(source)

As you approached the voting booth two weeks ago, what concerns were on your mind? If it was the economy, you were not alone. Six out of ten voters selected the economy as the number one issue facing our country. At the same time, none of the four other issues listed (Iraq, terrorism, energy, and health care) received more than one in ten votes.

Prior to the election, I wrote a post about how each candidate would affect our finances and the economy, if elected. My goal was to present clear, unbiased positions as presented by each candidate. An honest effort was made to dig deep into each campaign’s plan and present only the facts.

It became increasingly clear as my research progressed that Obama had provided a much more detailed plan regarding the measures he would take if elected. While Obama was bold and consistent in a time of needed change, McCain was uncertain, unclear, and grasping for themes and messages that would connect with the general populous (making him look more like ‘John the Snakeoil Salesman’ versus ‘John the Credible Presidential Candidate’).

Connecting with the Lower and Middle Classes

Where Obama really excelled over McCain in his campaign was with his ability to connect with common folk on the issues that matter the most to them, primarily the economy. Let’s look at how he was able to connect with this significant demographic in comparison to McCain. Obama seemed to have a clear edge on 4 out of the 7 major economic issues, while the other three were a push.

Tax Plans

Republicans claim to belong to the ‘party of lower taxation’. Obama sought to destroy this perception with the vote that mattered in this election. Obama’s tax plan was tactfully beneficial to 95% of the population, or all those making less than $250,000, effectively negating this historical Republican claim. At the same time, trickle down economics has left those below the elite thirsting for their fair share. Lately they’ve been parched dry. Advantage Obama.

Energy Expenses

Obama would like to provide a windfall oil profits refund of $1,000 to all taxpayers. McCain wanted to suspend the gas tax between Memorial and Labor Day. Which of these options gives you an exact dollar amount that will end up in your pocket, is more, and sticks it to the big corporations that have been taking it to the little guy in recent years? Advantage Obama.

College Loans & Expenses

Obama wants to provide a $4,000 annual credit towards college expenses in exchange for community service. McCain had laid out zero details on how he would assist students and their families in paying for college. Advantage Obama.

Homes & Mortgages

Obama would give everyone a ‘universal mortgage credit’ of 10%, which would directly impact two-thirds of homeowners who don’t itemize their taxes. McCain wanted to help those with troubled mortgages refinance. Obama’s plan would affect more people, but not ’save’ many from the impending loss of their homes. McCain’s would save many, but provide no reward for those who have stayed up-to-date on their payments. Push.

Health Care

Obama’s plan offers health care coverage for all, including those who were denied coverage previously. McCain’s offered a $2,500 tax credit per taxpayer. Both sides could argue which plan would be more effective in the short and long term, but the effect of Obama’s plan was much more transparent to the common voter. ‘I could lose my job and still have coverage?’ ‘I have cancer and can get coverage for the first time in a long time?’. Advantage Obama.

Investing & Retirement

Obama will raise the capital gains tax on those making over $250,000 from 15 to 25%. McCain would keep the tax at 15% for everyone. McCain’s strategy here did cater to 5% more of the population than Obama’s, but at the same time the other 95% of the population doesn’t mind seeing the elite pay a little more on their capital gains. Push.

Job Creation

Obama wants to build economic activity from the ground up as his plan includes infrastructure and alternative energy investments to create new jobs. McCain’s plan was to cut the corporate tax rate from 35 to 25%. I’m going to give this one a push, because arguments could be made for each side and I don’t think that it was a deal maker or breaker in either direction. My thoughts are that building the economy from the ground up has and always will be a larger generator of economic growth (especially when you consider that most corporations find ways to avoid any taxation). However, I’m not sure if this was the majority perception on a national scale. Push.

It Must Have Been Bush, Right?

Many Republican’s have been choosing (or would like others) to believe that Obama did not earn his victory. Rather, they insist that President Bush lost the election for McCain. Undoubtedly, Bush’s track record as President probably did not earn any new voters for the Republican party. At the same time, credit must be given where credit is due. Obama ran a masterful campaign with consistent messaging, detailed plans, and the promise of hope.

What’s Next?

Obama is certainly not in a position of envy with all the work that must be done in order to get this economy back on track. All we can do is hope that he sticks to the bold claims that won him this election and give him a fair and honest shot to make his mark. In a time like this, we must ignore our philosophical divisions and join together to make a positive impact for the sake of our country’s future.

For more of GE Miller’s writing, see 20somethingfinance.com

Almost overnight, the talking heads went from perpetuating the euphoria of investors to rushing to pronounce the economy dead. Last year, when lenders started dropping like flies as foreclosures rose and margins were called, the problems of Wall Street became more and more apparent, and lending guidelines were tightened to the point that many individuals were stuck in their time-bomb loans, and thus began a vicious cycle. But what led to this? Here is a visual guide to help you understand the events leading up to the bailout.

If you’ve been contributing to a 401k and socking away money for retirement, you probably think you have enough. But you’d better brace yourself for the shocking truth. Unless you’ve taken into account how old you were when you started on your retirement plan, you most likely don’t.

The bottom line is that most people don’t really know how much they’ll need for retirement and without knowing that how can you be sure you’re on the right track to get there? Consider that the average American works hard and plays hard, but reaches age 65 with a median 401k balance of $110,000. Is this enough?

That depends. You’re going to need a bigger nest egg than you probably think - 10/10/4 is a handy principle you should learn.

What is 10/10/4 and how can it help?

In short you need to save at least 10% of your income for retirement. You need to have a nest egg lump sum which is 10 times your annual earnings upon retirement. Finally, you should withdraw up to 4% of your next egg in retirement to avoid outliving your money.

Put simply, 10/10/4 is a strategy that takes into account which leg of the journey toward retirement you are on and provides appropriate recommendations along the way. It’s easy to remember and can be put into practice at any time.

Rule #1

If you are in your 20’s now is the best time to start contributing to your eventual retirement. The first “10″ in 10/10/4 refers to the idea of contributing 10% per year to your 401k or IRA.

At age 25, only saving 10% of your income per year into a 401k or IRA, is required to replace 70% of your pre-retirement income, and at age 20 it’s only 8%. Note this includes any company matching, so if your employer matches 2% for example, you would only need to save 8% per year. At age 20 or 25, time is on your side.

If you did start saving at age 20 or 25, go out and celebrate, you are on the right path already. You can enjoy 90% of your income today and save 10% for tomorrow – this will take some sacrifice, but it’s doable.

However, most of us did not do that early enough.

Missing this “window” is all too common. After many years go by, you will eventually wake up and look around, and see time is the real problem. The closer you get to retirement, the harder it gets to save for it.

For example, if you start saving for retirement at age 35, you would have to save 17% of your income to achieve the same goal, a daunting task. At age 45, the percentage of your income you would have to save is 31%, which, for most of us is essentially impossible.

All of these questions assume you start at a set age and continue to save at a set rate. But in reality, life is much more complicated.

For example, what if you start saving at age 25, then move to another job; stop saving for a few years and then start again? In other words, what if your savings are not linear?

There is no calculator we have ever found that will model this real world possibility of skipping years, or playing catch-up very fast without making the estimation process extremely cumbersome.

This is where the second “10″ comes in. This means that if you missed rule #1, and your life got complicated, then you must save enough to reach rule #2, which is often much harder than starting early.

Rule #2

Rule #2 says that, by the time you are 65, you will need 10x your income immediately prior to retirement to retire at the level you want. Therefore, say you plan a lifestyle of living in the south, on a beach, but with health care coverage, some travel and a few hobbies. You’ve calculated that will require $100,000 in yearly income.

Therefore, you will need 10x that income, or $1,000,000 at age 65. The second “10″ gives you the proper perspective.

Even if you get your target income down to $80,000 before taxes, you will still need $800,000 at age 65, significantly more than $110,000.

Rule #3

Okay, now you are ready for the third and final level of 10/10/4, so what is the “4″? The “4″ means 4% is all you can take out – especially in the early years of retirement and still have confidence that your money will last throughout retirement. If you plan to take out more in the early years, you could have a big problem in volatile market times such as those we are experiencing now.

The issue is the fluctuations in the stock and bond markets are a natural occurrence. Therefore if you retire at age 65, and have 60% in equity and 40% in bonds (a moderate investment allocation), you might still have 30 more years to live and no job because there are not a lot of jobs of jobs available for a 65 year old. Yes, the problem is that we live too long after age 65 – health care advances have been too successful.

The related problem is the wide range of normal volatility in these stock and bond markets and the fact that you may end up retiring in some very difficult times for returns, such as 2000, 2001, 2007, or 2008. If the markets are in decline right at the time you retire, it is going to be much more difficult than anticipated to make ends meet.

The experts look at all the probable outcomes and the models show that a 4% withdrawal rate in the early years is the maximum rate that will preserve capital with normal volatility, until you have been retired for 5-10 years. That means that if times are really rough in the first few years that you retire, and your target was $1,000,000, you might really have to live on 4%, or $40,000 per year until you get through the bad years. That is the realty for many people who have retired recently.

Think of 10/10/4 as 3 windows into your life plan. If you are fortunate enough to have succeeded in hitting the first “10″ (saving 10% of our income and you started in your 20’s) and the second “10″ (on track to hit 10 times your income goal at age 65), then to be sure of a secure retirement work on this third and final goal, “4″.

There are practical ways to live for a few years on 4% of your retirement balance if times are tough in the early years of your retirement. You may want to work part time if needed by obtaining a skill that does have a market at age 65. Perhaps you can turn a hobby such as photography or playing a musical instrument to your financial advantage? Or build an extra cushion in your balance for these contingent years if you retire and then experience some bad stock and bond market performance in your first few years.

10/10/4 is a tool you can use at any age and it will serve you well. If you are in your 20’s sign up for 10% in your 401k or IRA and think of the 90% you get to enjoy today. Live 90% today and 10% tomorrow. You will have to make a few sacrifices but you can do it.

If you are in your 30’s or 40’s you are starting to see the problem. If you do not see progress toward the 10x goal, usually because you started too late, or skipped some years, then you will have to save much more now to catch up.

That’s why it’s so important to make sure you aren’t leaving money on the table. If you’re in your first job, make sure you are enrolled in your employer’s 401k plan. If you’ve just changed jobs, don’t leave money sitting in your previous employer’s 401k account. Instead, move it into an IRA rollover account where you have more control over fees and more investment choices.

Start today because your future depends on it.

It wasn’t until he graduated college in May 2008 that my friend Ben realized the depth of his student loans: $40,000 owed upon completion of a liberal arts bachelors degree. Like many students, he didn’t worry too much about the numbers as he signed loan papers at the start of each semester. The debt totals and their corresponding monthly payments, due some time in the future, weren’t overly concerning at the time.

In the past ten years, debt levels for college graduates have more than doubled. In 1993, the average graduating student who had loans owed $9,250. Contrast that to 2004, when the average indebted student carried $19,200 in college loans. While less than 50% of four-year college grads had college debt in 1993, by 2004 that number has increased to 66%.

One of the main factors contributing to this rise is the decrease in public money available for colleges in the wake of the financial crisis. As state and local budgets tighten, colleges and universities often lose a portion of their funding, and this shortfall is passed on to students, who with their parents must bridge the gap with larger and larger loans.

Ben is not alone when it comes to higher-than-average college debt. At private non-profit colleges, like the one Ben attended, over 73% of graduating seniors carry student loans. Of those, a full 10% have loans in excess of $40,000. These high levels of debt are problematic for those entering the workforce and beginning their careers. Instead of being able to save money and invest enough for their future, let alone save for their own children’s educations, they are spending hundreds of dollars each month on loan payments.

Large debts likewise prevent college graduates from furthering their education. More than 40% of college grads who choose not to pursue a Master’s degree or doctorate cite college debt levels as a primary reason. Faced with tens of thousands of dollars in debt, many decide that enough is enough.

Rising student debt has a hidden cost to society: talented graduates forgoing good but lesser-paying jobs, in order to make enough to pay back what they owe. Faced with large monthly debt payments, Ben decided to work as a salesman where he’d make more money than in the other positions he considered-and even preferred.

“Student debt has a major impact on what careers young people choose. Large college loan payments discourage students from rewarding, albeit low-paying, sectors such as teaching or public service, that they would otherwise consider,”  said Edie Irons, communications director at the Project on Student Debt.

In 2002, a full 54% of former students reported that they would have borrowed less money for college if they had it to do over again. While it is little consolation to those already deeply in debt, students starting their college careers can find ways to limit their student debt loads as much as possible. Irons does not see debt-free college as realistic for most average American families, but believes the average amount of debt should and can be less than it is. To that end, it’s important that prospective college students seek as much grant money and private scholarships as possible, before relying solely on loans that need to be repaid.

Students should meet with financial aid officers and career development personnel to get a realistic view of how much debt they will incur while attaining their degrees, and how much they will likely earn when beginning their chosen professions. An accurate projection of their financial picture upon graduation can help students make better financial decisions while in school. Financial counseling for students needs overall improvement, as scores of students leave their alma mater with credit card balances and expensive car loans in addition to education debt.

In an effort to ensure that student loans don’t hurt more than they help, the Project on Student Debt works to identify and develop solutions for those burdened with unmanageable college debt. Income-Based Repayment is one of these.

Under a new federal loan repayment plan based on a model developed by the Project, students with federal loans are guaranteed  that their monthly student loan payments won’t exceed a certain percentage of their income (15% of discretionary income, which is classified as everything over 150% of the federal poverty level). This legislation, signed into law a year ago, takes effect  in July 2009 and applies to all federal student loans, past or present.

“Income-based repayment is important because it provides a guarantee that if a student makes a bad calculation and borrows more than he’s able to afford, there’s a reasonable safety net. It’s not a free pass. They still owe the money and have to pay it back, but this makes it affordable,” said Irons.

Loan forgiveness programs for those working in the public sector or for charitable non-profits are also underway. Ten years of qualified employment as well as loan payments are required for an applicant’s remaining debt to be erased. Irons believes that this incentive will encourage more jobs in fields such as teaching, law enforcement and state and local governing.

While many students and former students will benefit from the new legislation, Ben won’t be one of them. His student debt is primarily private loans through his college, and the legislation applies only to federal student loans. A full 80% of student loans are from government sources, and private college loans makes up the other 20%. For students with private debt, benefits such as loan deferment and forbearance are not guaranteed by the government. Their interest rates are also usually higher, translating into larger payments.

For Ben, the reality of a $40,000 debt has just begun to sink in.

Just because the economy is tanking, doesn’t mean the party is over. Entertaining at home is less expensive than you might think. These simple money saving tips will help you throw a great party for less than you’d spend on a big night on the town.

1. Go casual. If you think you need Champagne and caviar to have a good time, think again. A less formal affair encourages your guests to relax and have fun. It’s the difference between a Superbowl party and New Year’s Eve. Forget sit down affairs, go for finger food and wine. Decide on the budget you feel comfortable with and plan accordingly. Evite’s party budget estimator is a great way to figure out where and how to spend your money wisely.

2. Pick the right wines. Skip expensive cocktails and serve a choice of approachable and affordable red and white wines that will go with almost anything you serve. A Chardonnay that is mildly oaky will pair well with anything caramelized. “Toasted loves toasted,” says David Katz, Chef and Managing Partner of Pane Vino. Toasted bread, nuts or caramelized onions all make fine matches with a balanced Chardonnay. For a red wine, Katz recommends choosing something medium weight like Pinot Noir. Mirassou Chardonnay and Pinot Noir fit the bill nicely and are around $10 each. Other food friendly and budget friendly choices include a crisp Rosé or a sparkling Spanish Cava.

3. Know when to splurge and when to save. Some ingredients are worth the extra cash. Katz recommends saving when it comes to blue cheese with a domestic supermarket brand, but splurging on sliced to order imported prosciutto. Buying from a deli means you’ll end up with thinner slices and save in the long run. Wrap slices of prosciutto around Italian bread sticks for a quick and savory bite.

4. Prep in advance. Many great appetizers can be made in advance. Blue cheese mousse can be made days ahead then piped or spooned onto vegetables before the party starts. Meatballs made from any inexpensive ground meat or turkey found on sale can be made then frozen and reheated. Spiced toasted nuts can also be made hours before your guests arrive. End your party with a selection of homemade cookies and brownies, ice cream optional.

5. Get friends involved. Have a friend who knows something about wine? Ask them to bring a few of their favorite house reds. Is one of your pals a great cook? Get them to make an appetizer or dessert. Encouraging your friends to help out gives them a chance to take a more active role in the party, takes the pressure off of you as host and helps spread the financial burden more equitably as well.

Most importantly, make your party easy and relaxed. Stuffy parties that break the bank are no fun. Chances are, if you’re having a good time, your guests will too!

Amy Sherman is a San Francisco–based writer, recipe developer, and restaurant reviewer. Visit her blog at Cooking with Amy

The economy has taken a back seat to no other issue this election year, and for good reason. The unemployment rate is increasing and more layoffs are imminent, energy prices have had a huge impact on disposable income, foreclosures are at an all time high, the stock market has seen significant declines, and inflation has reared its ugly head again.

Amid abundant fear and uncertainty, one thing is certain: this election is too important for us to rely on political rhetoric. Our country desires and deserves more. Whether you’re on the fence or not, looking at the facts can go a long way toward providing clarity. To save you the time and frustration, we’ve researched how each candidate’s policies will affect your bottom line. No bias here, we’ve simply dug out the hard numbers as given from each campaign on all of the issues that will affect your financial well being.

Taxes

Obama: Obama claims that no family making less than $250,000 will see their taxes increase and that 95% of Americans would see a decrease in taxes in the form of a refundable credit of $500 per working person ($1,000 per married working couple). Those making more than $250,000 would see their tax rates return to 1990’s era levels (39.6%). Obama offers a tax calculator on his site.

McCain: McCain would keep the top tax rate at 35 percent and make permanent all previous Bush administration tax cuts. McCain would provide a progressively higher tax break to those who earn more, with the highest 20% of wage earners seeing the largest increase in take home income. Additionally, he would double the dependent exemption from $3,500 to $7,000 for those with incomes of less than $50,000.

Energy Expenses

Obama: Obama wants to institute a windfall profits tax on oil companies to give tax filers a $1,000 rebate to assist in the coverage of energy expenses.

McCain: Proposes that Congress suspend the 18.4 cent tax on gasoline and 24.4 cent tax on diesel between Memorial and Labor Day.

College Loans and Expenses

Obama: Proposes to increase Pell Grants from the limit of $4,050 to $5,100. Also would issue a $4,000 annual credit that can be used towards college tuition in exchange for community service.
McCain: Does not propose any new grants or tax benefits for those seeking higher education.

Home Ownership

Obama: Proposes creating a ‘universal mortgage credit’ of 10% to assist the two-thirds of U.S. homeowners who do not itemize their taxes (and as a result do not get mortgage credits). Obama’s campaign claims that the average recipient would receive approximately $500 from this credit.

McCain: Would allow holders of a sub-prime mortgage that was taken post 2005 to refinance to a new 30 year fixed-rate mortgage if they are delinquent or able to prove that they will not be able to pay their existing loan.

Health Care

Obama: Under Obama’s plan, if you like your health insurance, you need not change anything. If you don’t like your plan, or don’t have health insurance, you are guaranteed eligibility at no premium for a plan that is similar to that which is offered through the Federal Employees Health Benefits Program (FEHBP), which members of Congress use. This plan would cover preventative, maternity, mental health, and other services.

McCain: Under McCain’s plan, if you have employee sponsored health insurance, your benefits would now be treated as taxable income. To help offset this tax gain, McCain proposes a $5,000 refundable tax credit for families and $2,500 for individuals.

Investing & Retirement

Obama: Obama plans to raise the capital gains tax on investment profits from the current 15% maximum to 20% for those making over $250,000. Those earning under $250,000 would see no change. On the issue of taxing estates, Obama would raise the exclusion to $3.5 million per person and keep the taxable rate above that at 45%.

McCain: No change in the 15% maximum capital gains tax. When it comes to taxing estates, McCain would raise the exclusion to $5 million per person, while cutting the tax rate on transfers above that amount to 15%.

Job Creation

Obama: Obama’s largest focus is on creating new clean energy jobs. He proposes dedicating $150 billion over the next 10 years towards alternative energy technology and industry in an effort to create 5 million new jobs. The second major area of focus for job creation by the Obama campaign is to double the funding for the Manufacturing Extension Partnership (MEP) in order to maintain a strong manufacturing presence in the US. A third effort would be to create a National Infrastructure Reinvestment Bank that would receive $60 billion over 10 years in order to help finance the rebuilding of infrastructure which would hopefully lead to the creation of 2 million new jobs.

McCain: The crux of McCain’s job creation policy is to cut the corporate tax rate from 35 to 25% (whereas Obama advocates for keeping it at 35%). McCain plans on applying $2 billion per year towards developing clean coal technology. He’d also like to create 45 new nuclear plants by 2030, but does not dictate a specific amount towards this initiative.

For further research, visit:
The Tax Policy Center
Factcheck.org
Project Vote Smart
Barackobama.com
Johnmccain.com

May the best candidate win next Tuesday. Get out and vote!

For more of GE Miller’s writing, see 20somethingfinance.com

In this time of economic uncertainty many are putting off a major purchase such as buying a car. Why incur even more debt? But while the high price of gasoline might dissuade you from purchasing a gas guzzling sport utility vehicle (SUV), you probably don’t have the luxury of giving up driving entirely.

So if you are in the market for a new car, you’ll need to deal with the fact that it is harder than ever to get a loan. In better times, the major automobile manufacturers established their own financing to help people buy a car without having to leave the lot. These services typically don’t offer the best rates, but their threshold for extending credit has typically been lower than actual banks.

What many don’t realize is GMAC Financial Services and Ford Credit, are not only the largest companies dedicated to automotive financing but in fact are large financial institutions that process more credit than many banks.

Dealers have long provided a number of financing options. While those options haven’t gone away in the current financial crisis, the financing arms of the major automobile manufacturers are being more careful than before in providing credit.

GMAC Financial Services has responded to the instability of the global capital and credit markets by implementing a “more conservative purchase policy for consumer auto financing,” according to a recent press release.

Among the changes - you will now need a credit score of 700 or above to even qualify for a car loan from GMAC. Credit scores typically range between 300-500, meaning that many people who need a car won’t be able to get financing.

Before you even venture on to the lot, you should know your credit score. If you don’t know what it is, you’d better find out now. You’ll want to make sure it is both up-to-date and accurate. Try a service such as FreeCreditReport ($12.95/month for credit score and monitoring) or myFico (all three FICO scores and credit reports).

GM dealers are paying more to provide financing (an increase of 75 basis points) so they are going to be a lot more careful about who they are providing credit to and how much credit they are providing. Those shrill cries of “no down payment required,” are quickly becoming a thing of the past. GM customers can no longer borrow in excess of the dealer’s invoice price so must pony up 10% down on the purchase of a new vehicle. New limitations on loan terms are also making it more difficult to buy a car (60 months is typical).

If you have a high enough credit score, you may want to consider shopping around for the best car loan you can find rather than taking the dealer up on the factory financing. See this how-to video to learn how to find a great deal on a car loan. Just remember, you better get dealing before you can get wheeling.

The whisper numbers and inside information that inevitably leak have the potential to move markets in an instant, and in many cases the information is true. Increasingly, however, we are seeing a rash of rumors that often have the power to temporarily (or even permanently) hit a company’s stock below the belt. Here are a few of the strangest and most notorious rumors that have misled investors, and we look forward to your comments and links to some of the many others that have been heard and acted upon over the years.

The King Is Dying (Steve Jobs)

Steve Jobs once referred to Apple as “A Ship That Leaks From the Top,” but this time the “leak” came from somewhere else entirely. Certainly a lot of good can come from the witness in the street and the mad scramble among journalists to break a story first, but when a reporter (who was actually a 4chan prankster) “broke” the news of Steve Jobs’s heart attack on October 3rd, Apple stockholders felt a panic nearly on par with the “Enemy Planes Spotted Off California Coast” headline that popped up in World War II. Luckily for everyone, the story turned out to be false (and of course back in the day, the enemy planes weren’t there either). Apple’s stock price took a 10% hit in ten minutes before recovering, which was enough time for someone to make a lot of money, and for some panic sellers to lose big as well. In the fallout after, many people suggested that CNN’s iReport do some basic screening before something is published as “news,” as this can help prevent future scam efforts that piggyback off of a mainstream news source’s credibility.

Burned By The Past (United)

It’s rough enough for a company to battle its way through bankruptcy once, but when a worker at a stock advisory firm recently found a 2002 story that appeared to be current, United Airlines stock plummeted 75% for a brief window of time. It quickly rebounded, and finger-pointing ensued among all parties involved. Bottom line, the employee should have done a bit of fact-checking to get his bearings right before adding the article to a Bloomberg news feed, which led to the rapid sell-off of the stock. Of course, news sites can do their part and clearly date their articles for the good old web crawlers sent out by search engines so that we don’t freak out about an attack on Pearl Harbor.

The Bear Raid

Far more damaging to companies, and even entire industries, are the sustained attacks mounted by short-sellers. In a recent study by two finance experts, they argue that, while many of these attacks can be counteracted by bullish investors who see the lower price as a bargain, some companies are hit at crucial times and are sent spiraling. If a company is somewhat uncertain about the future of a potential new product or spending initiative that is announced that could potentially improve earnings, they are particularly susceptible to this type of attack as the sell-off could prompt them to believe that the market was simply responding negatively to the actual product or initiative.

Caught While You’re Sleeping (ZZZZ Best and Barry Minkow)

The phenomenon of stock manipulation, rumors and outright fraud is not new, of course, and one of the most notorious past examples is ZZZZ Best, the company that Barry Minkow took public in 1986 which was built on an entire foundation of lies. For awhile, no one even noticed that he was manufacturing phony invoices and receipts, and he was “savvy” enough to even perpetuate his scheme by spending $4 million on his office space. He ended up serving 25 years in prison for fraud after losing investors over $100 million. He was only 18 at the time the company went public, so if you can take any lesson from this, it is this: no matter how “hot” the stock, don’t bet it all, especially if it is run by a high school kid. Looking back at Enron, Worldcom, and Tyco, and certainly a few big surprise collapses that could come at any time, you should remember to take universal acclaim for any company with a grain of salt and diversify your portfolio.

Most Americans have debt.  Mortgages aside,  43% of US households spend more than they earn in a year.  It is no wonder that the median household has a balance of over $2,000 on their credit cards.  The average balance is over $8,000, but that is skewed by a small number of less-than-thrifty individuals.

The US government also spends more than it earns.  Whether this is an extension of its electorate or the setting of a bad example, the country as a whole is in worse shape than the sum of its parts.

We could go on about the trillions of dollars in debt, but numbers that large can feel really abstract. So,  let’s take the nation’s spending down to the household scale.  The median household pulls in $50,233 per year, the federal government around $3 trillion.  Some basic arithmetic will put them in scale.

Now let’s look at our lenders.  The majority of the Uncle Sam household debt is owed to the people of the United States.  We can let this slide for now and focus on the foreign lenders, who represent one quarter of the total debt.

Below are the top seven foreign lenders, visualized as credit cards, while the image at the top shows the total of  foreign lending.  All numbers have been brought down to the U.S. median household scale.  Just imagine your household with these balances and you will have a better perspective on just how large these debts really are.

Where do you keep your birth certificate? Passport? Maybe you are finding it harder to trust the bank with anything these days, and even have your cash stuffed in the mattress. However, there are still plenty of good reasons to keep some of your most vital documents locked up under the watchful eye of the bank.

There are some drawbacks, of course, to having your access to important items and papers somewhat restricted and only accessible during bank hours, so you need to know which things to keep close to home and which ones you can manage without for a few days.

Some are quick to point out other problems that can arise when you don’t take matters into your own hands, but we will help you make your own choice and decide if a safe deposit box at least beats the mattress and a plastic filing cabinet for security, or at least point you to some basics for safer storage within your home.

Opening a Safe Deposit Box

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Most banks and credit unions offer the service, and may even give discounts to existing customers, so start with your current bank. It is really important to plan ahead and give permission to someone you trust to access the safe deposit box or at least have an executed power of attorney that allows them to easily get to the contents.

This is especially important in case of death so that important papers and heirlooms can be accessed without delays. Consult with an attorney to determine state laws that affect the ability of your loved ones to gain access if you have reasons for not granting them access while you are alive.

The annual cost will typically range anywhere from $30 to $75 and you should also contact your insurance agent because the contents are not covered by the generous new $250,000 in FDIC coverage that you get, and most causes for loss within the bank will not be deemed to be the bank’s responsibility. Because neither the bank nor the insurance company will likely cover flood damage, make sure to put all contents in sealed plastic bags.

What You Should Put in the Safe Deposit Box

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A good rule of thumb to keep in mind that is grounded in common sense is to view your safe deposit box as the repository for stuff that you really need, but will not likely ever need on a moment’s notice. Items that are a pain to get replaced such as birth certificates and other family records definitely belong here.

Another important item to remember for insurance purposes is a videotape of your home’s content for insurance purposes, and a copy of this video definitely belongs in your safe deposit box. Contracts, stocks, bonds, certificates of deposit, original deeds to property, collectibles and rare jewels are also commonly kept in safe deposit boxes. If your grandmother gave you a pouch of diamonds or if you have negatives from your honeymoon that aren’t safe for the film lab then lock it all up at the bank! For that matter, you can put just about anything you want in the box.

What Does Not Go in My Safe Deposit Box?

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There are plenty of things that obviously do not belong in the safe deposit box that we do not need to go into for the sake of brevity i.e. food, pets and cash you are hiding to dodge paying taxes, although the latter is certainly a common but unethical choice.

You certainly can place copies but should never put originals or your only copy of medical care instructions, burial preferences or original Power of Attorney documents. Further, if you live your life like you are starring in Bourne Supremacy (or simply have friends and family overseas that you would visit in an emergency), you definitely don’t want your passport locked up overnight, let alone a three-day weekend.

You Don’t Understand Me…There Is No Way I Am Keeping My Valuables at the Bank

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Would you rather just bury it all in the backyard? If the thought of a bank robbery or putting your great-grandfather’s watch in a dark box somewhere makes you simply too uncomfortable, then it is time to shop for a fireproof safe and make sure that you get adequate insurance coverage to keep these items in your home. If you purchase an inexpensive safe, you might end up regretting the move as many of these safes only withstand an hour in a fire - not good if your videotape of the home’s contents gets melted in a fire in said home.

However, there are some heavy duty safes that can only be hacked into by Tom Cruise that will also give you the necessary levels of protection (UL125) to protect your computer data. You can check here and here for more information on choosing a fireproof safe, and make sure that you don’t buy a safe that is too small to contain any gold bars you plan on purchasing in the next few years.

If you already have a safe deposit box, but haven’t visited your safe deposit box in awhile, go check it out in person to make sure it looks like the one in the photo at the top and not like this one:

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So, remember to either get the safe deposit box along with a separate insurance policy, or do some research and get a fireproof safe that will protect digital information and film negatives (not just your paperwork) and insure the contents. Make sure that you are protected - this is not an item to put on the “vague list of important stuff to eventually take care of down the road.”