives there has been tremendous turmoil:

·         Economic: depressions, recessions, inflation, deflation and ‘stagflation’, very high and very low interest rates

·         Domestic strife and civil unrest: racial injustice, cold war, riots, and drugs

·         Wars: WWII, Korea, Vietnam, Persian Gulf, and Iraq

·         Financial controversy: depression era banking and financial crisis, oil crisis of the 70’s, Savings and Loan failures and junk bond implosion of the 80’s, tech bubble of the 90’s, and today’s mortgage and banking issues

·         Lack of leadership in government and corporations with overspending, unbalanced budgets and runaway Federal budget deficits and debt (to be fair, both parties are guilty), and trade deficits.

I am not saying we should be ambivalent towards these events or not make progress towards economic or financial stability and peace — what I am saying is that as we grow and mature towards perfection as a society we will experience these growth pains and cycles, and the ‘markets’ will fluctuate too.

The stock and bond markets are like a yo-yo going up stairs. Picture a boy playing with a yo-yo as he climbs the stairs; he walks slowly concentrating on the toy, making upward progress, yet all the while there is great fluctuation. At the end of the day there is always progress — so as it been with investment markets for more than 100 years.

This is why it makes sense to exert no energy trying to predict markets; stick to your investment asset allocation profile regardless of turmoil.

Following an asset allocation mix of stocks, bonds and cash equivalents will usually help your portfolio weather market fluctuations; when one category is not performing well, usually one of the others is doing better.

During market fluctuations, good or bad, don’t make emotional decisions. Monitor your investments, make sure that no single category gets too far out of balance, and get information from your investment provider on a regular basis.

If you are within 5 years of retirement or are retired, give extra attention to your investments, and employ an excellent financial planner or investment advisor. You are in a critical period, and you don’t want any decisions to put you in a situation that causes you to have to work longer.

Financial Planning - Updated Social Security Administration Web Site 

The Wall Street Journal reported last month that the Social Security Administration (www.ssa.gov) recently updated its Web site’s estimator for Social Security Benefits. People can obtain a benefit estimate after answering questions and inputting personal information. The new calculator helps future retirees create a more accurate estimate of benefits, because people can factor in their own estimate of future incomes. People can also use different alternatives for the age of retirement.

The Social Security Administration will continue to mail annual reports of benefit estimates that are based on people’s income staying the same.

The eFinPLAN financial planning software has a benefit estimator; it also permits you to input these estimates manually (which we recommend that you do). Conservative planners may want to assume that Social Security will not be available when you retire, or may only be available in part. In that case you may also want to lower this estimate for your input (e.g., 25%). 

Ideas from other Web sites - From the Blog World

At eFinPLAN.com you will see on the right side of the screen “News Feeds”. These are interesting financial articles and blogs from around the Web that I think are useful. Some I have written, but most are written by others. Go to eFinPLAN Blogroll to see the following and more:

• Dipping into the retirement account – from Money Rules, Debt Stinks

• When to hire a tax professional – from Free Money Finance

• The Best Investment You Can Make Is In Your Health – from My Two Dollars

• Seven Traits of Successful People – from Moolanomy

• 15 ways to make $200 – from Christian Personal Finance

eFinPLAN - Sponsors, Partners, and Affiliates 

The list of eFinPLAN partners and affiliates continues to grow regularly. The following is a partial list of them. The eFinPLAN Web site will soon have a complete listing.

·         Mary Hunts’ Debt Proof Living is an excellent source of information. Mary has written over a dozen popular books, most of which we have read. Visit this Web site for more information, including her popular monthly Debt-Proof Living newsletter, and her daily newsletter.

·         YNAB – You Need a Budget is a favorite budgeting software that we recommend. It is easy and inexpensive.

• Already featured in this newsletter is Elisabeth Donati, founder of Creative Wealth International and author of several books, including the book reviewed here, “The Ultimate Allowance.”

What is eFinPLAN? To Find out more about eFinPLAN; simply click to view a video or visit eFinPLAN.com.

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eFinPLAN Corporate  eFinPLAN Corporate Solutions for Retirement Plans, Worksite Financial Wellness, Banks and Credit Unions, and Advisors or Websites can partner together to uniquely serve their account holders, members, employees and clients; please visit eFinPLAN.com (above links) for more information. If you would like to explore this for your company, contact us. 

About the Authors Kent E. Irwin is CEO and co-founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at kirwin@efinplan.com. Laura D. Irwin is CFO and co-founder of eFinPLAN, LLC. She can be reached at lirwin@efinplan.com.

eFinPLAN reports, newsletters and Web site are designed to increase your knowledge of financial matters and permit you to take greater control of your financial future. The resources provided are to assist you as you advance up the financial learning curve. No single company or person has all the financial knowledge you need or can address everyone’s individual situation and show all possible solutions. Therefore, we encourage you to utilize other resources, and when appropriate, rely upon trusted professional advisors. This is not intended to, and does not, provide specific legal, tax, accounting, and insurance, and investment, financial or other professional advice. eFinPLAN is not your financial planner or investment advisor. For specific advice on these aspects of your overall financial plan we encourage utilizing trusted professional advisors. This is not an advertisement or solicitation for any specific investment or investment strategy. Information contained herein is not a substitute for consultation with a competent legal professional or tax advisor and should only be used in conjunction with professional advice.

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