This week’s radio show is now available.-Lou Listen Here
This week’s radio show is now available.-Lou Listen Here
My column this week for Physician’s Money Digest.-Lou
Your Choice of Financial Advisors Will Determine Your Success
We’re bombarded by tips and financial advice that can cost us lots of money. We get them from friends, family, TV personalities, media pundits and financial gurus. Unfortunately, they’re often bad or too late. We’re told to invest in hot trends, bubbles involving certain companies or industries. But by the time we invest, everyone has bought in, the price has gone up and the bubble is about to burst.
Then there’s “inside information.” The brother-in-law of a woman who works at X Corp. gives your Uncle Jack a tip about a revolutionary new product that X Corp. is about to launch. According to the brother-in-law, “It will sell like hot cakes and just can’t miss.” So you, Uncle Jack and half your family buy X Corp’s stock, the new product bombs and you lose big.
Advice from professionals such as stockbrokers and financial advisors can also be dicey, especially when they work on a commission basis. Many financial advisors receive a commission on every transaction they make for their clients, regardless of whether those investments make or lose money. The advisors can’t lose, even though their clients often do.
Blindly acting on advice from others can be a sure way to lose money. Before you invest, learn about financial advisors and investments. Find out who you can trust to advise you on how stock markets work and about specific industries — especially those in which you may invest.
To familiarize yourself with the financial world, read publications such as the Wall Street Journal, Barron’s, The Financial Times, Money, Bloomberg Businessweek and Forbes. At first, you may feel as if you’re reading a foreign language, but stick with it because it will quickly begin to make sense and you’ll learn a great deal.
Check the Internet; lots of great information is available online. Market Watch, which is owned by Dow Jones, provides comprehensive financial news, commentary and market data. Other good sources are Yahoo Finance, MSN Money, CNN Money and Bloomberg.
Listen to my weekly radio program, “The Financial Physician”, on WOMB-AM and on the Internet at www.wobmam.com.
Watch out for titles. People are impressed by titles, which is why nearly 100 different financial-advisor designations now exist. The requirements for these titles differ greatly. Some take years of education, experience and continuing education, while others only mean that someone has taken a three-hour course.
It doesn’t take much to get a license to sell mutual funds or other securities and then call yourself a financial advisor. And the fact that a person or firm is licensed or registered does not guarantee success. Get recommendations and investigate any advisor before you do business with him or her.
It’s crucial to know what different financial-advisor titles mean and the qualifications for each. It can help you to decide whom to work with. Since so many financial advisor titles exist, I’ve highlighted few of the major designations and some easy and weaker ones.
1. Major designations
A. Certified Financial Planner (CFP):
This is the most prestigious financial-advisor designation. The basic requirements for a CFP are:
A CFP will understand all of the major financial categories: investments, insurance, estate planning,
Sounds like a reasonable change to me.-Lou
What FICO’s New Credit Score Formula Means for Home Buyers
Your credit score plays a major role in the home-buying process, especially in the wake of the 2008 housing crash. A low score can mean higher mortgage interest rates or not qualifying for a loan at all.
If it’s medical debt or lack of credit that’s hurting your chances of getting a mortgage, a new version of FICO’s credit score formula could help your chances of getting a mortgage. The upgrade, known as FICO 9, will be released this fall.
“With FICO 9, the score will be much less sensitive to medical collections information reported to the credit bureaus,” says Mike Kinane, senior vice president of consumer lending at TD Bank. “Right now, the current score models have a heavier weighting to medical collections accounts.”
The FICO Score was created by Fair Isaac Corp. and is used by lenders to help determine loan eligibility to borrowers. The score is calculated by information in the consumer credit reports maintained by Experian, Equifax and TransUnion. Scores range from 300 (lowest) to 850 with 850. With the new score changes, medical collections will have a lower impact on a score. It also drops collection agency accounts that are paid off either via a settlement or paid in full.
What’s more, people with little or no credit will be given a score based on non-traditional credit. According to FICO, the median FICO score for consumers who only have medical collections on their credit report will increase by 25 points with the changes.
Mortgage experts don’t think when FICO 9 is adopted in masse by lenders that it will have a dramatic increase in new home sales, but they do say it can help a set group of people secure a loan or get better terms.
“The medical debt component won’t have a major impact because lenders already manually discount that,” says Brian Simon, COO at New Penn Financial. “The more interesting part is historically it’s difficult for people who don’t have credit to get credit.”
My weekly column of Physician’s Money Digest.-Lou
Importance of good record keeping and Review for Financial Success
When you go to your doctor for your annual check-up, your height, weight and vital signs are checked. You’re asked how you feel, if you have any pressing problems and that information is entered in your chart. Then the doctor reviews your record, notes changes from the previous year, gives you some more tests and discusses your physical condition with you. Every year, the same process is repeated.
Since we know that our physical health is vitally important, we undergo comprehensive medical examinations each year. We also give our doctor enough information to provide a good picture of our overall condition. However, when it comes to our financial health, few of us are nearly as diligent. Most of us don’t keep good financial records, make budgets or monitor our overall financial health.
Not keeping good financial records, checking your accounts, knowing your net worth and budgeting is financial malpractice. It can easily get your into deep financial trouble. By not keeping track of your finances, you can miss obvious danger signs, irregularities or dormant symptoms that recently sprang to life. They can damage your financial well-being and be expensive to fix.
Think of financial recordkeeping and review as preventative medicine — necessary steps you should take to stay financially fit.
As the 2008 financial crisis deepened and the stock market nose-dived, millions of people didn’t open their financial statements. Deliberately, they buried their heads in the sand because they were afraid to face how much they lost — so they chose not to look. They decided that ignorance was bliss, which it seldom is. As a result, they didn’t learn the extent of their losses and many didn’t spot places where they could have acted to reverse or reduce the pain.
Most people shy away from financial recordkeeping. They don’t like to balance their checkbooks and the idea of comparing their checkbook registers against their bank statements horrifies them. Some are just undisciplined, others don’t care. Many are afraid that they will make mistakes. For years, they have told themselves that they were never good at math — so they grew up hating and avoiding it. They think that keeping and checking any financial information is an onerous chore to be avoided at all costs.
Ironically, financial recordkeeping isn’t hard; but it takes a little time, organization, and attention. When you regularly monitor your finances, you feel proud of yourself and become more interested and engaged. You also become more disciplined. You always feel better when you’re in control of the car.
As you get more involved in keeping track of your finances, it becomes easier and something you might even enjoy. When you see improvement, it motivates you and makes you more engaged. When you place money in an account each month, you look forward to seeing statements that show how much your balance has grown.
If you regularly monitor your accounts, it gives you more control over your finances. You can make quick adjustments, such as cutting your losses or seizing potentially profitable opportunities, that often have narrow windows during which you can act.
My tax season is going to interesting this year.-Lou
H&R Block CEO says Obamacare to add ‘significant complexity’ to tax season
Speaking on H&R Block’s quarterly earnings conference call, CEO William Cobb said that the company was already taking steps to train its tax preparers based on the draft forms that the Internal Revenue Service has released to comply withObamacare.
“As expected, the forms are very detailed and can present significant complexity, depending on a filer’s coverage status during the year, income level, and household composition,” Cobb said. “Depending on their situation, there are instances where filers may need to file multiple new tax forms and complete additional worksheets.”
Starting with next year’s tax season, individuals who do not have health insurance that meets federal requirements will be subject to penalties. But there are various categories of individuals who could be exempted.
“Depending on the type of exemption, the process to claim it could be quite cumbersome and time consuming,” Cobb said.
In addition, many taxpayers who received subsidies to purchase health insurance through Obamacare could be forced to repay the federal government if, due to a miscalculation of their income, they received larger subsidies then they were entitled to under the law.
Cobb said people who are used to filing the pared down 1040-EZ will no longer be able to do so if they received any subsidies.
Some investors have predicted that H&R Block’s business could receive a boost if added complexity brought about by Obamacare increases demand for tax preparation services.
Here is my 30 Rock NBC selfie from yesterday’s appearance on MSNBC. I will have the video tomorrow morning. I think it went real well.-Lou