In another sign the American economy is on the comeback trail, a new survey from KPMG shows optimism is improving among U.S. manufacturing and service industry executives. Executives in both key sectors say the worst is behind us.
The survey shows 68 percent of manufacturing executives believe business activity will be higher in the next 12 months. That's up from 57 percent in October.
Forty-one percent of those same executives say they plan to hire more in the weeks and months ahead. That number was just 28 percent five months ago.
As far as revenue is concerned, 65 percent of manufacturers surveyed by KPMG expect revenues to rise in the next year.
"American manufacturing is on the rise because companies are rebalancing, and it is pretty clear demand is picking up nationwide," said Lynne Doughtie, KPMG's National Managing Partner for Advisory Services.
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Doughtie added that optimism is also getting better in the BRIC countries — Brazil, Russia, India and China. Then there's Europe. Despite debt problems in Portugal and Ireland, manufacturers are also seeing a brighter future on the continent.
Things are also getting brighter for the U.S. service sector. Sixty-six percent of executives believe business activity will pick up within the next 12 months. However, they're not quite as optimistic on hiring. Only 28 percent of those who responded expect to add jobs in the short term, and that's up ever so slightly from October.
Wednesday, March 30, 2011
6 money myths that can hurt you in prime earning years.
Workers often hit their peak earning years only to be pulled in several directions. Beyond basic expenses there may be college-age kids or aging parents who need financial help. It can be a lot to balance at a time when retirement savings should take on more importance.
The problem is many fall prey to the myth that they can juggle it all month-to-month, on the fly.
"What happens with the tens of thousands of consumers we talk with every month is they've gotten into the habit of bad habits," says Mike Croxson, president of CareOne, a debt counseling company. "They don't have a plan anymore."
This often happens to workers in their 30s to early 50s. As life gets busy, they pay bills on auto-pilot and pay little attention to long-term financial planning.
Here are six money myths to avoid as potential pitfalls during your peak earning years:
Myth 1. I need to prepare for an emergency before I pay down credit card debt.
It's wisest to pay down high-interest credit cards before you save for a rainy day. "You have to look at where you get the best bang for the buck," says Carlo Panaccione, a financial planner at Navigation Group Inc. in Redwood Shores, Calif.
You'd be better off paying down a $5,000 credit card balance charging you 14 percent than socking away that amount in a bank earning less than 2 percent.
If you're concerned about an inadequate emergency fund, you should be. But recognize that if you start paying down debt, you can still charge most expenses if a problem arises.
Also weigh the consequences if you're sacrificing 401(k) contributions. You're losing the benefit of lowering your taxable income and possibly missing out on an employer match. Consider having at least enough deducted so your employer matches your 401(k) contributions. It's an example of where saving first makes sense.
To manage your debt, use these basic guidelines. Start with your monthly gross income — before payroll deductions and taxes. Your housing expense shouldn't exceed 28 percent of that amount. If you then add revolving debt, such as credit cards and car loans, the amount shouldn't exceed 36 percent. If it does by much, you really need to focus on shedding some debt.
Myth 2: I should forget about asking for a raise until the economy recovers.
Lean and mean. After the recession it's become common to hear about companies operating with minimal staff. While worker productivity is up — they're working harder after staff cuts — they're not getting paid much more. Personal income grew 3 percent in 2009 after falling 1.7 percent in 2008. Typically, personal income grows around 5 percent to 6 percent a year.
The smartest managers don't want to lose their remaining talent. The best employees are in demand and are in a good position to ask for a raise, says Lee Miller, co-author of "A Woman's Guide to Successful Negotiating."
If you think you deserve a raise or a promotion you'll need to show why it's deserved. When you make the request, address the new skills or expanded roll you've taken on; or the additional responsibilities you're willing to tackle.
Then demonstrate what you've accomplished and why it's in the company's interest to give you a raise. Tell the boss how you've made an impact, such as boosting sales or landing a new client.
Myth 3: I'm a renter and I don't own that much. I don't need a will.
Estimates vary but it's probably generous to say that about a third of all Americans have a will. "Everybody absolutely needs a will," says Peter Lang, an adviser with HighTower Securities, who specializes in estate planning. Without a will, the state will decide who gets your assets.
It's unpleasant to think about your own death, which is one reason why many people don't prepare. But having a will ensures your possessions are distributed according to your wishes, and helps family members avoid disputes.
The process also encourages you to think about other matters that might otherwise be put off, such as a durable power of attorney. This document gives another person the right to manage your affairs if you're unable. You may also want an advance health care directive to spell out what level of life sustaining care you would want to receive.
Hire an attorney who specializes in estate planning to evaluate your circumstances. State laws vary and planning for a blended family, for instance, can introduce additional complexity.
There is the option of online do-it-yourself wills and the other documents. However, to use these products, your circumstances can't be too complex.
Myth 4: I'm focused on my retirement savings goal and that's enough.
The headlines "Retire Rich" and "Retire Early" have been retired. The 2008 stock market meltdown has left a lingering impact. Workers with 401(k) accounts saw their balances cut by about a third on average. Now many remain anxious and it hasn't helped that their balances have only recently rebounded to their levels at the market's peak in 2007.
So now many are contemplating working longer. Slumping home values and the weak economy has added five years of work for the average employee, says Brandon Ross, managing partner of Peak Capital Investments Services, a financial adviser.
What's more, collecting Social Security later increases the benefit. Avoid if you can, the permanent reduction in benefits if you retire early. If you were born in 1960 or later and you claim your benefits at 62 instead of the full retirement age of 67, you reduce your monthly benefit by 30 percent. A $1,000 benefit, for example, is reduced to $700.
Those who were planning on living very well in retirement, may now have to live more modestly, says Panaccione, the Navigation Group adviser. That may mean giving up the personal trainer or new car every few years in order to maintain a comfortable lifestyle in retirement.
Beyond savings, make sure you're also evaluating your anticipated expenses. That includes major items such as health care, possibly in a nursing home or through an in-home nursing service.
The Center for Retirement Research at Boston College has shown that a worker retiring in 2020 will need about $142,000 to cover just out-of-pocket health care costs in retirement.
Myth 5: I'm healthy and in the prime of my life, I don't need life insurance.
Life insurance isn't for you it's for your loved ones. Buying insurance often depends on whether you have financial obligations you want covered after you're gone. For young people term life insurance is inexpensive and will help cover funeral expenses and pay off debts. This is also a good option for single people to cover the basics. As it sounds, it's purchased for a specific time period so when it ends, you need another policy.
Mid-career workers should consider a permanent policy such as a universal life or whole life policy, which allows the buyer to continue to pay premiums to keep the policy in force on a continual basis.
It's critical for someone starting a family to seek coverage that could help the family survive the loss of a breadwinner. An insurance needs calculator is provided by the American Institute of Certified Public Accountants here. Be sure to purchase from a company with a solid financial strength rating. You can review ratings at Insure.com .
Myth 6: Buying in bulk is always a good strategy.
Just just bought a huge commercial-kitchen jar of Grey Poupon? It's estimated that most people only consume 12 ounces of mustard per year. So you may have just stocked up on more than a decade's worth unless you're hosting a major picnic.
Buying in bulk, taking advantage of sales, and using coupons is a good savings strategy if you're actually purchasing items that you need and would have purchased anyway.
It doesn't make sense to spend a lot on gas to cash in on a small coupon. A good deal on a perishable item isn't so good if half of it spoils.
"Don't buy things that you otherwise wouldn't normally buy just because you think you can get a deal on it," says Neal Ringquist, president of Advisor Software Inc., which runs Goalgami.com, a personal finance website.
With smartphones and ubiquitous daily deal email offers, the temptation to spend is all around. So be cautious about buying into promotions like those on Groupon or Living Social as impulse purchases.
Workers often hit their peak earning years only to be pulled in several directions. Beyond basic expenses there may be college-age kids or aging parents who need financial help. It can be a lot to balance at a time when retirement savings should take on more importance.
The problem is many fall prey to the myth that they can juggle it all month-to-month, on the fly.
"What happens with the tens of thousands of consumers we talk with every month is they've gotten into the habit of bad habits," says Mike Croxson, president of CareOne, a debt counseling company. "They don't have a plan anymore."
This often happens to workers in their 30s to early 50s. As life gets busy, they pay bills on auto-pilot and pay little attention to long-term financial planning.
Here are six money myths to avoid as potential pitfalls during your peak earning years:
Myth 1. I need to prepare for an emergency before I pay down credit card debt.
It's wisest to pay down high-interest credit cards before you save for a rainy day. "You have to look at where you get the best bang for the buck," says Carlo Panaccione, a financial planner at Navigation Group Inc. in Redwood Shores, Calif.
You'd be better off paying down a $5,000 credit card balance charging you 14 percent than socking away that amount in a bank earning less than 2 percent.
If you're concerned about an inadequate emergency fund, you should be. But recognize that if you start paying down debt, you can still charge most expenses if a problem arises.
Also weigh the consequences if you're sacrificing 401(k) contributions. You're losing the benefit of lowering your taxable income and possibly missing out on an employer match. Consider having at least enough deducted so your employer matches your 401(k) contributions. It's an example of where saving first makes sense.
To manage your debt, use these basic guidelines. Start with your monthly gross income — before payroll deductions and taxes. Your housing expense shouldn't exceed 28 percent of that amount. If you then add revolving debt, such as credit cards and car loans, the amount shouldn't exceed 36 percent. If it does by much, you really need to focus on shedding some debt.
Myth 2: I should forget about asking for a raise until the economy recovers.
Lean and mean. After the recession it's become common to hear about companies operating with minimal staff. While worker productivity is up — they're working harder after staff cuts — they're not getting paid much more. Personal income grew 3 percent in 2009 after falling 1.7 percent in 2008. Typically, personal income grows around 5 percent to 6 percent a year.
The smartest managers don't want to lose their remaining talent. The best employees are in demand and are in a good position to ask for a raise, says Lee Miller, co-author of "A Woman's Guide to Successful Negotiating."
If you think you deserve a raise or a promotion you'll need to show why it's deserved. When you make the request, address the new skills or expanded roll you've taken on; or the additional responsibilities you're willing to tackle.
Then demonstrate what you've accomplished and why it's in the company's interest to give you a raise. Tell the boss how you've made an impact, such as boosting sales or landing a new client.
Myth 3: I'm a renter and I don't own that much. I don't need a will.
Estimates vary but it's probably generous to say that about a third of all Americans have a will. "Everybody absolutely needs a will," says Peter Lang, an adviser with HighTower Securities, who specializes in estate planning. Without a will, the state will decide who gets your assets.
It's unpleasant to think about your own death, which is one reason why many people don't prepare. But having a will ensures your possessions are distributed according to your wishes, and helps family members avoid disputes.
The process also encourages you to think about other matters that might otherwise be put off, such as a durable power of attorney. This document gives another person the right to manage your affairs if you're unable. You may also want an advance health care directive to spell out what level of life sustaining care you would want to receive.
Hire an attorney who specializes in estate planning to evaluate your circumstances. State laws vary and planning for a blended family, for instance, can introduce additional complexity.
There is the option of online do-it-yourself wills and the other documents. However, to use these products, your circumstances can't be too complex.
Myth 4: I'm focused on my retirement savings goal and that's enough.
The headlines "Retire Rich" and "Retire Early" have been retired. The 2008 stock market meltdown has left a lingering impact. Workers with 401(k) accounts saw their balances cut by about a third on average. Now many remain anxious and it hasn't helped that their balances have only recently rebounded to their levels at the market's peak in 2007.
So now many are contemplating working longer. Slumping home values and the weak economy has added five years of work for the average employee, says Brandon Ross, managing partner of Peak Capital Investments Services, a financial adviser.
What's more, collecting Social Security later increases the benefit. Avoid if you can, the permanent reduction in benefits if you retire early. If you were born in 1960 or later and you claim your benefits at 62 instead of the full retirement age of 67, you reduce your monthly benefit by 30 percent. A $1,000 benefit, for example, is reduced to $700.
Those who were planning on living very well in retirement, may now have to live more modestly, says Panaccione, the Navigation Group adviser. That may mean giving up the personal trainer or new car every few years in order to maintain a comfortable lifestyle in retirement.
Beyond savings, make sure you're also evaluating your anticipated expenses. That includes major items such as health care, possibly in a nursing home or through an in-home nursing service.
The Center for Retirement Research at Boston College has shown that a worker retiring in 2020 will need about $142,000 to cover just out-of-pocket health care costs in retirement.
Myth 5: I'm healthy and in the prime of my life, I don't need life insurance.
Life insurance isn't for you it's for your loved ones. Buying insurance often depends on whether you have financial obligations you want covered after you're gone. For young people term life insurance is inexpensive and will help cover funeral expenses and pay off debts. This is also a good option for single people to cover the basics. As it sounds, it's purchased for a specific time period so when it ends, you need another policy.
Mid-career workers should consider a permanent policy such as a universal life or whole life policy, which allows the buyer to continue to pay premiums to keep the policy in force on a continual basis.
It's critical for someone starting a family to seek coverage that could help the family survive the loss of a breadwinner. An insurance needs calculator is provided by the American Institute of Certified Public Accountants here. Be sure to purchase from a company with a solid financial strength rating. You can review ratings at Insure.com .
Myth 6: Buying in bulk is always a good strategy.
Just just bought a huge commercial-kitchen jar of Grey Poupon? It's estimated that most people only consume 12 ounces of mustard per year. So you may have just stocked up on more than a decade's worth unless you're hosting a major picnic.
Buying in bulk, taking advantage of sales, and using coupons is a good savings strategy if you're actually purchasing items that you need and would have purchased anyway.
It doesn't make sense to spend a lot on gas to cash in on a small coupon. A good deal on a perishable item isn't so good if half of it spoils.
"Don't buy things that you otherwise wouldn't normally buy just because you think you can get a deal on it," says Neal Ringquist, president of Advisor Software Inc., which runs Goalgami.com, a personal finance website.
With smartphones and ubiquitous daily deal email offers, the temptation to spend is all around. So be cautious about buying into promotions like those on Groupon or Living Social as impulse purchases.
S & P DOWNGRADES PORTUGAL AND GREECE AGAIN!
S.&P. Downgrades Portugal and Greece Again
Standard & Poor’s said Tuesday that it had cut its sovereign credit ratings for Portugal and Greece, piling further pressure on the two countries with heavy debt loads, weak economies and moribund banks.
Jose Manuel Ribeiro/Reuters
A shop window in downtown Lisbon. S.& P. warned that Portugal would probably need a bailout.
Francisco Seco/Associated Press
José Sócrates
S.& P. cut Portugal’s rating to BBB– from BBB, with a negative outlook, the agency’s second downgrade of the country since Friday. BBB- is the agency’s lowest investment grade rating and is just one notch above junk. The Greek rating, which had already been cut to junk, was lowered to BB– from BB+.
Richard McGuire, a fixed income strategist at Rabobank in London, said the steps confirmed investor perceptions that Greece would have to default on some of it debt and that a similar outcome was “increasingly likely” for Portugal. He added that the European bailout mechanisms were inadequate, likening them to attaching a first-aid bandage “to a festering wound.”
“It’s a liquidity solution to a solvency problem,” he added.
The Portuguese government collapsed last week after it was unable to push further measures through Parliament to plug its deficit and fend off the need for outside aid. The country now faces weeks of political uncertainty before holding national elections.
S.& P. said the country would probably need an international bailout. Lisbon has about 9 billion euros ($12.7 billion) of bond redemptions falling due in April and June. Portugal’s cash position is sufficient to cover the April redemption, but not the one in June, analysts said.
The yields on benchmark euro zone government bonds pushed higher after the announcement of the downgrades. The yield on the Portuguese 10-year note hit 7.8 percent, around its highest level since the inception of the euro.
Mr. McGuire said that investors had been dumping short-dated Portuguese debt this week to protect themselves from default, making it harder for Lisbon to raise money by issuing short-dated bills and hence make it to June without a bailout.
If Fitch and Moody’s Investors Service both downgrade Portugal by one more notch, it will cost investors 5 percent more to use its debt as collateral in exchange for loans from the European Central Bank.
Meanwhile, investors are waiting for the results of a health check on Irish banks, scheduled for release by the Irish central bank on Thursday, and an announcement from the European Central Bank about a new facility to support struggling banks that will be focused initially on Irish lenders. In June, the results of stress tests on European banks, and steps to recapitalize them, will be announced.
Mr. McGuire said that countries like Ireland, Greece and Portugal would either have to default or “pray that a surge in economic growth comes along to save them.”
The euro was broadly steady, at $1.4088, from levels late Monday.
S.& P. said Portugal was likely to have to turn to the European Stability Mechanism, which is being set up by European countries, for aid. Unlike Greece, Portugal might be able to avoid restructuring its debt, but the agency said that the government’s unsecured debt, or debt issued without the security of an underlying asset, would probably be subordinated to future loans from the mechanism. The agency retained a negative outlook on its rating as the “macroeconomic environment could weaken beyond our current expectations.” It also said that “a political impasse could undermine the effective implementation of Portugal’s adjustment program.” S.&P. already cut Portugal’s rating on Friday, warning that it might do so again once the details of the new mechanism were announced. Fitch Ratings also cut Portugal’s ratings on Friday. Mr. McGuire of Rabobank said that once a bailout was arranged for Portugal, yields were not likely to come down much, until longer-term solutions to the regional banking problem emerge.
S.& P. said the Greek downgrade reflected the view that a sovereign debt restructuring was likely and would probably be a condition for Athens to borrow from the mechanism being established by the European Union. Likewise, senior unsecured Greek debt would be subordinated to loans from the fund, said Marko Mrsnik, a credit analyst at the agency.
The agency also cited “growing risks to Greece’s budgetary position.” Recently released provisional data on the government’s 2010 balance indicated “a relatively higher cash deficit and larger outstanding spending arrears than planned,” it said. That suggests that the 2010 deficit could exceed the government’s goal of 9.6 percent of gross domestic product. It also said the government was unlikely to hit its 2011 budget deficit goal of 7.5 percent of G.D.P.
“We believe that the government has not tightened spending controls sufficiently to prevent further accumulation of arrears in 2011,” it said. “Government revenues have been underperforming budgetary expectations, most recently in the current quarter.” It added that prospects for better tax collection remained uncertain because of the effects of weaker domestic demand and persisting inefficiencies of the tax administration.
S.&P. Downgrades Portugal and Greece Again
Standard & Poor’s said Tuesday that it had cut its sovereign credit ratings for Portugal and Greece, piling further pressure on the two countries with heavy debt loads, weak economies and moribund banks.
Jose Manuel Ribeiro/Reuters
A shop window in downtown Lisbon. S.& P. warned that Portugal would probably need a bailout.
Francisco Seco/Associated Press
José Sócrates
S.& P. cut Portugal’s rating to BBB– from BBB, with a negative outlook, the agency’s second downgrade of the country since Friday. BBB- is the agency’s lowest investment grade rating and is just one notch above junk. The Greek rating, which had already been cut to junk, was lowered to BB– from BB+.
Richard McGuire, a fixed income strategist at Rabobank in London, said the steps confirmed investor perceptions that Greece would have to default on some of it debt and that a similar outcome was “increasingly likely” for Portugal. He added that the European bailout mechanisms were inadequate, likening them to attaching a first-aid bandage “to a festering wound.”
“It’s a liquidity solution to a solvency problem,” he added.
The Portuguese government collapsed last week after it was unable to push further measures through Parliament to plug its deficit and fend off the need for outside aid. The country now faces weeks of political uncertainty before holding national elections.
S.& P. said the country would probably need an international bailout. Lisbon has about 9 billion euros ($12.7 billion) of bond redemptions falling due in April and June. Portugal’s cash position is sufficient to cover the April redemption, but not the one in June, analysts said.
The yields on benchmark euro zone government bonds pushed higher after the announcement of the downgrades. The yield on the Portuguese 10-year note hit 7.8 percent, around its highest level since the inception of the euro.
Mr. McGuire said that investors had been dumping short-dated Portuguese debt this week to protect themselves from default, making it harder for Lisbon to raise money by issuing short-dated bills and hence make it to June without a bailout.
If Fitch and Moody’s Investors Service both downgrade Portugal by one more notch, it will cost investors 5 percent more to use its debt as collateral in exchange for loans from the European Central Bank.
Meanwhile, investors are waiting for the results of a health check on Irish banks, scheduled for release by the Irish central bank on Thursday, and an announcement from the European Central Bank about a new facility to support struggling banks that will be focused initially on Irish lenders. In June, the results of stress tests on European banks, and steps to recapitalize them, will be announced.
Mr. McGuire said that countries like Ireland, Greece and Portugal would either have to default or “pray that a surge in economic growth comes along to save them.”
The euro was broadly steady, at $1.4088, from levels late Monday.
S.& P. said Portugal was likely to have to turn to the European Stability Mechanism, which is being set up by European countries, for aid. Unlike Greece, Portugal might be able to avoid restructuring its debt, but the agency said that the government’s unsecured debt, or debt issued without the security of an underlying asset, would probably be subordinated to future loans from the mechanism. The agency retained a negative outlook on its rating as the “macroeconomic environment could weaken beyond our current expectations.” It also said that “a political impasse could undermine the effective implementation of Portugal’s adjustment program.” S.&P. already cut Portugal’s rating on Friday, warning that it might do so again once the details of the new mechanism were announced. Fitch Ratings also cut Portugal’s ratings on Friday. Mr. McGuire of Rabobank said that once a bailout was arranged for Portugal, yields were not likely to come down much, until longer-term solutions to the regional banking problem emerge.
S.& P. said the Greek downgrade reflected the view that a sovereign debt restructuring was likely and would probably be a condition for Athens to borrow from the mechanism being established by the European Union. Likewise, senior unsecured Greek debt would be subordinated to loans from the fund, said Marko Mrsnik, a credit analyst at the agency.
The agency also cited “growing risks to Greece’s budgetary position.” Recently released provisional data on the government’s 2010 balance indicated “a relatively higher cash deficit and larger outstanding spending arrears than planned,” it said. That suggests that the 2010 deficit could exceed the government’s goal of 9.6 percent of gross domestic product. It also said the government was unlikely to hit its 2011 budget deficit goal of 7.5 percent of G.D.P.
“We believe that the government has not tightened spending controls sufficiently to prevent further accumulation of arrears in 2011,” it said. “Government revenues have been underperforming budgetary expectations, most recently in the current quarter.” It added that prospects for better tax collection remained uncertain because of the effects of weaker domestic demand and persisting inefficiencies of the tax administration.
6 money myths that can hurt you in prime earning years
Workers often hit their peak earning years only to be pulled in several directions. Beyond basic expenses there may be college-age kids or aging parents who need financial help. It can be a lot to balance at a time when retirement savings should take on more importance.
The problem is many fall prey to the myth that they can juggle it all month-to-month, on the fly.
"What happens with the tens of thousands of consumers we talk with every month is they've gotten into the habit of bad habits," says Mike Croxson, president of CareOne, a debt counseling company. "They don't have a plan anymore."
This often happens to workers in their 30s to early 50s. As life gets busy, they pay bills on auto-pilot and pay little attention to long-term financial planning.
Here are six money myths to avoid as potential pitfalls during your peak earning years:
Myth 1. I need to prepare for an emergency before I pay down credit card debt.
It's wisest to pay down high-interest credit cards before you save for a rainy day. "You have to look at where you get the best bang for the buck," says Carlo Panaccione, a financial planner at Navigation Group Inc. in Redwood Shores, Calif.
You'd be better off paying down a $5,000 credit card balance charging you 14 percent than socking away that amount in a bank earning less than 2 percent.
If you're concerned about an inadequate emergency fund, you should be. But recognize that if you start paying down debt, you can still charge most expenses if a problem arises.
Also weigh the consequences if you're sacrificing 401(k) contributions. You're losing the benefit of lowering your taxable income and possibly missing out on an employer match. Consider having at least enough deducted so your employer matches your 401(k) contributions. It's an example of where saving first makes sense.
To manage your debt, use these basic guidelines. Start with your monthly gross income — before payroll deductions and taxes. Your housing expense shouldn't exceed 28 percent of that amount. If you then add revolving debt, such as credit cards and car loans, the amount shouldn't exceed 36 percent. If it does by much, you really need to focus on shedding some debt.
Myth 2: I should forget about asking for a raise until the economy recovers.
Lean and mean. After the recession it's become common to hear about companies operating with minimal staff. While worker productivity is up — they're working harder after staff cuts — they're not getting paid much more. Personal income grew 3 percent in 2009 after falling 1.7 percent in 2008. Typically, personal income grows around 5 percent to 6 percent a year.
The smartest managers don't want to lose their remaining talent. The best employees are in demand and are in a good position to ask for a raise, says Lee Miller, co-author of "A Woman's Guide to Successful Negotiating."
If you think you deserve a raise or a promotion you'll need to show why it's deserved. When you make the request, address the new skills or expanded roll you've taken on; or the additional responsibilities you're willing to tackle.
Then demonstrate what you've accomplished and why it's in the company's interest to give you a raise. Tell the boss how you've made an impact, such as boosting sales or landing a new client.
Myth 3: I'm a renter and I don't own that much. I don't need a will.
Estimates vary but it's probably generous to say that about a third of all Americans have a will. "Everybody absolutely needs a will," says Peter Lang, an adviser with HighTower Securities, who specializes in estate planning. Without a will, the state will decide who gets your assets.
It's unpleasant to think about your own death, which is one reason why many people don't prepare. But having a will ensures your possessions are distributed according to your wishes, and helps family members avoid disputes.
The process also encourages you to think about other matters that might otherwise be put off, such as a durable power of attorney. This document gives another person the right to manage your affairs if you're unable. You may also want an advance health care directive to spell out what level of life sustaining care you would want to receive.
Hire an attorney who specializes in estate planning to evaluate your circumstances. State laws vary and planning for a blended family, for instance, can introduce additional complexity.
There is the option of online do-it-yourself wills and the other documents. However, to use these products, your circumstances can't be too complex.
Myth 4: I'm focused on my retirement savings goal and that's enough.
The headlines "Retire Rich" and "Retire Early" have been retired. The 2008 stock market meltdown has left a lingering impact. Workers with 401(k) accounts saw their balances cut by about a third on average. Now many remain anxious and it hasn't helped that their balances have only recently rebounded to their levels at the market's peak in 2007.
So now many are contemplating working longer. Slumping home values and the weak economy has added five years of work for the average employee, says Brandon Ross, managing partner of Peak Capital Investments Services, a financial adviser.
What's more, collecting Social Security later increases the benefit. Avoid if you can, the permanent reduction in benefits if you retire early. If you were born in 1960 or later and you claim your benefits at 62 instead of the full retirement age of 67, you reduce your monthly benefit by 30 percent. A $1,000 benefit, for example, is reduced to $700.
Those who were planning on living very well in retirement, may now have to live more modestly, says Panaccione, the Navigation Group adviser. That may mean giving up the personal trainer or new car every few years in order to maintain a comfortable lifestyle in retirement.
Beyond savings, make sure you're also evaluating your anticipated expenses. That includes major items such as health care, possibly in a nursing home or through an in-home nursing service.
The Center for Retirement Research at Boston College has shown that a worker retiring in 2020 will need about $142,000 to cover just out-of-pocket health care costs in retirement.
Myth 5: I'm healthy and in the prime of my life, I don't need life insurance.
Life insurance isn't for you it's for your loved ones. Buying insurance often depends on whether you have financial obligations you want covered after you're gone. For young people term life insurance is inexpensive and will help cover funeral expenses and pay off debts. This is also a good option for single people to cover the basics. As it sounds, it's purchased for a specific time period so when it ends, you need another policy.
Mid-career workers should consider a permanent policy such as a universal life or whole life policy, which allows the buyer to continue to pay premiums to keep the policy in force on a continual basis.
It's critical for someone starting a family to seek coverage that could help the family survive the loss of a breadwinner. An insurance needs calculator is provided by the American Institute of Certified Public Accountants here. Be sure to purchase from a company with a solid financial strength rating. You can review ratings at Insure.com .
Myth 6: Buying in bulk is always a good strategy.
Just just bought a huge commercial-kitchen jar of Grey Poupon? It's estimated that most people only consume 12 ounces of mustard per year. So you may have just stocked up on more than a decade's worth unless you're hosting a major picnic.
Buying in bulk, taking advantage of sales, and using coupons is a good savings strategy if you're actually purchasing items that you need and would have purchased anyway.
It doesn't make sense to spend a lot on gas to cash in on a small coupon. A good deal on a perishable item isn't so good if half of it spoils.
"Don't buy things that you otherwise wouldn't normally buy just because you think you can get a deal on it," says Neal Ringquist, president of Advisor Software Inc., which runs Goalgami.com, a personal finance website.
With smartphones and ubiquitous daily deal email offers, the temptation to spend is all around. So be cautious about buying into promotions like those on Groupon or Living Social as impulse purchases.
The problem is many fall prey to the myth that they can juggle it all month-to-month, on the fly.
"What happens with the tens of thousands of consumers we talk with every month is they've gotten into the habit of bad habits," says Mike Croxson, president of CareOne, a debt counseling company. "They don't have a plan anymore."
This often happens to workers in their 30s to early 50s. As life gets busy, they pay bills on auto-pilot and pay little attention to long-term financial planning.
Here are six money myths to avoid as potential pitfalls during your peak earning years:
Myth 1. I need to prepare for an emergency before I pay down credit card debt.
It's wisest to pay down high-interest credit cards before you save for a rainy day. "You have to look at where you get the best bang for the buck," says Carlo Panaccione, a financial planner at Navigation Group Inc. in Redwood Shores, Calif.
You'd be better off paying down a $5,000 credit card balance charging you 14 percent than socking away that amount in a bank earning less than 2 percent.
If you're concerned about an inadequate emergency fund, you should be. But recognize that if you start paying down debt, you can still charge most expenses if a problem arises.
Also weigh the consequences if you're sacrificing 401(k) contributions. You're losing the benefit of lowering your taxable income and possibly missing out on an employer match. Consider having at least enough deducted so your employer matches your 401(k) contributions. It's an example of where saving first makes sense.
To manage your debt, use these basic guidelines. Start with your monthly gross income — before payroll deductions and taxes. Your housing expense shouldn't exceed 28 percent of that amount. If you then add revolving debt, such as credit cards and car loans, the amount shouldn't exceed 36 percent. If it does by much, you really need to focus on shedding some debt.
Myth 2: I should forget about asking for a raise until the economy recovers.
Lean and mean. After the recession it's become common to hear about companies operating with minimal staff. While worker productivity is up — they're working harder after staff cuts — they're not getting paid much more. Personal income grew 3 percent in 2009 after falling 1.7 percent in 2008. Typically, personal income grows around 5 percent to 6 percent a year.
The smartest managers don't want to lose their remaining talent. The best employees are in demand and are in a good position to ask for a raise, says Lee Miller, co-author of "A Woman's Guide to Successful Negotiating."
If you think you deserve a raise or a promotion you'll need to show why it's deserved. When you make the request, address the new skills or expanded roll you've taken on; or the additional responsibilities you're willing to tackle.
Then demonstrate what you've accomplished and why it's in the company's interest to give you a raise. Tell the boss how you've made an impact, such as boosting sales or landing a new client.
Myth 3: I'm a renter and I don't own that much. I don't need a will.
Estimates vary but it's probably generous to say that about a third of all Americans have a will. "Everybody absolutely needs a will," says Peter Lang, an adviser with HighTower Securities, who specializes in estate planning. Without a will, the state will decide who gets your assets.
It's unpleasant to think about your own death, which is one reason why many people don't prepare. But having a will ensures your possessions are distributed according to your wishes, and helps family members avoid disputes.
The process also encourages you to think about other matters that might otherwise be put off, such as a durable power of attorney. This document gives another person the right to manage your affairs if you're unable. You may also want an advance health care directive to spell out what level of life sustaining care you would want to receive.
Hire an attorney who specializes in estate planning to evaluate your circumstances. State laws vary and planning for a blended family, for instance, can introduce additional complexity.
There is the option of online do-it-yourself wills and the other documents. However, to use these products, your circumstances can't be too complex.
Myth 4: I'm focused on my retirement savings goal and that's enough.
The headlines "Retire Rich" and "Retire Early" have been retired. The 2008 stock market meltdown has left a lingering impact. Workers with 401(k) accounts saw their balances cut by about a third on average. Now many remain anxious and it hasn't helped that their balances have only recently rebounded to their levels at the market's peak in 2007.
So now many are contemplating working longer. Slumping home values and the weak economy has added five years of work for the average employee, says Brandon Ross, managing partner of Peak Capital Investments Services, a financial adviser.
What's more, collecting Social Security later increases the benefit. Avoid if you can, the permanent reduction in benefits if you retire early. If you were born in 1960 or later and you claim your benefits at 62 instead of the full retirement age of 67, you reduce your monthly benefit by 30 percent. A $1,000 benefit, for example, is reduced to $700.
Those who were planning on living very well in retirement, may now have to live more modestly, says Panaccione, the Navigation Group adviser. That may mean giving up the personal trainer or new car every few years in order to maintain a comfortable lifestyle in retirement.
Beyond savings, make sure you're also evaluating your anticipated expenses. That includes major items such as health care, possibly in a nursing home or through an in-home nursing service.
The Center for Retirement Research at Boston College has shown that a worker retiring in 2020 will need about $142,000 to cover just out-of-pocket health care costs in retirement.
Myth 5: I'm healthy and in the prime of my life, I don't need life insurance.
Life insurance isn't for you it's for your loved ones. Buying insurance often depends on whether you have financial obligations you want covered after you're gone. For young people term life insurance is inexpensive and will help cover funeral expenses and pay off debts. This is also a good option for single people to cover the basics. As it sounds, it's purchased for a specific time period so when it ends, you need another policy.
Mid-career workers should consider a permanent policy such as a universal life or whole life policy, which allows the buyer to continue to pay premiums to keep the policy in force on a continual basis.
It's critical for someone starting a family to seek coverage that could help the family survive the loss of a breadwinner. An insurance needs calculator is provided by the American Institute of Certified Public Accountants here. Be sure to purchase from a company with a solid financial strength rating. You can review ratings at Insure.com .
Myth 6: Buying in bulk is always a good strategy.
Just just bought a huge commercial-kitchen jar of Grey Poupon? It's estimated that most people only consume 12 ounces of mustard per year. So you may have just stocked up on more than a decade's worth unless you're hosting a major picnic.
Buying in bulk, taking advantage of sales, and using coupons is a good savings strategy if you're actually purchasing items that you need and would have purchased anyway.
It doesn't make sense to spend a lot on gas to cash in on a small coupon. A good deal on a perishable item isn't so good if half of it spoils.
"Don't buy things that you otherwise wouldn't normally buy just because you think you can get a deal on it," says Neal Ringquist, president of Advisor Software Inc., which runs Goalgami.com, a personal finance website.
With smartphones and ubiquitous daily deal email offers, the temptation to spend is all around. So be cautious about buying into promotions like those on Groupon or Living Social as impulse purchases.
S & P DOWNGRADES PORTUGAL AND GREECE AGAIN!
S.&P. Downgrades Portugal and Greece Again
Standard & Poor’s said Tuesday that it had cut its sovereign credit ratings for Portugal and Greece, piling further pressure on the two countries with heavy debt loads, weak economies and moribund banks.
Jose Manuel Ribeiro/Reuters
A shop window in downtown Lisbon. S.& P. warned that Portugal would probably need a bailout.
Francisco Seco/Associated Press
José Sócrates
S.& P. cut Portugal’s rating to BBB– from BBB, with a negative outlook, the agency’s second downgrade of the country since Friday. BBB- is the agency’s lowest investment grade rating and is just one notch above junk. The Greek rating, which had already been cut to junk, was lowered to BB– from BB+.
Richard McGuire, a fixed income strategist at Rabobank in London, said the steps confirmed investor perceptions that Greece would have to default on some of it debt and that a similar outcome was “increasingly likely” for Portugal. He added that the European bailout mechanisms were inadequate, likening them to attaching a first-aid bandage “to a festering wound.”
“It’s a liquidity solution to a solvency problem,” he added.
The Portuguese government collapsed last week after it was unable to push further measures through Parliament to plug its deficit and fend off the need for outside aid. The country now faces weeks of political uncertainty before holding national elections.
S.& P. said the country would probably need an international bailout. Lisbon has about 9 billion euros ($12.7 billion) of bond redemptions falling due in April and June. Portugal’s cash position is sufficient to cover the April redemption, but not the one in June, analysts said.
The yields on benchmark euro zone government bonds pushed higher after the announcement of the downgrades. The yield on the Portuguese 10-year note hit 7.8 percent, around its highest level since the inception of the euro.
Mr. McGuire said that investors had been dumping short-dated Portuguese debt this week to protect themselves from default, making it harder for Lisbon to raise money by issuing short-dated bills and hence make it to June without a bailout.
If Fitch and Moody’s Investors Service both downgrade Portugal by one more notch, it will cost investors 5 percent more to use its debt as collateral in exchange for loans from the European Central Bank.
Meanwhile, investors are waiting for the results of a health check on Irish banks, scheduled for release by the Irish central bank on Thursday, and an announcement from the European Central Bank about a new facility to support struggling banks that will be focused initially on Irish lenders. In June, the results of stress tests on European banks, and steps to recapitalize them, will be announced.
Mr. McGuire said that countries like Ireland, Greece and Portugal would either have to default or “pray that a surge in economic growth comes along to save them.”
The euro was broadly steady, at $1.4088, from levels late Monday.
S.& P. said Portugal was likely to have to turn to the European Stability Mechanism, which is being set up by European countries, for aid. Unlike Greece, Portugal might be able to avoid restructuring its debt, but the agency said that the government’s unsecured debt, or debt issued without the security of an underlying asset, would probably be subordinated to future loans from the mechanism. The agency retained a negative outlook on its rating as the “macroeconomic environment could weaken beyond our current expectations.” It also said that “a political impasse could undermine the effective implementation of Portugal’s adjustment program.” S.&P. already cut Portugal’s rating on Friday, warning that it might do so again once the details of the new mechanism were announced. Fitch Ratings also cut Portugal’s ratings on Friday. Mr. McGuire of Rabobank said that once a bailout was arranged for Portugal, yields were not likely to come down much, until longer-term solutions to the regional banking problem emerge.
S.& P. said the Greek downgrade reflected the view that a sovereign debt restructuring was likely and would probably be a condition for Athens to borrow from the mechanism being established by the European Union. Likewise, senior unsecured Greek debt would be subordinated to loans from the fund, said Marko Mrsnik, a credit analyst at the agency.
The agency also cited “growing risks to Greece’s budgetary position.” Recently released provisional data on the government’s 2010 balance indicated “a relatively higher cash deficit and larger outstanding spending arrears than planned,” it said. That suggests that the 2010 deficit could exceed the government’s goal of 9.6 percent of gross domestic product. It also said the government was unlikely to hit its 2011 budget deficit goal of 7.5 percent of G.D.P.
“We believe that the government has not tightened spending controls sufficiently to prevent further accumulation of arrears in 2011,” it said. “Government revenues have been underperforming budgetary expectations, most recently in the current quarter.” It added that prospects for better tax collection remained uncertain because of the effects of weaker domestic demand and persisting inefficiencies of the tax administration.
Standard & Poor’s said Tuesday that it had cut its sovereign credit ratings for Portugal and Greece, piling further pressure on the two countries with heavy debt loads, weak economies and moribund banks.
Jose Manuel Ribeiro/Reuters
A shop window in downtown Lisbon. S.& P. warned that Portugal would probably need a bailout.
Francisco Seco/Associated Press
José Sócrates
S.& P. cut Portugal’s rating to BBB– from BBB, with a negative outlook, the agency’s second downgrade of the country since Friday. BBB- is the agency’s lowest investment grade rating and is just one notch above junk. The Greek rating, which had already been cut to junk, was lowered to BB– from BB+.
Richard McGuire, a fixed income strategist at Rabobank in London, said the steps confirmed investor perceptions that Greece would have to default on some of it debt and that a similar outcome was “increasingly likely” for Portugal. He added that the European bailout mechanisms were inadequate, likening them to attaching a first-aid bandage “to a festering wound.”
“It’s a liquidity solution to a solvency problem,” he added.
The Portuguese government collapsed last week after it was unable to push further measures through Parliament to plug its deficit and fend off the need for outside aid. The country now faces weeks of political uncertainty before holding national elections.
S.& P. said the country would probably need an international bailout. Lisbon has about 9 billion euros ($12.7 billion) of bond redemptions falling due in April and June. Portugal’s cash position is sufficient to cover the April redemption, but not the one in June, analysts said.
The yields on benchmark euro zone government bonds pushed higher after the announcement of the downgrades. The yield on the Portuguese 10-year note hit 7.8 percent, around its highest level since the inception of the euro.
Mr. McGuire said that investors had been dumping short-dated Portuguese debt this week to protect themselves from default, making it harder for Lisbon to raise money by issuing short-dated bills and hence make it to June without a bailout.
If Fitch and Moody’s Investors Service both downgrade Portugal by one more notch, it will cost investors 5 percent more to use its debt as collateral in exchange for loans from the European Central Bank.
Meanwhile, investors are waiting for the results of a health check on Irish banks, scheduled for release by the Irish central bank on Thursday, and an announcement from the European Central Bank about a new facility to support struggling banks that will be focused initially on Irish lenders. In June, the results of stress tests on European banks, and steps to recapitalize them, will be announced.
Mr. McGuire said that countries like Ireland, Greece and Portugal would either have to default or “pray that a surge in economic growth comes along to save them.”
The euro was broadly steady, at $1.4088, from levels late Monday.
S.& P. said Portugal was likely to have to turn to the European Stability Mechanism, which is being set up by European countries, for aid. Unlike Greece, Portugal might be able to avoid restructuring its debt, but the agency said that the government’s unsecured debt, or debt issued without the security of an underlying asset, would probably be subordinated to future loans from the mechanism. The agency retained a negative outlook on its rating as the “macroeconomic environment could weaken beyond our current expectations.” It also said that “a political impasse could undermine the effective implementation of Portugal’s adjustment program.” S.&P. already cut Portugal’s rating on Friday, warning that it might do so again once the details of the new mechanism were announced. Fitch Ratings also cut Portugal’s ratings on Friday. Mr. McGuire of Rabobank said that once a bailout was arranged for Portugal, yields were not likely to come down much, until longer-term solutions to the regional banking problem emerge.
S.& P. said the Greek downgrade reflected the view that a sovereign debt restructuring was likely and would probably be a condition for Athens to borrow from the mechanism being established by the European Union. Likewise, senior unsecured Greek debt would be subordinated to loans from the fund, said Marko Mrsnik, a credit analyst at the agency.
The agency also cited “growing risks to Greece’s budgetary position.” Recently released provisional data on the government’s 2010 balance indicated “a relatively higher cash deficit and larger outstanding spending arrears than planned,” it said. That suggests that the 2010 deficit could exceed the government’s goal of 9.6 percent of gross domestic product. It also said the government was unlikely to hit its 2011 budget deficit goal of 7.5 percent of G.D.P.
“We believe that the government has not tightened spending controls sufficiently to prevent further accumulation of arrears in 2011,” it said. “Government revenues have been underperforming budgetary expectations, most recently in the current quarter.” It added that prospects for better tax collection remained uncertain because of the effects of weaker domestic demand and persisting inefficiencies of the tax administration.
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