Ok so here's the situation..

I know there was an update here earlier but all that has kind of changed.  I needed to do a little more organizing before I posted the last update.  If you don't know what I am talking about that means I removed it since you've been here last so no worries.  There is tons of fun happening mainly in the shape of two new blog spaces.  I've decided that this blogging project was either going to get bigger or it was going to be forgotten about so as I say in one of my new spaces..I decided to grow.  The two new blogs are broken out into a "professional" and a "general interest".  The "professional" can be found at www.financiallydigital.squarespace.com and the "general interest" is www.everythingelse.blogspot.com.  Financially Digital is going to be replacing Physical Therapy for Your Wallet in pretty much title alone.  I wanted to spread the coverage to include tech, which is also a passion of mine, as well as finance.

I will be leaving this space up for a while as I finish the new space. What I really should have done was pick myself up a copy of Blogging For Dummies sooner so I could have saved myself some headaches.  You live and you learn.  I'm excited to keep bringing my voice and personal touch to these topics and hopefully you guys are excited to keep reading.  So go look around the new places and let me know what you think!!

Cheers!

Oh Nooo Not More Infaltion Garble...

When you are talking to your friends or are at the dinner table with family can you think of a type of conversation that, regardless of your personal experiences, gets everyone fired up? I’m willing to bet that this is the same kind of conversation that some of you flinch at when you hear the two magical prefacing words; “hypothetically speaking”. Part of the fun and frustration is that there is either no right answer or lots and lots of variables to consider. I have a conversation like that for us today. When the dinner time conversation turns to finance and the economy, inevitably someone is going to bring up inflation. Today I hope to give you some intellectual ammo in the event of an arm chair economist face off. Hypothetically speaking of course.

Today we are going to cover what inflation is, how it’s calculated and its different causes.  At the end of today though be sure to check out the link to the Massachusetts specific inflation page from the U.S. Bureau of Labor Statistics. Time to let the variables fly! 

Inflation is defined as the increase in the price level for goods and services over time.  The biggest tool that the Bureau of Labor Statistics uses to determine the changes in prices levels is the Consumer Price Index or CPI. Think of the CPI as a picnic basket full of goods and services that you, as a consumer, use every day. CPI takes price and weighted use of goods and services data from over 87 urban areas and 27,000 retail and service establishments to track changes in the economy’s price level. Within the CPI are categories that range from housing, rent, and new vehicle purchases all the way to the eggs, milk and bread you use every day. CPI measures price fluctuations as percentage changes from month to month and from fixed points like December 2008 and 1967. What setting points of reference allow economists to do is to find patterns and make conjecture about where inflation has been and where it might go in the future.  That conjecture is what the Federal Reserve and the current Administration use to make decisions on fiscal and monetary policy. The CPI gets the data it uses to calculate price changes from the Consumer Expenditure Survey put out by the Bureau of Labor Statistics. 

Let’s set up a small example that illustrates inflation at work. If on the news you hear that inflation has gone up 3% in the last year what does that mean for the consumer? Well for starters that $1.00 soda in the grocery store effectively costs $1.03. Inflation reduces the real purchasing power of your dollar, or it takes more dollars to purchase that same good. Inflation is not just about prices going up and I don’t want you to stop reading here and think that it’s all bad either. In fact in a healthy growing economy you need a certain level of inflation so that prices don’t get out of control and that workers all over the country get wages they deserve. Inflation as an economic indicator is used to mediate wages, adjust fixed income streams like Social Security, and affects the cost of your children’s school lunch programs.

There are basically two major economic causes for inflation, a Demand-Pull and a Cost-Push. Keep in mind we are covering the topics in brevity and making assumptions along the way like not considering demand elasticity, substitution, and market competition. When there is a Demand-Pull it implies there is too much money floating around in the economy chasing too few goods. People are willing to spend more for the same goods. When the news talks about worries of the Treasury just printing money or the debate over the effectiveness of stimulus checks being sent out to everyone they are referring to a Demand-Pull concern. The biggest part of that concern is that prices will rise too quickly, which is called hyperinflation, and imagery of an early 20^th Century Germany comes to mind with rapid devaluation of a currency and unimaginable bread lines. On the other side is Cost-Push which has more to do with the costs that companies have to incur in the production of goods and services and the ultimate effect on the price the consumer pays. Here the variables are more in line with resource scarcity like with timber and other natural resources that have inherently fixed amounts of inventory. The taxes on the raw materials imposed by the government and the cost of imports are also factors. Ultimately if the costs of production increase, with no foreseeable substitutes available, then the costs to the consumer will increase which implies inflation.

I hope you are starting to see why there are so many debates over what the causes of inflation at any given time actually are. With that debate goes the debate over what kind of policy should be enacted to address it at any given time as well. It’s a calculation that is much easier to see in hindsight when consumers have made their purchases and suppliers have shipped their goods. As promised take a look at how Massachusetts is doing compared to the rest of the country.  If you are still confused give one of my favorite economists and books read, its Naked Economics: Undressing the Dismal Science.  I think if you give Charles Wheelan a chance he makes this stuff fun and is extremely well spoken. 

Cheers! 

Just graduating or just starting? A quick list

Happy Tuesday!

I was just talking to a friend of mine who is going to be graduating and moving right into his professional role as a pharmacist.  He started picking my brain about things he should be thinking about when he graduates so that he doesn't just blow through all of his income.  From what I have heard about pharmacists they go from having the income of a part-time working student in college to making upwards of $100k their first year depending on their location.  As I was answering those questions I thought it would be a neat idea to post up some bullets just in case anyone else was in the discovering phase of their new financial planning obligations.  This too goes for anyone who might not have every thought about getting themselves organized.

1.) Setting up your companies retirement.  If your going to work in bigger firm odds are their company's HR department will be tossing lots of folders and packets your way with lots of deadlines.  For retirement it's a good idea to at least contribute enough to take advantage of any matching program your firm offers.  As far as stock purchase plans, or other stock based incentive programs if you are unsure start small, look for the minimums to participate and as you get more comfortable you can increase your contributions.  In the retirement plan you'll have lots of options and without giving any kind of specific recommendations try to diversify using large, mid, and small cap funds as well as a global that way you create some kind of diversity until you can have your in house or personal financial professional take a look.

2.) Your IRA.  If you are eligible I would recommend setting up a Roth, there aren't any deductions you can take as you contribute but it grows tax free and for the most part the withdrawals in retirement are also tax free.  Under certain situations you can access funds in it before retirement without any tax consequences as well and for more on it check out this IRS publication http://www.irs.gov/pub/irs-pdf/p590.pdf

3.) Automate your savings.  If you know you have a few different goals your saving for its ok to have a few different savings accounts.  If you want to vacation once a year, buy a home in five years, and a new car in three then have those accounts separate.  Right from your paycheck have amounts deposited that you feel will get you to those goals, just set it and forget them.  You can do the same for checking accounts and your bills. Having different accounts makes your savings easier to track and honor so that you aren't overspending.  When the time comes to buy that first home you know you'll have saved for it and can spend from it worry free.  Last note it's a good idea to have at least six months worth of expenses in an account in case of an emergency.

4.) Have fun.  After all that is said and done it's ok to go out and spend on the things that make you happy.  If you aren't enjoying what you worked so hard to achieve in school or working up the corporate ladder then you will drive yourself nuts thinking about all this stuff.  That's the great thing about automation, at the end of it you know exactly what your working with and you'll still cover everything that you have to.

4 1/2.) Credit.  Don't be afraid of it. Get a few credit cards and use them.  I know, I know you're thinking what kind of planner tells his clients to go out and wrack up crippling credit card debt.  That's not what I'm saying at all.  Throughout life so much is based on that little credit score number so like working out to get a better body we need to work your credit to get a healthier score.  Go out and pick up a few big ticket items and then break out the payments over the year.  Don't rush to pay it off.  The idea here is that you are demonstrating to credit companies that you are a positive credit risk and that in the future it will be easier for them to extend your credit lines or offer you great mortgage rates.  Before you get carried away though you might want to take a look at Credit Card Nation: The Consequences of America's Addiction to Credit.  It will  scare you straight.

I know I said bullet points but those were more like explanation points.  Please also note that things talked about here were in brevity, if you can believe that.  It was just to give an idea of some of the things you should start to think about.  If you want to know more about anyone thing feel free to shoot me an email or leave a comment. I love the feedback good or bad. And thanks to my friend for sparking that conversation!!

Cheers!

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Really...really..

Wow.

I am such a bad blogger. I really do want to make this a better blog and not let it just die.  I went back to actually reading about making blogs better and getting to the meat of what I'm passionate about so that I don't let this blog fade away.  One of my favorites so far has been Problogger.  I picked up ProBlogger: Secrets for Blogging Your Way to a Six-Figure Income and gave it a good read.  It's less about making an income blogging like so many bloggers aspire but more about ownership of your content.  I believe in spreading financial awareness but I, like everyone else, get so caught up in everyday to-do's that I don't give this blog the love it deserves.

I believe that researching why I've been so bad at this was the first step, a passive aggressive one, but a step none the less.  My next action item is to kick this blog into gear again.  Wish me luck!

Cheers!

A blast from the past..

Happy Sunday!

I know, I know..two updates in two days, that is just crazy. I'm really trying to make the effort to bring this back so here I am yet again. Tonight though I think I have a treat for you. What I'm posting is an article that I wrote from my personal finance column for Boston.com. I've been seeing a lot in the news lately about the rise in filings for personal bankruptcy, so I went looking through my articles. Turns out I covered this subject in a Bankruptcy 101 kind of way back on June 29, 2009. Take a look through and I hope you enjoy it..

Cheers!

"Welcome to another, hopefully productive, Tuesday morning. All I can continue to say is thank you to everyone who contributes for your continued support. Today my hopes are to get into something a little more focused and a bit hot buttoned – bankruptcy. It’s been all over the news lately and it’s one of the most requested topics to date. So far the best comment I’ve received on the subject had to do with a concern from a GM vehicle owner wanting to know if he would be able to get his car serviced reading that the company filed for bankruptcy. I proceeded to respond, as quickly as I could, that you can rest assure a company like that isn’t just going to throw in their chips and walk away.

All forms of bankruptcy correspond with chapters in the Internal Revenue Service Bankruptcy Codes and there are six major filings for bankruptcy. The three most talked about filings are Chapters 7, 11 and 13 which we will cover in more depth than the next ones mentioned. The other three are Chapters 9, 12, and 15 and we’ll cover those very quickly now. Chapter 9 has to do with the adjustment and repayment of debts that a municipality is responsible for. Chapter 12 has to do with the adjustments of debts for and protection of family farm and fisherman assets. Last but not least is the Chapter 15 that has to do with insolvencies that stretch across national borders and the process for bankruptcy estates to be settled when there is more than one country involved. Sorry for the rapid fire but I could talk about this stuff for a lot more than the seven hundred-ish word limit that I constantly spill over.

A broad definition for bankruptcy just to set the foundation is; a process that a debtor initiates when they, individual or business, are unable to satisfy financial obligations they are responsible for. It’s not just about getting off the hook for credit you might owe. Something that people might not think about when they enter into bankruptcy proceedings is any debt that may be forgiven or cancelled by the creditor turns into income on the borrowers side which means extra tax liabilities come April 15^th. So on top of the stress to your credit health there may be an extra financial liability by the end of the proceeding.

Chapter 7 paints the picture of the person who may be more than just be down on their luck. What I mean by that is they are unable to satisfy current debts and have no form of regular income, if you make too much you will not qualify for Chapter 7. What happens here is the Chapter 7 filings begin with the courts and a “bankruptcy estate” is created. It’s the job of the court to turn whatever assets they need to into liquid cash and pay the creditors that are owed. There are assets that are exempt from liquidation and they vary by state but some common ones are your Declaration of Homestead, life insurance benefits, and pension funds. Most likely as soon as the proceedings end you are discharged of any debts because your assets sold satisfy them all. After the procedures are concluded the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA of 2005) states eight years must pass before you can file for Chapter 7 proceedings again.

Chapter 13 is along the same lines as Chapter 7 and is often times preferred. In Chapter 13 you have the opportunity to create a plan to repay creditors over a time period. It’s more about debt reduction and court appointed repayment deadlines than it is about straight out liquidation. A trustee may be assigned to your estate by the court but you get to keep control over your assets. It’s up to the court to decide whether your plan meets the Chapter 13 requirements and can make changes to it depending on your situation. Unlike Chapter 7 though you aren’t cleared until the proceedings are through, meaning you aren’t discharged of the debts until your planned repayments are finished. While the plan is in effect you are protected from further actions that creditors may seek otherwise, i.e. lawsuits and further garnishment of wages. Time between filings here are four years by the BAPCPA of 2005.

The big one in the news is Chapter 11. What happens here is under court supervision businesses are allowed the opportunity to create a plan similar to what the individual does in Chapter 13. Businesses have the chance to cancel contracts, sell assets, and restructure corporately to repay debts owed. The goal for a business here is to come out still in business and making profits again. The courts are very much involved and have the ultimate say on the details of a plan. So in GM’s case the very-important-people not arriving in a private jet makes a good impression on the courts.

That in an, abbreviated, nutshell is the difference between the different kinds of bankruptcies out there. In the articles to come I’ll try to break them out better individually, so we can really sink into the demystification of bankruptcy. If it’s something you’re considering or just want to learn more about in the mean time, IRS Publication 908 of 03/2009 is a good starting point found at www.irs.gov. My hope is at the very least is I was able to bring up some talking points about a word that’s clouded in propaganda and fear by the media and by people who might not know the differences out there. I’m sure the farm families that get to keep their farmsteads in bad times can appreciate it so it’s not all bad right?

Cheers!"

New Year, New Me. Well same me but...

Happy Saturday Evening!

It's that time again; a little over a week into the New Year. How are those resolutions holding out? Still rolling strong or still the same wishful thinking from a week before January 1, 2010? Now about this time last year I posted about conducting your financial physical and you can check that post out if you scroll down a ways. I'm not here now to just rehash that subject but it still very much applies, a financial physical is something everyone should get in the habit of doing.

Something quick that I wanted to vent about while it was still fresh in my overcrowded head space was more along the lines of goal setting and tracking. I am constantly learning new ways to trick myself through these little mental hurdles that from an objective rational point of view should be non-issues to start with. My tribulations run from projects I'm working on (like this blog) to even staying motivated at the gym (which was not part of my personal resolutions because I'm a gym rat already). I know I'm not the only one out there that has these problems and I even coach people to get over their financial hurdles all the time. If you were looking for an excuse to get going or stop procrastinating here is the excuse. It's still really early in 2010 so get started. It doesn't matter where you are now financially the point is to pick your tracking medium and start. One of my favorites is still Mint.com, it will give you an instant gut check provided you keep honest with it. If you're more old school your spread sheet of choice or even good old pen and paper will suffice.

Set a real, reachable, track-able, tangible goal. If it's a savings number, a return for a portfolio, or even just to number that you want to work your discretionary spending down to just set it. If you're visual like me make some kind of graphical way to track it. I'm still a fan of coloring so I make little thermometers that I can color in as I go along which in itself is gratifying. Create a plan for yourself and write it down somewhere. Every week take a look at it and make sure that your actions for the week are reinforcing your efforts to reach your goal. Let someone else read it and give them a copy so they can hold you accountable, make sure it's someone you trust handing over your personal financial goals over to. Then at the end set up a little reward for yourself so that not only did you reach the goal that you set for yourself you also threw a little kicker in there. An example would be taking a savings goal, increasing the base by 5% and then using that extra to treat yourself at the end. It sounds really fundamental but you'd be surprised at how many people drag their feet or let their resolutions fall to the wayside. Own it people!!

Now I'm no authority on keeping people motivated, nor am a goal crushing guru, I just know what works for the people I work with and myself. So if you swing by this post and read my little rant hopefully it just gave you the little mental push to get started and if I failed to motivate then do what you need to do to get motivated!! Just trying to plant the seed here. Stay tuned for some meatier content as my resolution is to resurrect my little pet project here and bring some substance back.

Cheers!

I must be a magician..

So it looks like I have a good handle on the whole vanishing writer act. I know that it's been a very long time since my last post, but I'm back. Lots of transition, including a brand new living situation, which is always exciting. I hope to get back on to the posting at least once every couple of days...I have to bring this thing back to life.

Thanks and see you soon!