Sushi Money

So the U.S. Economy has its Worst Growth Since 2002?  Many economists have been predicting much slower growth this year, with some looking for a recession in the last half of 2007.  But the National Association for Business Economics predicts the April to June quarter will show 2.3% growth.  This will be an interesting year to watch as recessions traditionally are based on two or more consecutive quarters of decline of real GDP.   But other economists simply look for declining economic activity over a period of time as justification for calling it a recession.  In either case the consumers continue to spend and the global economy is still growing.  The stock market has not been worried about a recession as yet, with the Fed’s concerns about possible inflation taking the front row seat.  But lately the market has been very strong with many believing the Fed will cut rates in the latter part of 2007.   Former Fed Chief Alan Greenspan gave a wake up call this week with concerns about China’s market valuations.  The Chinese market dropped over 6% earlier this week as they increased tax surcharges on investment transactions.  I don’t follow the Chinese market per se, but it’s not the “mature” market that we have with a long history of activity by investors.  I read somewhere that up to 300,000 Chinese investors were moving into their market every day!  Sounds reminiscent of the late 1990’s here in the U.S.  For our sake I hope they manage to temper investor expectations, but they are still growing like crazy economically.  Just yesterday I received a junk mail investment flyer touting Chinese telecom stocks on the NASDAQ pink sheets.  Should the Chinese economy “burp” and/or their market tumble, there’s going to be a lot of novice investors hurt financially… and then the blame game will begin.  Wouldn’t surprise me to see them blame the large investors around the world, and notably those in the U.S.  When something negative happens in the world it seems the first reaction for many is to blame the U.S.  But those issues are for the political folks and institutions to sort out. 

All I can really do is manage my corner of the investment spectrum for the long-term good of my family and retirement goals.  So I can watch, read and try to learn about what things might affect those goals here at home, and look out a few years.  In 2003 I had purchased a new home, with the goal of only living there for 3-5 years. Had an incredible 5/30 ARM with a 4.3% rate.  It wasn’t a subprime loan, but a great product for a specified purpose.  Saved us a lot of money over the 2 1/2 years we lived in the home.  In early 2006 I sold that home to make a more permanent move, and the timing worked out well.  I also had a rental home in another state and felt I should sell it by 2005.  That was a lucky, or prescient, goal and I did sell that home in May of 2005 at the top of the market.  Worked out very well, but I had owned that home for 13 years with very slow appreciation for most of that time.  Why did I sell at those times?  Several reasons, including leaving one career to begin another, the death of a parent, and a desire for a different lifestyle. For some reason I felt strongly that the time was right, and I needed to accomplish those changes before 2006-2007.   Human nature and growth is based on knowledge and experience, and we tend to hold on to what works for us.  So I try to apply the same thought process and analysis as I look ahead in future years.   I still think we’ll see some increasing market volatility in the U.S. this year, but I believe the 2008-2009 period should be fine for growth and technological productivity.  2010 to 2014 may be a challenging few years…  There’s a whole host of people who think the “end of the world” is based around 2012 for religious reasons, ancient predictions and who knows what else.  I’m not one of them, but I’ll be on the sidelines watching for change. The middle east conflict and the “war on terrorism” is not going to change overnight unfortunately.  U.S. goals and policies will change, but how?  No easy solution there, but I believe we need to make a pretty strong change in the short term.  We can only do so much, and at some point we need to regroup and take a hard look at the value we see for our efforts, and the lives of our military members…  at some point self-determination among people, or nations, must emerge.  I believe we can maintain our policies of strength and defense without such a hands-on role at this point.  But that too is something for the political and military leaders to wrestle with. 

I look back and see that time passes so quickly… the decade or two of yesterday seems so real to me that I wonder what I missed along the way!   So I look out ahead knowing that the next decade will come quickly as well, and we need to maximize the opportunities we have.  Demographics naturally play a large role in U.S. and global economic changes over time, and as the Boomers take precedence more and more as the largest segment of the retirement population, especially regarding health care and other “senior” needs,  we’ll see service industries growing and prospering.  I like to think that 2014 to 2020 will be a prosperous period of growth and change, and retirement as a goal looms personally for me during that timeframe, as well as college education costs!  But the small steps lead to great progress over time, and between now and then I hope to continue the steady progress of saving and investing, riding the ups and downs, and working to make the dreams of the distant future a tangible reality.

A busy week at home and with classes.  But school’s out for the kids and summer is approaching quickly!  Lots of chores to catch up on taking care of the house as well.  What do you do during the summer months?  We made a list the other night and gave up after sixty task items… ugh!  But you’ve got to start somewhere.  I see painting and weeding in my future, along with lots of grass cutting.  I cut about 4-5 acres every 10 days, and more if it rains a lot.  I actually enjoy it… until about July.  Then I’m ready for a break and fortunately the weather cooperates as the rain slows down and the grass begins to go dormant for the summer.  Watching the markets lately I’m wondering if they too will go “dormant” soon…  returns have been pretty nice so far this year, but as May draws to a close I wouldn’t be surprised to see the markets take a break.  As summer begins many families will be planning ahead for vacations and school in the fall.  The election cycle will pick up steam as we approach fall, and 2008 will be a busy year.  I’m not sure I’m ready for the political media circus, and it’s hard to believe we’re starting again.  But I’ll keep plugging away on saving and investing, and the slow accumulation for our 529 fund.  After Congress made the 529 plan legislation permanent last year, there is almost no reason for a family not to fund a 529 for college education savings.  I started one in 2002, and it has done remarkably well with an average of 16% gains over the past five years.  It helped to have a good “down” year of putting money in the fund early before the market roared back in 2003 as well.   My 6-year old doesn’t know much about money or investing yet, but we’re going to start learning a lot more together this year.  I would love to start a Roth IRA for him at some point as well- if he can place some earnings in an IRA while young, and keep at it through the years, he could be so far ahead of most of us it would be amazing!  I like to think of investing in terms of generations.  Certainly achieving financial security during our lifetime, and for our retirement years is a primary goal, but at some point I would like to accumulate enough to leave a financial legacy.  In what form?  Well, both for charitable purposes as well as family goals.  Wouldn’t it be something to leave enough money to ones heirs that it could continue to grow over decades, providing some assistance for children, grandchildren and even great grandchildren?  I have no illusions of fame or historical significance… but doing something for family in the years ahead would be pretty cool.  But it’s time to focus on the present… tomorrow I’ll get a little class work accomplished… and maybe even cut some grass.  Money and investing is kind of like taking care of the yard to me… the blades of grass simply grow.  Sometimes bare spots appear, and weeds take over.  But we plant more grass seed, and try to minimize the weeds.  With care the blades of grass multiply and continue growing, providing a cool foundation to enjoy over the years.  The grass grows faster at times with good weather and a little rain, and then slower when it’s hot and dry, going dormant to all appearances.  But the roots are there, waiting for better climate… and then zoom! it begins to grow again, sometimes in great leaps.  If we take care of our financial assets, they too will continue growing… sometimes in great leaps, and sometimes slowly, even leaving bare spots at times.  But saving and investing consistently over time will lead to a foundation of greener pastures in the years ahead.

I am continually amazed at the amount of junk mail, solicitations and credit card offers I receive in the mail.  Imagine how much money is spent on these mailings throughout the nation!  Holy schmoly… the margins on profits must be pretty decent for the companies to keep doing it.  I think my shredder is working overtime these days…   and some of these mailings are down-right deceptive!  Some of my “favorites”:

* The official looking envelope with the fake certified mail stamp on it… the letter states that “Your car warranty is due to expire! (Oh no!)  Just call us and we can help you pay for a new warranty program!”  Hmmm… don’t think so.

* The other official looking envelope with the fake certified mail stamp on it… the letter says “You mortgage rate is too high and you could lose your home!  Just call us and we can give you a better deal…”  Uh…  no thanks.

* Chase… Citibank… Discover… Amex… Cap One…  Shred, shred shred.

* Charities, donation programs, etc…   I receive two or three a week, but in the fall when many people are making charitable gifts for end of year tax purposes?  Then we seem to get a few each day… ugh!  Most of them have my name spelled wrong, and I have an official policy… if you can’t get my name right, then there’s no way I’m going to look at your request!

* Prize notices, fake “you won” brochures from local car dealers, the list goes on and on.  I don’t have the time to look at them all let alone call some dude about a prize I didn’t really win!  We actually received a car key in one of these mailers the other day.  It said “one of the keys mailed out is actually the key to a real car you could win!”  Maybe… looked fake to me, but maybe we passed up a new car.  Oh well. 

* Annual reports and proxy materials…  I usually elect to receive email notices for these.  But I still get the “blue plastic wrapped” reports and proxy voting sheets.  Honestly I don’t read many of them.  Think how much money the companies spend on these materials!  I can read the report on the internet any time I might want, and the email notifications are fine.  Save the money and put it to work! Better yet… how about a dividend bonus for those of us who elect not to receive them?

There’s a lot more junk we get in the mail of course, most of which we just throw away or shred.  I try to minimize the amount of stuff I receive.  When I shop online, or sign up for some service, I always choose not to be contacted… especially by regular mail, or by phone… and only sometimes with email.  I don’t know if that works very well… if it does I shudder to think how much stuff I’d get in the mailbox.   We filter an amazing amount of data and information each day wherever it comes from.  Between home, work and the internet I think we’re running out of time!  So choices have to be made… I think that’s why I’m making decisions a little quicker these days and not exploring opportunities that don’t interest me.  It’s too easy to fall behind on personal or professional goals, house or yard work, business interests and even school.   Oh… and telemarketing calls?  Don’t you love the ones that call at about 8:00 pm on friday night?  Do they actually think I want to talk to them at that time!?    I had a call from some vacation resort office the other week… my mistake, two years earlier I filled out a card at a sport show to receive a catalog or something.  They’re still calling.  The one who called a few weeks ago, after I said I’m not interested?  The girl rudely replied, “Then don’t fill out cards!” and hung up.  Well, I used an extra few minutes the next week to call their main office… spoke with a senior rep who was very disappointed in their marketing department and apologized profusely.    Life goes on… and we have to make the choices that we believe provides the most benefit to our lives and goals.  But I saw a quote I really like that helps frame the dynamics of each day as we make those choices:

“Take as a gift whatever the day brings forth.”

                                                                              Horace

Within each day there are gifts… sometimes it’s a simple lesson we learn.  I doubt it’s coming in the mailbox however.

You may have read the recent article Fed Wants to Clear Credit Card Confusion by Jeannine Aversa of the AP. She discusses how the U.S. Federal Reserve may try to clear up confusing rules and pitfalls by credit card companies. Wow… wouldn’t it be nice to have 45 days instead of 15 days notice if a credit card company wanted to change rate or late payment terms? There’s a host of other potential changes, and in my view it’s about time! Congress has recently been wrestling with the same issue as consumer complaints have continued to rise over the whims of credit card company actions. How many of us really understand the terms of a credit card agreement? I don’t… I know the basic rate, and due date of the monthly bill (although that seems to change sometimes as well). I ensure I pay the bills on time and watch for any issues the credit card company may raise about rate terms, etc. But most of that language just seems to imply they can do anything they want at any time.

Fortunately most of the credit card companies are starting to feel the consumer backlash and reigning in some of the most egregious practices such as universal default. If I’m late on some payment one month I don’t think it’s appropriate for a different credit card company to raise my interest rates. Sure, it may indicate that a consumer’s credit risk has changed in some way, but that shouldn’t allow them to change rate terms on unrelated debt… that’s the heart of universal default. Certainly we don’t have to use credit cards, and we do agree to the terms of use when we activate the card. But I applaud the Fed’s efforts to improve disclosure and help consumers understand what they are really agreeing to in the first place. I think all most consumers really want is clarity and a fair agreement. Yes, business is business… but some companies will nickle and dime consumers at every turn. If the credit card companies cannot or will not respond effectively to consumer complaints, then legislation and fed intervention will probably happen. That’s not always a good thing… but in this case the political climate is leading the way and I have to agree that consumer’s interests must be balanced more fairly against a credit card company’s efforts to make profits.

–Updated–

CNN/Money has a great article about Credit Card Companies being as “tough as ever” while discussing fees, charges, etc. We are due for some change…. literally!

     Lots of news out this week and the market keeps rolling along. I’m not sure what to think about the new highs we keep seeing, but apparently there’s new money coming into the markets in force these days. Ron Scherrer from The Christian Sience Monitor via Yahoo has an interesting article titled Dollar Buying Ever Less of the World’s Goods. Interesting that it speaks to the effect of the weak dollar actually helping reduce the U.S. trade deficit and helping the U.S. economy through foreign investment in the U.S. The weak dollar also continues to help U.S. companies overseas because of more competitive price margins. All in all it’s quite a balance to the economy here at home.

Will we have a recession in the next 12-18 months? Many think so especially with the housing weakness and high food and energy prices. But the traditional CPI numbers technically exclude food and energy and have remained tame thus far. But those food and energy costs are very real for most of us… and must be reflected somewhere over time. Yet the markets look strong… for now. Somewhere down the road we’ll see weakness, but hopefully not for long. For now I’m positioned to ride it both ways… not as growth oriented as I could be, but balanced enough for the long portfolio. Actually, should the market reverse itself in coming weeks I’m not prepared or willing to sell anything. I like where I’m positioned, but then again I’m never quite satisfied it seems! For tinkerers like me who tend to want to “improve things” it’s hard to establish a portfolio and not want to make changes for the sake of change. But that is a subtle threshold that, once crossed, becomes a self-defeating process.

For now I’m thankful to see some real portfolio growth over time. For the days when it’s tough to remain patient, I just take out the calculator and look at some long numbers down the road. Those numbers over the years are like benchmarks or goals for me. If I can achieve my goals over three years, five years, and ten years… then I’ll be right where I want to be in twenty or thirty years. And yes, I’ve got a benchmark for that too! In many ways, I’m thankful to have the perspective of the long view. When I want to “do more” I look at saving some money for investing and then explore opportunities. I have a short list of several stocks I’d love to own, but I’m not willing to pay what I view as high prices at this point.

One of Dennis Gartman’s famous rules for investing is to “Buy high and sell higher” because we don’t really know what high or low is regarding price in a moving market. You’ve got to make the call somewhere though. So I try not to tinker, simply rebalancing the portfolio once or twice a year based on my goals and asset allocations, and putting new money to work where it seems most appropriate. Got to have goals though… no matter how small… one step at a time.

“If you don’t know where you’re going, you will probably wind up somewhere else.”

Laurence J. Peter

Many investors, if they have been investing in individual stocks for any length of time are well aware of the P/E ratio for the companies they invest in.  Today we’ll examine some considerations and uses for the P/E ratio.   But what is P/E really?  Quite simply, the P/E ratio is a measure of the Price or Market Value per share of stock divided by the companies Earnings per share of stock.  For example, if stock ZZ is trading at $20 per share and the company earnings over the past 12 months were $1.25, then the P/E ratio would be 16.  This measure is typically shown as a trailing P/E ratio… taken from earnings over the past year.  The P/E ratio is also known as the “multiple” or “price or earnings multiple.”

•  Why is a P/E ratio useful?  Because it gives potential investors one way to measure how much to pay for or value a corporation’s stock as compared to its earnings.  This is useful in many ways, not simply looking at one company but also comparing that company to its peers in similar industries, or as a historical evaluation of that company’s earnings growth over time. It may also be appropriate when used within similar market sectors to understand how those companies are valued by the market… businesses grow in different ways and are subject to cyclic economic forces as well.  Some industry profits fluctuate in much greater ways than others. 
• Low versus high:  So a low P/E ratio means that a given stock is inexpensive as compared to it’s earnings right?  Well… maybe.   It may be too simple to say that a low P/E stock is a good investment, because there may be many reasons the P/E ratio happens to be low for a given stock.  Equally, simply because a P/E ratio is high doesn’t necessarily make it a poor investment, although it probably carries more risk and is a more volatile choice compared to the market as a whole.  High P/E ratios usually indicate that investors expect the company to grow profits at a faster rate over time.  Low P/E ratios may simply reflect consistent earnings, but slow growth over time. There are market sectors where P/E ratios tend to be higher, such as technology companies that may grow faster, and market sectors where P/E ratios tend to be lower such as the banks and utilities that grow earnings at a slower pace.  That’s why it’s important to look at the history for a given company or market sector, as well as the current issues facing the company and future forecasts.  And that’s also why there are countless analysts out there making a living by looking closely at various businesses and sectors… to make their best estimates on future prospects.  
• How can I use the P/E ratio?  Most commonly we see the P/E ratio shown as a trailing P/E ratio… the price over earnings per share is taken from earnings over the last four quarters or 12 months.  But a forward P/E is also useful as a projected or estimated P/E based on earnings forecasts over the next four quarters.   We generally accept trailing P/E at face value, but analysts often disagree over the future P/E based on estimates.   That perhaps is the heart of the analyst’s job… to listen to the company’s forecasts and examine the business sector as well as the overall economy.  Sometimes outsiders see things that those working inside the company do not… national or global trends and data that may affect a company two years from now.   Sometimes there are forces that no one could forecast… a national crisis, or a crisis half a world away that affects the business of a local company.  Or perhaps a new company invents a better widget… changing the trends and dynamics that an older company was counting on to earn its business profits.  The wonderful world of investing!
• What else do we need to consider?    There are many different methods to analyze business data of course.  We are talking about P/E, but many of the other ratios are also based on the data a company reports each quarter.  We expect that a given company is reporting its earnings properly, with sound accounting… being forthright and not trying to hide anything.  That’s not always been the case, and even today we read of various companies restating earnings or some scandal where a company is trying to recover credibility with investors over how they manage and report company data.  So in that sense P/E is not a pure statistical ratio when used for analysis… because part of the formula depends upon something that is very human… the statement of earnings.  Those earnings are obviously figured out and reported by people, and some of which may be subject to manipulation.  All things being equal, we expect that solid companies, like GE or AT&T for example, will conduct their accounting and quarterly reports in a sound manner.  In many ways that is why a corporation’s credibility in reporting and forecasting is so important… investors and analysts expect that a company generally knows what it’s talking about and they make decisions based on those estimates.  When a company “misses” its earnings or has a particularly bad quarter, investors want to know why… and obviously they may lose money.  That’s also why good companies will “warn” or give notice to investors about particular events that may affect their earnings in a given or future quarter.  It may be bad news, but it shows the business is serious about letting investors know what is going on with their earnings.
• So what do you do with P/E?  For me it’s one of the criteria I use before making an investment… but my criteria is a little more strict these days.  I generally don’t invest in companies unless their P/E is lower than 22.  Ideally I would like to choose companies with a P/E of less than 18.  This isn’t as simple as it sounds however.  In the last 12 months I bought shares of eBay (EBAY)… they currently have a P/E around 40!  But their forward P/E is closer to 20 or 22.  They are still growing earnings pretty fast.   I also bought shares of Conoco-Phillips… (COP)big oil, big profits right?  At least lately, and their earnings have usually been consistent.   Yet sometimes the oil companies have problems with politics, refinery issues, etc.  Their P/E ratios are usually pretty low… when I bought COP, the P/E was 10, with a forward P/E of 7!    Interestingly, you can also evalute the average P/E for the mutual funds you hold.  One of the funds I have is Vanguard Wellesley Income (VWINX).  On Yahoo Finance you can look at the data and see the average P/E for the fund- for VWINX it’s been between 14 and 16 over the past couple years.  It also shows a comparison with the fund’s peers. 

In recent years investors have favored lower P/E stocks… during the height of the dotcom craze P/E multiples were inflated many times over. Many investors reasoned that the future of these companies, whether or not they made money, was extremely bright and they would either be fast growing, or be bought out quickly making equally rapid gains in the price of the stock.  I invested in many of those companies… I lost money and made money, but learned a valuable lesson… it’s important to try and find a fair valuation for a company I will invest in if I’m going to invest for the long term.  In many ways I take a value approach… find a good company I want to invest in and then wait… wait for the time that the stock is out of favor or down at a lower earnings multiple when the market is down.  Usually I invest in those companies that pay dividends as well and hold the stock for several years or more.  Oh one more thing… do you invest in a company that doesn’t even have a P/E ratio, hence isn’t making any real earnings per share?  Well… not me.  It may be a small company with huge future growth capability, but those are speculative investments that I don’t have the time or patience to watch.  Lots of folks like to trade those stocks. Lots of risk may equal lots of return… or loss!

CNN/Money has a “Money and Ethics” quiz written by Jeanne Fleming and Leonard Schwarz that consumers can take and see where they stand compared to other individuals taking the quiz. I found it fun and very interesting, but also disagreed with some of the statements by the authors. If you want to see it for yourself, take the quiz! I decided to go through the questions here to some degree, but didn’t include many of the comments by the authors. Overall I think this is a great quiz or survey and would provide some interesting data for a research project. But here’s how I did:

1. You are doing some home improvement and the tile guy says he’ll give you a 20% discount if you pay in cash… and you think he’s probably doing it so he doesn’t have to report it… How do you pay? I said pay in cash and take the discount. As of today 67% of respondents agreed and said they would also pay in cash. But Money says that is “abetting a thief.” I don’t think so… they are trying to tie the tile workers behavior and choices to my decision to pay in cash in this case. If the worker is asking for cash for doing a job, and giving me a discount to pay in cash… then economically that is perfectly fine. What HE does with the cash is his choice, and a business decision for his company. I am not responsible for his actions or behavior… I am paying him properly with U.S. dollars for work done on a remodeling job. I suspect the “cash economy” in many parts of this country is enormous. I don’t sanction not reporting income, and I don’t believe in helping someone else make illegal decisions. But I do believe I can pay anyone cash in U.S. dollars for work accomplished without being labled as “abetting a thief.”

2. You’re selling your home and get wind of a possible assessment by City Hall to make your neighborhood more attractive… do you tell prospective buyers? Yes, absolutely. Assessments are part of life, and besides- if it’s something to improve the quality of the neighborhood, it should improve the long-term values of the properties. Proper disclosure on real estate forms is important- I don’t want any surprises and neither do other prospective buyers. 60% of the respondents agreed.

3. You’re being considered for a job or promotion… would you flirt with the boss or person making the decision? I said absolutely not, and 80% of people agreed. Networking, being friendly and flirting can cross many shades of gray… but cozying up too much is absolutely wrong. Performance and professionalism are much more important.

4. Similar question… but would you SLEEP with your boss or a person that could help you get a job or promotion? Uh… no, absolutely not. 94% of the respondents agreed on that one.

5. You’re having dinner with an old friend… that friend makes a lot more money than you do. Who pays for the check? The question didn’t frame how the dinner came about, but I said you should split the check. Other choices included the friend should pay, or pay more. 87% of folks agreed with splitting the check.

6. How often have you not left a tip for a waiter/waitress who gave bad service? I said once or twice, to which 38% of people agreed. 33% of people said they’ve never done this, and 21% said occasionally. Surprisingly, 8% said they’ve done this frequently! Personally, service would have to be really poor before I would do this… and not just because the food wasn’t right, or took too long. If a waitperson had a really bad attitude, was rude, etc. I would probably get up and leave the restaurant after talking with the manager.

7. This question talks about inheritances. Your older mother, a rich widow, is giving away some of her money to charity… you always thought you’d receive most of it. Is this fair? Is it her business? I said it was strictly her business, and 76% of folks agreed. I might think otherwise if she was having problems handling her financial affairs, and would then seek help for her. But otherwise, it’s her bucks…

8. What’s the most amount of money you ever lent to a friend or relative? I was with 11% with over $5000 only because I helped a family member with a real-estate purchase. Otherwise I would probably be in the $500-$1000 range. But the other 25% were in the $1000 – $5000 range, 14% in the $500-$1000 range, and 26% in the $100-$500 range. The remaining 25% was less than $100.

9. Should you charge interest for loans to relatives? I said yes, you should! But most people disagreed and I was out of step on that one in the 10% minority. My reasoning, which the authors didn’t address, was primarly about the IRS rules for personal loans. If you loan a large sum to a relative (exceeding $12,000) , you could be making a taxable gift to them! To qualify as a loan, you need to make sure to use the Applicable Federal Rate as established by the IRS each month. That rate is a fair rate based on prevailing interest rates. When I loaned money to a family member for a home purchase, I ensured we drew up a detailed contract and used the Applicable Federal Rate. At tax time, I had to report the interest earned on that loan the previous year as income. But if I did the question again, I would take it at face value for smaller sums of money… and no, I would not charge interest to family members in that regard.

10. If a family member dies, there’s always someone who wants more than their share. Agree, disagree? I agreed somewhat, as did 48% of other people. Surprisingly, 38% of the quiz takers strongly agreed with that statement. Usually when estates are divided, there are strong feelings in many directions… inevitably someone seems to want more than others. It may be greed, or it may simply be their way of holding on the the love of the memory for that person.

11. You should never let your relatives know how much money you have? Agree, disagree? I also agreed somewhat, as did 47% of other folks. 35% of people strongly agreed with not telling relatives how much money you have. It’s great to know your family members well and be close to each other. But it’s also important to maintain some privacy about your personal affairs. Now, if you don’t have a cent to your name… they probably already know that!

12. You borrow a neighbors mower and it breaks while you’re using it. Do you pay to fix it? All of it? Some of it? I said to offer to pay all for fixing it. 53% of folks agreed, but 25% said they would split the costs, and 21% said they would pay for some of it! My view is that if I borrow something… then whatever happens to it while I’m using it is my responsibility. It may have been ready to break down… but that doesn’t matter because I borrowed it. I’ll return it in good working condition.

13. Have you ever taken home office supplies, pens, etc. from work? I said yes, occasionally. Only 29% of folks agreed with me… 39% said once or twice, and 29% said never. 3% of folks said frequently! I was tempted to say “once or twice” but as I thought back honestly over many years, I know my briefcase included pens or pencils from the office, notepads, etc that came from the office. Most of the time this was perfectly legitimate while completing work at home. But it can cross the boundary if one is not careful. We need to make sure our “ownership” for our job and responsibilities does not included “owning” property of the company. Really though, some jobs encourage this more than others depending on the work situation.

14. Should you ever let co-workers know your salary? I said sometimes… which most people agreed with. It’s really none of their business, but in some work situations everybody knows the general salary range for each individual. Sometimes while mentoring younger workers you can help motivate them by helping them understand salary goals and possibilities.

15. Would I work for a company that I thought was doing serious damage to the environment? I said no, I wouldn’t to which the majority of people (43%) agreed. 39% agreed somewhat with the statement. But this question is based on one’s personal views and perspective of what “damaging the environment” means. Some people believe oil and logging companies are evil destoyers of the natural world, while others- myself included, see these companies as being in business to make money and serve a purpose… I believe we can do so in sustainable fashion, and with laws and regulations that balance our needs with that of taking care of the world around us.

I like Ben Stein.  He has a diverse array of talents… but the greatest ones?  I think they revolve around a genuine desire to help people succeed by sharing the lessons he has learned, and continues to learn, during his life.   His article titled A Few Lessons from the Road speaks honestly about the challenges we face as we grow old, or how jobs and the economy swing in various directions leaving many to make hard choices about money and lifestyles. 

I think he speaks more about facing the challenges in our lives by doing something… taking action now to promote change in our lives, being adaptable to other forces of change, and working to achieve a positive future.  The greatest challenge we may face?  Saving enough money for our retirement years… and trying to stay healthy to enjoy them.  I don’t exercise formally nearly enough, but I do a great deal of physical labor outdoors that, hopefully, makes up for some of it.  I seem to spend more mental energy writing, planning and completing classes.  But I believe life is about balance… and as Ben says, flexibility. 

One of my father’s friends many years ago gave me some advice.  He said to “Make uncertainty your friend.”   I’ve always appreciated those words, and in times of personal or professional challenge I have tried to view uncertainty as an opportunity.  I think we can embrace uncertainty with the awareness that we don’t have all the answers, and that’s okay.  What we do have is the ability to do things and promote change… a little at a time, and sometimes all at once.  Often the hardest part is finding the courage and discipline within to do so.  Just like Ben speaks of with saving money… start now, a little at a time, and keep after it!

“Nothing will ever be achieved if all objections must first be removed.”  

                                                                                                                         Ralph Waldo Emerson

Do you save receipts from retail purchases?  Are you planning on buying a car, boat or other large items for your home?  If so, it may be wise to save every receipt you can in order to take advantage of the sales tax deduction when you file your 2007 income taxes next year.  Essentially we have a choice… deduct state and local income taxes, or deduct total sales taxes.  Depending on how much you spend during the year, the sales tax deduction may provide a greater deduction.  The American Jobs Creation Act of 2004 initially enacted this legislation, but it was extended through 2007 as part of the Tax Relief and Health Care Act of 2006.  The Republicans wanted to ensure this deduction was available to all citizens at least through 2007.  All bets are off after this year because Congress will need to pass new legislation to extend it.  In late 2007, Congress passed legislation to continue the sales tax deduction for 2008.

But for now, it’s a great way to save on taxes if your total sales taxes paid add up to more than your state and local income taxes paid.  For those who live in states without an income tax but do have sales taxes (Florida, Nevada, South Dakota, Texas, Washington, Wyoming and Tennessee), it’s a huge freebie for an extra income tax deduction.  It may even benefit residents of Alaska or New Hampshire who don’t pay state income or sales taxes, but do have local taxes or other charges. 

I used the sales tax deduction in both of the previous two years because it added up to more than my state income taxes.  It’s really not that difficult either- we just keep a shoebox around and throw all our receipts from purchases into it.  One year we purchased a new car, and another year we purchased large appliances for our home.  The sales taxes paid on those items really bumped up the totals, and at tax time I simply added up the taxes from each receipt I had saved.  I was surprised how fast it added up, and it probably saved us $400-$700 more on our total income taxes due than we would have achieved with a state income tax deduction. 

If you have moved, or will move to a new home this year, you may have many more expenses than in previous years and could be surprised at the total sales taxes you have paid.  If nothing else, why not save receipts during the year and add up the total in November or December?  At that time if you are considering a large appliance or other purchase, maybe your decision will be easier based on the total sales taxes paid, and the larger tax deduction at filing time!

For more information, see the IRS website: Sales Tax Deduction Extended

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ID theft is a growing problem.  I’ve never experienced it first hand (knock on wood), yet work very hard to minimize the likelihood of it happening.  But you never know exactly how it could happen, and all we can really do is manage the risk.   Financial risk takes many forms, and for me fraudulent use of my identity is a very real risk.  There are stories everyday of how someone’s ID is stolen… and although true liability in terms of money may seem small, the problem is more about the time spent resolving fraudulent issues as well as future administrative burdens to prove yourself to a potential creditor, and possibly making it difficult to receive necessary health care at a critical time.  Consider this story, DOUBLE TROUBLE FOR ID THEFT VICTIM,  from MSNBC’s Red Tape Chronicles.  It took the individual over 6 weeks to resolve the initial financial problems, all the while having very little money to use while Bank of America sorted it out.  I was surprised that the bank didn’t simply “lock” the account when she notified them… and she was a former Bank of America teller!  So what can we do?  For me “managing the risk” means modifying my behavior and thinking about how I use ID relevant information.  Let me know if you disagree or do other things to manage your ID theft risk… I’m always interested in learning new things!

1.  Use the Post Office:  If I am going to mail anything with personal information on it, including checks with bills, etc, I take them to the post office (or a big blue mailbox) and mail them myself.  I don’t place personally identifiable mail in our household mailbox.  My neighbor a couple years ago had several bills stolen from her mailbox.  The thief “erased” her checks and changed the “pay to” line and the amount, stealing hundreds of dollars from her checking account.  Supposedly the gel-based ink pens will prevent this kind of theft, but she no longer mailed bills from her home’s mailbox.  It only takes one time, so I simply don’t use our mailbox more than we have to.

2.  Paper checks:  We pay most of our bills online, direct from the bank to the payees.  This not only saves time, but I don’t have to write out a check and mail it in the first place.  I actually feel more secure this way, and have been doing so since 1998 without a problem (knock on wood again!).  I write very few checks locally, even at the grocery store.  Instead we use our ATM/Debit/Credit cards.  When we use these cards, we always select the “credit” option.  Sometimes you have to tell the cashier to use “credit” or modify the entry on the keypad swipe device.  If it automatically comes up asking for your pin, just push “cancel” and then select “credit” or tell the cashier to do so.  The liability for using the credit function is greatly reduced from that of debit.  Debit cards have their own problems, and I don’t want to stand there and enter a pin anyway.  There have been some ID theft reports of where theives watch from a distance for PIN entries, even at gas stations.  With the PIN the thief can then make a card that works and empty your bank account.  But paper checks?  I just don’t like using them.  They can be easily duplicated by a determined thief… from Bob Sullivan’s article above:

“A little known truth about paper checks: Anyone can take the account number and routing number off the bottom of a check and create new, bogus checks with them.  The name and account number don’t even have to match.”

3.  Credit History:  When was the last time you checked your credit history?  I have used a credit monitoring service for a couple of years, recently stopping to find a service at a lower price.  I started well before we purchased our latest home in order to monitor my credit scores.  I’ll start again when I find the right company/service based on the cost.  But it was very useful during that time.  I had monthly access to all three major credit reports, and I received email notification whenever something changed officially on my credit report.  Checking your credit reports can show you if anyone else has opened credit in your name, as well as a host of other information that you may be surprised to see if you’ve never looked at it before.  Most credit-monitoring services cost between $9 to $20 per month, so it can be expensive.  But it is peace of mind, and if you plan to purchase a home or some other major expenditure involving financing in the next 1-2 years, it may be worth it to verify where you stand.  If you are surprised by some information you didn’t know was in your credit report, you will now have time to correct it before applying for a loan.

4.  Shred paperwork at home:  I try not to throw anything in the trash with personally identifiable information on it.  I don’t know if anyone would rumage through my trash, but it is an easy way for a thief to gather personal data.  Instead we shred everything that we no longer need.

5.  Driver’s licenses:  Some states automatically ask to use your Social Security Number for the driver’s license.  But most also give you the option of selecting a different number, which is the best solution.  Some stores or businesses want to make a copy or record the number of your driver’s license at times… why give them your SSN to do so? 

6.  Social Security Numbers:  I try to never give it out.  Yet many institutions, schools and other business routinely require it.  Yes, they may not be able to force you to give it to them, but often they won’t let you do business with them otherwise.  I bought a large piece of machinery a while ago, financing it with the company.  Once I received the payment booklets I was shocked to see that my account number was primarily made up of my SSN, with just one or two extra characters!  Poor business practice in my book, and the company wouldn’t change it.  I don’t mail payment stubs back to them… instead I pay them online, but yes, including the SSN-based account number.   Many schools and colleges require the SSN for records and accounting.  But many will also let you select a different student ID number.  I was attending a school a few years ago that used the SSN for everything… and they had tons of paperwork for data entry.  Piles of paper just sat around with countless students’ SSNs on them.  Shopping for a car?  Never give the salesman your SSN unless you are ready for them to conduct a credit check.  They don’t need to see your credit history unless you are serious about buying, and financing, a car from them.  If you are using your own bank, then they don’t even need to know it.  And how many people still write their SSN on paper checks?  Too many… the people often doing so are older and it has been a long habit.  Not a good idea anymore.  I once tried to open a movie rental account at local branch of a major rental company.  They wouldn’t do so without my SSN, so I said “fine” and found a different rental place.

7.  Passwords and Internet use:   In short, make sure your passwords are “strong” passwords.  That means at least eight (8) characters, including numbers, special characters and some capitol letters.  Why make it easier for someone to gain access to an internet account because you want an easy to remember password?  You can make up a strong password with an easy to remember key sequence, or one that means something special.     Where do you keep your password list?  Many people just write it down in the calendar book, or a notepad.  But you can use special encryption software that “holds” your passwords for you- many varieties exist, just make sure the one you choose has excellent encryption technology.  It’s easy to do, and you can use one “strong” password for the data file.  That data file can usually be exported so you can back-it-up, and if your computer crashes you still have the list.

8.  WiFi and other wireless internet:  If you are using wireless internet, then take advantage of the password capabilities that come with it.  There are several forms, but surprisingly many people don’t use any of them.  At a minimum you can use the WEP password protocols, but I recommend at least using WPA with a passphrase that you can always remember.  The likelihood of someone snooping on and using your wireless internet access is small, but in more populated metropolitan areas the odds are higher.  My concern for access to my wireless internet is more for potential criminal activity that could occur using my internet services, and possibly access to my computer systems.

9.  Virus protection:  A must for your computer these days.  My favorite is the AVG series of virus protection and utilities.  They have a great free product that I believe is as good as Symantec or McAffee, with less impact on the computer system itself. 

10.  Email and Browser use:  We read countless stories of “phishing” and hijacked web browsers.  We just need to be alert to the fact that the interent is loaded with malcontents and thieves who are trying to get your passwords and to get you to give them your personal information.  It’s not so hard to do with a moment’s inattention.  My rule is that I never open email unless I know who it’s from, or I know it’s from a trusted company or source. I’ve received tons of “official” looking email from companies I do business with- and I’ve opened them… often to read that they are asking me to click a link and re-enter some type of personal information.  That’s when I know they are phishing attempts or fake emails.   Just don’t do it!  If I ever receive paper mail, a phone call, or an email that asks for personal information- I will contact the company I do business with and ask them myself if there is a problem.  Don’t give anyone your personal information unless you contact them first and verify why they need it!  Hi-jacked web browsers can often be a subtle form of manipulation.  Try to always look closely at the web site and ensure it’s the real one… make sure the security “lock” is seen in the corner of your web browser.  If in doubt, don’t use it.

11.  Medical ID theft:  This is an ever increasing area of ID theft where someone steals your persona information to use for gaining access to health care services.  Most of the companies use special secondary companies to process claims and codes for health care services, and all that paperwork has our personal information on it.  What can you do?  At my last visit to my primary care hospital, they verified my ID, and made a scan of my ID card, driver’s license, etc. at the time of service.  That was their way to verify identity, and I was pleased they did so.  I try to minimize the personal information I give out when using health care services unless absolutely necessary.  But often, thieves steal someone’s ID in another manner, and then use that information for gaining access to health care services.  If you receive strange claims or paperwork from your health care provider, you may want to check it out and ensure no one is using your ID.

12.  Your Wallet or Purse:  Do you really need to carry your Social Security card in your wallet?  What other forms of ID do you have in there?  Fortunately I’ve only lost my wallet once before, and found it in a trash can with everything, except the cash, still inside.  I hope it doesn’t happen again, but if it does, I will have very little personal information in it.  But there is enough for a thief to do some serious damage if I don’t respond right away.  My plan of action is to contact every creditor and company that my wallet reflected I may have an account with, and make sure they know it was stolen, and then have new cards re-issued.  Come to think of it, I better make a list of just what those cards and retailer names are… so I won’t have to try and remember what I was carrying with me!

13.  Your Auto / Vehicle:  What forms of ID or other information do you carry in your glove box or trunk?  I try to carry only what is absolutely necessary… sometimes when I go through my glove box I find more stuff than I realized, like bank statements.   If someone steals or breaks into my car, I don’t want to give them all my personal information along with it.

Practically speaking we may not be able to prevent evey possibility that will lead to ID theft.  But we can do our best to minimize the risk of ID theft happening.  There are also various insurance programs that will “pay” to help defray the costs of ID theft for a victim.  I have yet to read of any of this type of insurance actually helping anyone- for now it seems somewhat of a gimmick since most of the hassle with ID theft is an administrative one over time.  The statistics indicate that it is most often someone in your local area, or a relative, that will commit ID theft in the first place.  Wikipedia has a decent overview of the issues involving Identity Theft, and here are a few other resources and information you might find helpful:

• Federal Trade Commission:  Fighting Back Against ID Theft
• ITRC:  Identity Theft Resource Center 
• Better Business Bureau Online:  Identity Theft
• Privacy Rights Clearinghouse