Permanent Value

Week In Review 7/25/2016

Bruce Doole
July 25th, 2016
The Recipe For Building Wealth Hasn’t Changed

Building wealth has gotten harder for most people in recent years. But the habits that can make you financially independent haven’t changed.
It boils down to this: putting aside money, regularly and consistently, that can be invested for your future. You have to leave that money alone to grow, which means you also need an emergency fund. And you must be careful with debt, because the wrong kinds can erode your wealth rather than build it.

They Pay Themselves First
If you have nothing saved, start. You don’t need to have several months’ worth of expenses set aside, at least not yet: $500 is enough for now. That will cover many minor emergencies that might otherwise add to your debt.

Put aside something, anything, into an emergency fund every single paycheck. Pay the minimums on your credit cards and student loans and mortgages if that’s the only way to get a little breathing room. Make the transfers automatic, so they happen before you see the money and are tempted to spend it.

Then Invest For Retirement 
If there’s one thing every 20-something should be doing, it’s contributing to a retirement fund. There’s no better time to put money aside than when you have decades ahead of you for that money to grow.

Those who start early have a much easier time of it: To retire with 60 percent of current income, someone starting at age 25 needs to put aside 6.4 percent of their pay. A 45-year-old would need to save 19.4 percent.

You need to have most of your portfolio in equities, such as stock exchange traded funds. The financial crisis and continuing stock market volatility scared many people into keeping their money in low-risk investments, but that’s no way to get ahead. You need the kind of investment growth that can outpace inflation, and that’s what stocks offer.

They’re Smart About Debt
Moderate amounts of student loan debt can help you get an education that boosts your income. A reasonably sized mortgage can help you build equity in a home. Otherwise, you need to be cautious about adding new debts and vigilant about getting rid of any toxic debt that’s weighing you down.

As you move away from a paycheck-to-paycheck life, though, you’re getting financially stronger. You’re better able to weather setbacks and you’ll have assets, such as stocks and a home, that can grow in value during good times. Even if you never make it to millionaire status, you can build a decent net worth that means a more comfortable life.

Source: Yahoo Finance

THIS WEEK’S ECONOMIC DATA

  • U.S. housing starts rose 4.8% in June to a 1.189 million annualized rate with permits up 1.5% to a 1.153 rate.
  • Great Britain Labour Market Report indicated that joblessness rose a smaller than anticipated 400 on the month in June, but May’s previously reported 400 decline was revised to a 12,200 increase. The unemployment rate held steady at 2.2%, up slightly from the low seen in January and February.
  • U.S. EIA Petroleum Status Report showed that crude oil inventories fell 2.3 million barrels in the July 15 week to 519.5 million, while gasoline inventories rose 0.9 million barrels to 241 million and distillate fuel stocks fell 0.2 million barrels to 152.8 million.
  • Great Britain retail sales cooled in June to a lower than expected 0.9% monthly fall that fully reversed May’s increase and reduced annual growth of purchases from 5.7% to 4.3%, its slowest rate since March.
  • U.S. jobless claims fell 1,000 in the July 16 week to a 253,000 level that is far below the consensus which was calling for a spike back higher.
  • U.S. existing home sales extended May’s gain, rising 1.1% to a 5.570 million annualized rate for June.

Source: Ivy Weekly

Week in Review 7/18/2016

Bruce Doole
July 18th, 2016

The 75% dilemma

Could it be possible to avoid paying the higher cost of out-of-state education? Is there any way to sneak into your out-of-state dream school, but pay the in-state price?
Six ways to save 75%:

1. Take advantage of academic common markets
Across the country, four groups of states have banded together into what they call “academic common markets,” or ACMs. Within each ACM, students from member states may be entitled to discounted tuition rates — up to and including full in-state tuition benefits — when attending schools outside their home state, but within the ACM.

2. “You’ve got a friend in Pennsylvania”
An analogous program, dubbed the “friendly neighbor policy,” may be available from states that are willing to bend the rules a little. Sometimes, a state will grant in-state tuition rates to a student who lives near its border but in a neighboring state. But we need to emphasize that this is a “sometimes” option. The friendly neighbor policy is less official and more variable than an academic common market.

3. Neighbors with benefits
You should also looks into whether your state has negotiated a specific deal for in-state tuition reciprocity with a neighboring state. Such deals take place outside any academic common market, and they’re not at all common. That said, Ohio and Minnesota, for example, are fond of negotiating these types of agreements. Colorado and New Mexico also have one between them.

4. Doesn’t everyone “move” to college?
Just because you move to a new state to attend college doesn’t make you an in-state resident. To the contrary, moving to a state to attend college may in fact disqualify you for in-state status. The key is to move into the state before applying to the college, establish ties to the state, and only then apply.

As a general rule, you’ll want to make the move at least one full year before the school year begins. You’ll also want to begin assembling documentary proof of your ties to the new state immediately — so make sure to pay your taxes, register to vote, and get a new driver’s license in your new state as well.

5. Emancipate yourself from college debt
Too late to make the move before school starts? There’s still another option. If a student declares financial independence from his or her parents — and can prove it by, for example, showing he or she has sufficient funds (or access to sufficient loans) to pay for tuition and room and board — then it may be possible to become an in-state resident even after starting school.

6. You want cheap tuition? Uncle Sam wants you!
Join the Army (or Air Force, Navy, or Marine Corps). Members of the U.S. military can essentially pick a state for their domicile, and if that state just happens to be the one with the best in-state tuition rate, well, what a happy coincidence!

Source: The Motley Fool – Rick Smith

This Week’s Economic Data:

  • Japan Producer Price Index slipped 0.1% for June and tumbled 4.2% from a year ago.
  • U.S. job openings fell sharply in May to 5.500 million from April’s revised 5.845 million – the lowest rate since February.
  • The U.S. Treasury posted a $6.3 billion surplus in June, but nine months into the government’s fiscal year, the deficit is widening sharply, up 27% to $400.9 billion versus $316.4 billion this time last year.
  • China retail sales remain robust and are expected to grow 9.2% in 2016.
  • U.S. jobless claims remained unchanged at 254,000 for the July 9 week.
  • U.S. consumer sentiment flash for July is down 4.0 points to 89.5.
  • U.S. retail sales posted a healthy gain in June, up 0.6%.

Source: Ivy Weekly

Week in Review 7/11/2016

Bruce Doole
July 11th, 2016

10 Social Security Myths Debunked! (2/2)
Myth 6: Social Security doesn’t pay much.
The average monthly retirement benefit was recently $1,347. That amounts to $16,164 per year, and probably doesn’t seem like that much. Note, though, that if your earnings have been above average, you’ll collect more than that — up to the maximum monthly Social Security benefit for those retiring at their full retirement age, which was recently $2,639 — or about $32,000 for the whole year.

Even the smaller benefits are meaningful to most people. According to the Social Security Administration, the majority of elderly beneficiaries get 50% or more of their income from Social Security, while 22% of married elderly beneficiaries, and 47% of unmarried ones, get fully 90% or more of their income from Social Security.

Myth 7: Those who never worked for an employer will never get Social Security benefits.
If you’ve worked for yourself and have filed tax returns as a self-employed person, you will have paid into the system and can expect benefits. Self-employed workers actually pay twice as much into Social Security as employees do.

Myth 8: The retirement age at which you start collecting benefits is 65.
We often think of 65 as the normal retirement age, but in order to strengthen the Social Security system, the normal (or “full”) retirement age was increased. For those born in 1937 or earlier, it’s 65, and for those born in 1960 or later, it’s 67. For those born between 1937 and 1960, it’s somewhere in between.

Myth 9: There isn’t much you can do to change the amount you get.
This is wrong, too. You can start receiving benefits as early as age 62 and as late as age 70. For every year beyond your full retirement age that you delay starting to receive benefits, you’ll increase their value by about 8% — until age 70. So delaying from age 67 to 70 can leave you with checks about 24% fatter.

Retire early, and your benefits may be up to about 30% smaller. Note, though, that the system is designed so that total benefits received are about the same no matter when you start collecting, for those with average life spans. Checks that start arriving at age 62 will be considerably smaller, but you’ll receive many more of them. You can also increase your benefits by working longer, earning more, and/or coordinating strategies with your spouse.

Myth 10: Social Security benefits are not taxable.
They are often not taxed, but they could be taxed. If you’re working, or have other significant income while collecting Social Security benefits, up to 85% of your benefits might be taxed.

Source: Selena Maranjian

This Week’s Economic Data:

  • New orders for U.S. factory goods fell in May by 1.0%. The drop followed a 1.8% increase in April. It was led by weak demand for transportation and defense capital goods. However, experts believe the worst of the manufacturing downturn is over.
  • U.S. non-manufacturing had the fastest increase in June, the highest over the past seven months. Service sector activity rose to 56.5 from 52.9 in May. It was above the expected rating and the highest since November.

Source: Ivy Weekly