June 29, 2009

A Trip Back "Home"

Tomorrow I should be posting the 2nd half of the "homework" for everyone, but I thought I would write a short post about my trip "home" over the weekend which actually had more to do with this blog than I ever would have thought.

To start, I grew up in Plano, Texas right outside of Dallas. It was, and still is, a place that is the perfect description of middle class America. Good public schools, safe neighborhoods, and everyone really does know all of their neighbors.

I moved to Atlanta in 1990 (I was 17), and while I had been back to Dallas to visit family since then, I had not really been back to the "old stomping grounds" of my youth. It is funny how the houses are smaller and the trees are now much bigger than I imagine.

I ran into the neighbor that was moving into the house next door the month before we moved (19 years ago), and he vaguely remembered my family and me. We talked about the changes to the house and neighborhood, and we laughed at various things as well. I marveled that the wood fence that I build for our backyard in 1988 was not only still standing, but it was in excellent condition.

Unfortunately, the people that bought "my" house were not home, but it is still the same couple. I hope to write them a letter or send a card just to say hello.

OK, enough about that... the rest of the trip allowed me to see family and friends, and it was great to eat some REAL Mexican food and BEEF bar-b-que. I will not bore you with the details, but I enjoyed it.

Anyway, yesterday I was boarding a flight home, and it ended up that a large number of the passengers were... educators. Yes, they were all headed to the 17th Annual Model Schools Conference in Atlanta this week.

I talked to those sitting around me about their retirement plans and pensions, the Social Security Windfall Elimination Provision (WEP), what you must have to retire in Texas, and more. It was interesting to "hear" the various opinions, and they asked numerous questions about plans from other states (after I mentioned this blog).

Under the current plan in Texas, I was told that educators would need to have their age plus years of service equal 90 or more to retire with full benefits (age + service = 90). This was raised from the previous plan (some were under the old plan) of age plus service equal to 80 or more (age + service = 80).

We had some interesting discussions during the flight, and as we went our separate ways, I wished them all good luck in the future and to enjoy the conference (gave some sightseeing tips too).

The funniest question... "How much do you get paid for that (the blog)?"

I said, "Nothing."

"Well, I would not spend my off time working like that..."

I asked, "How much are you getting paid to go to the conference?"

"Well, nothing."

I then asked, "But, you are going their to learn how to be more effective and help others, right?"

"Well, yes. I want to be able to help other teachers at my school to help our students."

I responded, "Exactly how are we different?" The smile from her and those around her said it all.

June 24, 2009

Points of View - Education Reform

There have been many, many, many editorials and articles written about education reform. I have read quite a few of them, and below are some of the more interesting ones to me. I am sure that most of you have seen or heard about at least some of them, but they are all worthy of a first or second glance.

I know that I am not here to pick and choose how to make our schools better. All of you know far more than me about the education system, but if true reform is going to happen, some of these ideas may end up being proposals - to fight for or against.

If we want to build a bridge, we get an engineer and a contractor. If we want to go to the moon, we get astronauts and scientists. If we want to reform education, why do we get legislators? Just a funny thought I have heard once or twice.


Truth in Teaching - The New York Times - "Education reform will go nowhere until the states are forced to revamp corrupt teacher evaluation systems that rate a vast majority of teachers as “excellent,” even in schools where children learn nothing. Education Secretary Arne Duncan was right to require the states that participate in the school stabilization fund, which is part of the federal education stimulus program, to show — finally — how student achievement is weighted in teacher evaluations. The states have long resisted such accountability, and Mr. Duncan will need to press them hard to ensure they live up to their commitment."

Five Ways to Fix America’s Schools - By Harold O. Levy - The New York Times - "American education was once the best in the world. But today, our private and public universities are losing their competitive edge to foreign institutions, they are losing the advertising wars to for-profit colleges and they are losing control over their own admissions because of an ill-conceived ranking system. With the recession causing big state budget cuts, the situation in higher education has turned critical."

Obama's Charter Stimulus - The Wall Street Journal - "'States that don't have charter school laws, or put artificial caps on the growth of charter schools, will jeopardize their application' for some $5 billion in federal grant money, Mr. Duncan said in a conference call with reporters this week. 'Simply put, they put themselves at a competitive disadvantage for the largest pool of discretionary dollars states have ever had access to.'"

Next Test: Value of $125,000-a-Year Teachers - By Elissa Gootman - The New York Times - "So what kind of teachers could a school get if it paid them $125,000 a year?"

A Dream Teacher, on Many Levels - Letters to the Editor - The New York Times - "As a modestly paid middle-school teacher, I took a great deal of interest in the raise offered by the Equity Project. I agree that excellent teachers are important, but I would certainly not complain if my salary were doubled."

June 19, 2009

Getting Organized...

This is something that everyone should do, but they don't... Everyone should think about, but they put it off for another day... Yes, it is the dreaded "organization" talk that I have with most of my clients. I can already hear the groans...

This is one of the most interesting parts of my job, and it can be funny or tough, but it needs to be done. To get a grasp on your finances, it is a necessity.

First, there are two areas that we need to focus on, but you can take getting organized so much further than just these important items - detailing all of your financial assets and accounts and preparing a will and power of attorneys.

Today, we are going to focus on the detailing of the financial assets and accounts, and in a few days, we will handle the will and power of attorneys.

First, if you are good with excel, then create a spreadsheet with one page for assets and one page for debts. If you are not that great with excel, I created some sample sheets for you to print and use (click here to see the PDF file). This is not a complete balance sheet, but it gets you pretty close.

Next, find your stuff! Bank balances, IRA accounts, savings accounts, credit card statements, school loans, car loans, mortgages, etc. If you have money in it or owe money to it, put it on the list. When I have my clients do this exercise, I always try to make it "budget friendly" too by including monthly income and expenses (also included in the sample sheets). This may look like something trivial, but the better organized you are with your money the easier it is to make some decisions.

If you wondered where your money went each month, this is a good time to figure it out. If something seems a bit wrong, you now have some information to go investigate it.

Okay, once you have everything all together (and it may take a day or two), you are ready to move on to the real fun stuff... wills and power of attorneys.

By the way, I once had someone ask me why they needed to get organized first before they start making some decisions. There are numerous reasons with a few being to help with retirement options, planning your estate, potential debt issues, and the last one is so your "agent" or "attorney-in-fact" can make decisions for you should the need arise.

These items are important, so gather them all up, make some notes, and now on to step two after a few days of rest.

June 7, 2009

Enjoying the Break Yet? The Market Has Been

After 11 years of marriage to an educator, I have learned many things, and one of the best lessons is simply... do not bother an educator during the last week of school or the following week. As for your first week off, I hope you enjoyed it.

The market has been performing absolutely fantastic over the past three months. The financial markets are starting to normalize, and the current run that we have going is very nice. I have had many people call me recently wanting to put all their money back in the market since it is now "good" again (if they sold out). One point though is that the market is up somewhere around 30% from the bottom. To expect it to just continue such a fast paced recovery to pre-2008 levels is most likely not in the cards.

If you pulled all of your money out of the market, getting back in is tough. A slow, methodical investing scenario is most likely the best option. The market could have a pull back or continue higher and either way is a gamble. A "dollar cost averaging" scenario is best whether it is over many weeks or months, and please remember to diversify. Just because fund "XYZ" has been hot does not mean it will be next week, next month, or the rest of the year. Spread the money in various sectors, market caps, and internationally. There is generally not one "best idea."

If you have continued to stay invested, you have been rewarded handsomely. You are probably beating the S&P 500 for the year (+5.6% YTD), and you have let your money work for you. Whether it was your research, just not doing anything different, or listening to others (and perhaps me), being prudent and steadfast in being diversified and taking a long term approach looks to have paid off recently.

I have had some questions as to why I would have thought the market would move higher a few months back. All I can really say to that is research. If you flood the economy with money, keep interest rates low, have a reasonably low unemployment rate, and a global economy hell bent on turning itself around, the market will follow. History has shown a determined Federal Reserve and the American consumer to be two of the most powerful influences in the world of economics. The old saying of "Don't fight the Fed" still rings true.

Looking forward, the housing market is still troubling, but all signs are pointing to it bottoming. Foreclosures will continue to be an issue, but the recent reports are still to move in the right direction. Also, with everyone staying at home for "staycations" this summer, it seems that home improvement has started to flourish again. The complete remodels may be out at the moment, but painting, partial remodels, and "sprucing up" have returned. Home Depot and Lowe's both reported a pick up in sales recently over the previous quarter.

Unemployment moved to 9.4% according to the latest government report, and it will move higher. Remember that unemployment is a lagging indicator and not a predictor. Most companies hold on to employees for as long as possible then start layoffs. With the remaining workforce, they go lean and try to squeeze every bit of productivity out of them before hiring any new staff. Once again, history... It shows that the market moves 6-9 months before the economy, and unemployment moves 6-12 months after the economy. Market --> Economy --> Unemployment

Stay diversified. It helped you in a down market, and it will help you in an up market as well. International, mid cap, and growth funds have been leading the market, and your diversification should have helped you reap some of those gains.

Finally, researching and asking questions and for help are important. Research everything you can and ask questions about it to people you trust. You preach it to your students in the classroom, and it is sage advice for you, too.

I wish you all a very happy, peaceful, and relaxing summer. In my next post, I will give you just a bit of homework for you to handle while you have some time. Not too worry though, I'll give you another week or so to relax. Enjoy!