Monday, June 30, 2008

Black Money Tips: Ways to Get Rich


The smart way to get rich - MSN Money

Feel like taking a risk in hopes of hitting the jackpot on a rocket stock? #mediaarticle #articleBody #segment {HEIGHT: 1100px!Important}

Before you make the leap, you might want to get a grip on risk

Prices go up, prices go down, and you never know which way they're headed next. A lot of folks would say, well, that's risk. But really that's only half the picture. The other half is what you do in response.

After all, there's nothing wrong with risk itself. What's important is how you handle it. To know how to manage the risk-reward equation, you're first going to have to get a grip on what you're playing with -- and how much you can afford to lose.

It's pretty hard to talk about investment risk without falling into a lot of clich├ęs about roller coasters and bungee jumping and being able to sleep at night. That imagery is entertaining but maybe not terribly helpful. Instead, let's start with the basics. We don't want to lose money, right?

"Obviously, negative return is risk," says Lee Schultheis, the CEO and chief investment strategist at AIP Mutual Funds in White Plains, N.Y.

Pros such as Schultheis use some pretty powerful computer-driven tools in their analysis of risk. Here are just a few of the concepts that are important to them:

  • Standard deviation, much beloved of finance professors, measures how much the results of a process tend to vary. The higher the standard deviation, the more unpredictable the results.
  • Correlation, used by those managing diversified portfolios, tells you how much two assets move together to reinforce -- or offset -- performance.
  • Value at risk, often used by hedge funds, measures the likelihood that you will lose all of your money in any time period.

All three are mathematical concepts and require some comfort with statistics to calculate -- but not to understand. Each translates the uncertainties of risk into mathematical estimates of likelihood that offer a good basis for planning.

If you have an investment with a high standard deviation, close correlation to other investments or a high value at risk, you're taking on significantly more risk. If more than one of those factors is involved, watch out.

Let's say you're thinking about doubling up an investment in technology stocks. Results in that sector are going to be erratic to begin with.

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Friday, June 27, 2008

Black Money Tip: It is not Always Best to Buy a Home


This is an article explaining some reasons why you might not feel it necessary to purchase a home.  I agree.  What is also true is that there are convenience reasons that an individual may not want to buy: if you are only living in a city for a short period of time, don't want the hastle and expense (not to mention taxes) of home ownership, you have a business that is already giving you a good return or you have a great tax write-off elsewhere.  Owning a home is great, but it is more important to remember the importance of eventually owning SOMETHING.  It doesn't have to be a house. 

Real-estate agents have been pushing the virtues of homeownership since homes were invented. Or since real-estate agents were invented, anyway. Paying a mortgage, they insist, is a can't-miss investment (the tax breaks, the appreciation, the thrill of fixing your own roof!). Renting is for simpletons who don't like keeping their own money.


But does owning a home really trump renting? With the economy stumbling, house prices falling, and credit tightening, many housing experts are questioning the conventional wisdom. "Over the last decade, it may have been true," says W. Van Harlow, an economist at the Fidelity Research Institute. "Clearly, there are periods where [the housing market] will dominate. But give this market correction another 18 months, and it may not be true anymore."

Not so hot. The housing boom produced endless stories of homeowners getting twice what they paid for their homes. But "prices don't always go up," says Jay Butler, director of realty studies at Arizona State University. Even a boomtown like Phoenix has seen median rates of appreciation climb only 4.6 percent a year since 1981. According to a Fidelity study published this year, the return on a dollar invested in real estate in 1963 barely beat that of a low-risk treasury bill.

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Long Term Financial Consequences of Divorce

s you may already know, June is the most popular month in this country for weddings. So now that the marrying month is almost over, I thought it might be a good idea to turn the focus to - what else? - divorce!

I don't mean to be a downer about it, but the reality is, the divorce rate in America has hovered pretty close to the 50% mark for years now. And while there are lots of financial (not to mention emotional) complexities related to divorce, financial planners say one of the most common mistakes people make after getting un-hitched is simply failing to update the beneficiary forms on their retirement accounts.

And that can lead to all kinds of unintended financial consequences years, or even decades, down the road.

Here's why: if you get divorced, you'll probably make a point of updating your will to exclude your ex-spouse. But what you may not realize is that your will has no bearing whatsoever on who inherits any money sitting in your qualified retirement accounts - including an IRA, 401(k), 403(b) or traditional company pension plan - at the time of your death.

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Dems Who Flipped On FISA Immunity See More Telecom Cash, By Chris Frates - CBS News


(The Politico)House Democrats who flipped their votes to support retroactive immunity for telecom companies in last week’s FISA bill took thousands of dollars more from phone companies than Democrats who consistently voted against legislation with an immunity provision, according to an analysis by

In March, the House passed an amendment that rejected retroactive immunity. But last week, 94 Democrats who supported the March amendment voted to support the compromise FISA legislation, which includes a provision that could let telecom companies that cooperated with the government’s warrantless electronic surveillance off the hook.

The 94 Democrats who changed their positions received on average $8,359 in contributions from Verizon, AT&T and Sprint from January, 2005, to March, 2008, according to the analysis by MAPLight, a nonpartisan organization that tracks the connection between campaign contributions and legislative outcomes.

Retroactive immunity could squash about 40 lawsuits pending against telecommunication companies that helped the government monitor the telecommunications traffic of Americans without warrants. The telecom industry has lobbied hard to insure that the provision is included in the Foreign Intelligence Surveillance Act update Congress is currently considering.


Monday, June 23, 2008

Black Money, Black Love, Black Families: Financially Fit Divorce?

I just saw an article today on "How to Leave Your Husband". The article focuses on how women can have a financially fit divorce. I find it amazing that we have gotten to the point that these are the kinds of articles that appear on the front pages of major media outlets. This speaks well to the state of love in America.

The article also seems to imply that beyond the 50% of all Americans who end up in divorce, there are many others who would be divorced if only they could find a way to get it done efficiently. Since when did the bliss of love make us so unhappy?

When I wrote Financial Lovemaking 101, one of the objectives I had in this book was to teach couples how to be jointly responsible when it comes to money. The truth of the matter is that being financially smart and responsible also increases your ability to be financially independent. Therefore, one might conclude that if you end up as one of the millions of Americans who chooses divorce, you might be able to erase your mistake without destroying your bank account.

I once counseled a couple that was nearing retirement. The couple had modest resources, but the wife was quite determined. Over a period of 10 years, she worked overtime and saved her butt off to pay off the family's credit card debt. She also looked into retirement plans on her job, putting thousands into a 401k plan to prepare for the family's golden years. Her husband had other plans. Without his wife's knowledge, he maxed out all the credit cards to start a business. He then withdrew all of the family funds from the retirement plan. The business failed, and his wife was in tears. She wanted to leave her husband, but she was financially drained. What's worse is that staying with her spouse would not have made her any more financially secure.

The reality is that money and love are linked in ways that we never envisioned on that first date. A person's beauty, body shape, and quality of sex become secondary to how well they pay the mortgage and put food on the table. Then, when we find that the love is gone and we want to move on, money becomes the barrier between freedom and misery. Planning ahead financially can be the way to plan your escape route, if that is what you choose to do.

The irony of it all, however, is that being financially intelligent and responsible reduces one major source of conflict in your marriage. It also allows you to make a stronger contribution to the overall well-being of your family. Therefore, by being financially intelligent and independent, you are more likely to have a successful marriage. Kind of paradoxical, don't you think?

I don't judge those who get divorced, never get married or are trying to get divorced. I only say that whatever you do, make sure you do it right. Your love depends on it, and so does your LIFE.

Sunday, June 22, 2008

Black Money, Black Wealth: The Dangers of Debt Consolidation

Fred Harteis News Articles - Debts and debt consolidation strategies go together in the economy like peanut butter and jelly. You don't need a financial planner to comprehend the basic logic: Combining multiple payments into a single monthly check lowers interest rates and can positively impact your FICO score.

"It's easier to take on the 1,000-pound gorilla who comes to the front door as opposed to 20, 50-pound gorillas pouring in through separate doors and windows," says Boyce Watkins, author of "Financial Love-Making 101: Merge Assets With Your Partner in Ways That Feel Good," and a professor who teaches personal finance planning. "Psychologically, consolidation is very comforting."

Click to read more.

Wednesday, June 18, 2008

Higher Credit Card Limits: The Danger of it all

There was an article I saw on the dangers of higher credit card limits. During the housing boom, banks began increasing credit card limits in response to higher home equity values. Many people took the bait, as Americans dramatically increased their borrowing, using their homes as ATM machines.

Ed McMahon was no exception. Recently appearing on Larry King Live to ask for financial help, he discussed how his high income expectations led him to continuously borrow against the value of his home through the years and he eventually ended up in foreclosure.

Call me evil, but I didn't feel sorry for McMahon. There are millions of hard-working Americans with real jobs who had to fight through foreclosure without the luxury of begging for a bailout on Larry King Live. This is not to be insensitive to Ed's situation, but I think that his irresponsibility was reflective of not just many extravagant people in Hollywood, but also of many Americans who think that the financial sunshine will always be bright.

The lesson to learn from the article above is simple: set budgets, don't use extra credit card capacity to have things that you don't really need, be financially cautious. When thinking about money, keeping the worst case scenario in mind is a good financial policy to live by. Most of us can't go on Larry King's show to get a bailout.

Tuesday, June 10, 2008

College Athletes Should be Paid: A Finance Prof's Perspective

As a Finance Professor, I've never understood why college athletes and their families don't demand compensation for the billions they bring to their campuses.

Here is a link to an interview I did with a great website, on the topic. I also did some work on this issue with CNN, ESPN, CBS Sports, the LA Times and a few dozen media outlets across the country. I truly believe that young men and women should fight for what is right, for the NCAA is pillaging the black community.

Here's the article.

Friday, June 6, 2008

Ed McMahon Goes into Foreclosure

Add Ed McMahon from the Tonight Show to the list of celebs getting their homes forclosed upon. I saw this story in CNN Today and it led to a set of thoughts that I wanted to share quickly. These were the thoughts that led me to write Financial Lovemaking 101, since the mistakes of the McMahon family are not uncommon:

1) Making alot of money is the easiest way to trick yourself into thinking you have more than you really do.

2) Celebs are not as wealthy as you think. Many of them are trying to maintain a perception that others expect to see.

3) If you are in an industry that doesn't have much job security, you should go overboard to protect your financial security. Actors have incredibly poor job security, even the really good ones.

4) If you hit retirement age, you should be extra conservative with your spending. If you lose your money at that stage of life, it's hard to get it back.

5) Pay someone you trust to watch the person who is watching your money. Then watch the person you're paying to watch the other person.

Did that make sense?

The article is here, enjoy!