The James Dicks Blog

I know it’s been tough the past couple of years and you’ve probably experienced some financial losses along the way, which could include a loss of equity in your home (or the loss of your home through foreclosure), your investments have probably taken a beating, and your 401(k) is no longer a viable option for your retirement future. If you were saving for your children’s education, that may have been put on hold, at least for the foreseeable future. Vacations? Forget about it….at least for now.

Remember, you may be down but you’re certainly not out by a long shot. Time to start the rebuilding process and the sooner the better. The faster you start, the more time you’ll have to put away the cash, the assets, the peace of mind before you really need it. But what to do first?
You might look back and try to remember where you started when you first left home or when you first got married. Chances are you began by putting away what you could in a bank savings account. That is probably a good place to start now.

Recently an economist said that average U.S. household wealth is down almost 20 percent from its pre-recessionary financial crest three years ago. There has been no reduction of U.S. household wealth in the last 50 years that has even come close to touching this loss. Many of those who supposedly know (government officials, economists and the like) are starting to believe that the “Great Recession” has probably seen its worse and investors are beginning to get restless about standing on the sidelines. But, many more are not yet interested in getting back in yet. There are fears that they might run into a second phase of this recession period and take another big hit. And others are getting nervous about the possibility of losing out on something big when things do begin to look clearer economically.

So what should we do? The answer to that question is very personal – it’s your money and that means its entirely your decision. But let me just throw out a few facts that may help you make some very important decisions.

Many people I talk to are ready to jump back into stocks. The negative or positive activity experienced by the stock market is normally guided by the strength or the weakness of the U.S. economy. When our economy begins to expand and the chances of inflation are relatively slim, the stock markets tend to thrive. Today, I don’t think we know the answer to either of those questions because growth and inflationary questions remain persistent today.

I don’t know about you, but I’ve been hearing lots of advertisements about investing in commodities these days, specifically gold. During periods of inflationary pressure, the commodity sector has been where many people go to find a financial refuge. Although gold has been showing some considerable strength, it has also shown itself to be rather stagnant over the last few months – not gain or losing much in the process. The Fed has stated this year that if inflation begins to show itself while our national economy continues to be on the mend, they will pull back some of the liquidity they’ve put out there in order to slow it down. This will indeed have a great impact on commodity pricing.

So where to go? Back to that savings account at the bank that hardly pays anything as far as interest is concerned. Or maybe its time to remain on the sidelines and get involved in CD’s or other interest rate vehicles. While these types of investments aren’t very lucrative, you can be sure of one thing…you’re probably not going to lose in the process either.

Are you in a mood to take a chance or are you in preservation mode right now? Remember the old adage – “You pay your money and you take your chances.” But the chances we are experiencing today are not like anything this generation has ever seen. Getting back in or staying on the sidelines is a decision that each one of us must make independently and not by the flipping of a coin. Get educated and make sure the decision you ultimately make is one you can personally live whether your investments go up or whether they go down.

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You’ve heard the old saying, “it’s not what you make; it’s what you keep.” That has never been truer than in today’s very weak economic situation. Everyone has had to change their lifestyle – no matter how much money they are making. I know ”millionaires” who have to change their personal financial habits. It’s tough al over and families have redirected their priorities because of the money question.

So, what’s the answer? One phrase, “spend less – save more.” It’s time to design a very positive approach to actually changing your habits and develop individual goals. This kind of action will better secure your success in obtaining meaningful returns through an actual meaningful reorganization of your financial life. A recent government report showed that Americans cut their spending and saved more for a sixth straight month as more and more people were either worried about finding a job or keeping a job.

Goal setting is another top priority. Determine specific and attainable goals, short and long term, and make sure you write them down. Physically writing them down gives them power. The act of writing and visualizing your goals makes it much more likely that you will actually achieve them.

You must also understand your current financial situation to know where to make your changes. Add up your assets and your liabilities. Find out how much you owe on your home, your cars and your credit cards and conclude how best to shape and maybe cut those liabilities down a bit during the year ahead. It’s always a good idea to get rid of debt, especially high interest debt. You might also consider establishing new insurance needs. Examine the validity of your current life, disability, home, health or auto policies and decide whether changes are required. If you’re like the rest of us, you probably haven’t looked at your policies in quite some time.

Again, the best way to establish a solid financial plan is to save, save, save. The general rule is to put away 5 percent to 10 percent of your take-home pay, if you can. Remember to pay yourself first and don’t wait for what’s left over after you pay your bills. If that’s your strategy, you’ll find it difficult to save anything. You should also be sure to set aside your savings in an interest-bearing account, such as a money market account, or in a tax-deferred account like an individual retirement plan (IRA). If your company offers a 401(k) plan, start contributing as soon as you possibly can, especially if the company matches your contributions. Once you’ve finished the basics, then you can start examining your portfolio and other investment opportunities.

Something else to pay close attention to, especially during this time of the year, is your tax strategy. When you receive your annual W-2s, make sure your monthly tax payments are being deducted at the proper level. The trick is to come as close to breaking even as possible on your federal tax returns. You should keep and invest your money throughout the year rather than allow the government to use your hard-earned cash.

Remember, it doesn’t matter how old or young you are, or how much money you’re making; now is the time to start improving your financial situation. There are a lot of important events in our lives that rely on our financial health – education, weddings, vacations, security, and retirement just to name a few. These times are tough, there’s no doubt about it, but we all must start to rebuild what we have lost and set goals to get back to where we want to be. It’s important and the sooner you start the sooner things will start to improve for you and your family.

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This may be a little off topic from most of my blogs, but after watching the most disturbing investigative news report I have seen in a long time, there was no way I was going to bed without writing about it. The story was on 20/20 last Friday night on ABC. It was about young children going to the dentist and being subjected to the most traumatic experiences you could ever imagine. The videos that they showed in this report were shocking, unacceptable and you can bet I will be with my kids next time they visit the dentist. These young kids were having in some cases up to 16 root canals in one sitting, the dentist turning up the radio so parents couldn’t hear them screaming, putting the kids on a restraining board so they couldn’t move while still carry out these procedures until the kids were beyond hysteria. I can hardly even write about it.

I will let you, if you dare, go to You Tube and search the 20/20 Small Smiles story which aired Friday night January 22, 2009. The clinic that the story focused on was called Small Smiles with locations all over the country. Apparently they just settled with the Justice department this week for $24 million, and have had numerous other settlements.

Let me share a dentist story with you that happened to me. I went to a dentist many years ago, the dentist told me I had 8 cavities and that I needed them filled. I can tell you one thing; this Marine doesn’t like going to the dentist or at least their practice. So I put the procedure off and told them I would be back later. I’m glad I did that because I went to a different dentist for a second opinion and, guess what, I had no cavities. This dentist was about to start drilling for no reason at all and worse yet, I had family members that weren’t as lucky as me and ended up getting the drill from this dentist, who ultimately lost his license.

So back to your kids; do not under any circumstance let your kids go back with the dentist without you. And if the dentist won’t allow you to go back, then FIND A NEW DENTIST! If you can’t bear to watch then something must be wrong. If all else fails get a second opinion. I am sorry if this is harsh or hard to read, especially if you are a parent of young kids like I am. But as I said in the beginning, no way was I going to sleep after seeing that report. Protect your children and their teeth.

All my best

James

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While I don’t have a personal crystal ball to predict the future, I continue hearing the so-called “financial experts” forecast that 2010 won’t be any better than 2009; some even say it will likely be worse. Now I’m not saying that we should just give up, roll over or panic, but I am saying that as long as we have an inkling of what may lie ahead, we will have a better chance of planning for our future economic situation. As they say, prepare for the worst while hoping for the best.

The global economic situation turned from bad to worse during the past 18 months and it probably won’t get much better in the near term. You can be assured that unless you keep the proper attitude, plan for any possible financial downturn and create a solid set of goals for the coming year, you will be in a weaker position. I’ve seen some prognostications across the board that the typical American consumer will have to “tighten up the belt” just a little more in the coming months. Some retailers are saying that even if the customer has the wherewithal to pay for items, the chances of finding them might be hindered because many retailers are hesitant about holding a large inventory.

One thing is certain. It’s the American (and global) consumer that will ultimately bring us back to financial solvency but not until they are confident enough to start spending their hard earned dollars (yen, euro, or pounds) again. The current global economic downturn has really exposed the financial “underbelly” of many personal households. No family ever handles a job loss well, but the ones with enough cash on-hand and a well thought out emergency plan will be able to handle it better than ones that don’t have them. The strong economy of the past, fed by a number of factors including cheap credit, concealed the damaging decisions that many people made in their personal financial lives.

So, let’s say the economy begins to improve this year; you can be sure that the recovery process will take many more years to come. Let’s remember that there are 15 to 20 million Americans out of work and that number doesn’t seem to be getting any smaller as job openings haven’t increased either. The paradigm of how the consumer spends has definitely changed and isn’t likely to change back to the way it was before. Today the American consumer base is either trying to pay off their debt or, more likely, allowing their accounts to default because they can no longer afford to pay the bills without employment.

America’s small business has the biggest challenge ahead of them. It is small business that keeps most of America employed but in the current situation and under the current set of rules, expanding the workforce just isn’t very likely. Through all this, if your small business is still breathing (even if only shallow), start the new year by double checking your business plan and see if it’s still valid in today’s economic reality; some changes just might be necessary. This can be a great time for you to use your networking community to find the support and information you need to make the difference between success and failure; you might even consider a strategic partnership. People and business everywhere are trying to find better ways to stay afloat and your business just may be their answer. They need to know you’re there and advertising your service or product has never been more essential. If they don’t know you’re there then they won’t be able to find or use your business or service. That will certainly hurt your bottom line.

I am very optimistic about our country and the ability of its people to find solutions. Americans do their best in times of crisis and I see the nation finding the answers that will ultimately turn this situation around to the positive. It may take some time, but we can never give up or give in. What can you do? Get up every morning, become dedicated to your plan and never allow the situation to get the best of you. This will turn around eventually but it’s going to take some hard work and determination to create a solid economic base. Don’t be mislead, it’s going to take a lot of hard work but the sooner we start rebuilding our personal and professional economic foundations, the faster our lives will start to improve. Let’s get to work.

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One of the major effects of the current economic downturn is that many people are putting their credit cards away and only using cash to make all their daily purchases. I know that the American population has a long way to go before it will totally accept such a radical premise as a cash-only existence. But the situation we now find ourselves in may make it the better way to live day-by-day, at least at the personal level. But with the recent changes in the credit card industry and the increase in interest rates, more and more consumers are now using cash (and that includes debit cards) to make their important daily purchases.

In 1950, Diner’s Club issued the very first “plastic money” to a very small consumer base; about 200 customers who used the card at 27 restaurants in New York City. By the late 1950’s the credit card industry really changed how we handled our spending habits and buying on time became extremely popular, if not the norm among the population in the United States. In 1959, it was the Bank of America that issued the very first, truly universal credit card but only in California but by the mid-1960’s their card was available for use on a coast-to-coast basis.

So what’s your plan for 2010? If you decide that a cash-only lifestyle is how you want to live the rest of your life, you must first create a budget. That is the key to making this whole plan work. You must know how much you need to spend in any particular area. A budget is the simplest form of a “cash-in and cash-out” system and by using only the money that you have on hand has a way of encouraging you to not spend what you do not have; which runs contrary to all of the hype that you see for credit and credit cards in our American society.

Those who have already started using cash-only have experienced a real decline in their spending. That’s because they are only spending money in their personal or small-business banking accounts. By using a debit card, you still have the convenience of using a card while not being encouraged to spend more than you have. You now have a limit and you have a financial plan in the form of your monthly budget.

Some people argue that if you don’t have credit, you can’t build your credit rating but that’s not entirely true. There are methods of building your credit without a credit card but most times this will include borrowing money. You might get your car financed, and then pay off the entire amount after a couple of months. You may also consider getting a secure credit card (which is really just a debit card that is reported to the credit bureaus) to help you build a credit rating without using true credit. But be very careful when it comes to the fees they charge; many are very high.

Another interesting sidebar of living without credit is that people who are doing so have noticed they are sleeping better at night knowing that they don’t have a mountain of debt weighing on them. If you are mentally healthy then chances are you will also become physically healthy too. Stress is everywhere in life and if you can rid yourself from the stressful situation of a debt load then that’s all the better for your personal well-being.

Finally, as you are learning to live within this new, cash-only lifestyle, make sure you teach your kids about money. I don’t know if you’ve noticed, but the various school systems around the nation, from elementary to college; just do not do a good job of teaching our young people about their finances. Because of this, they take a large amount of financial ignorance into their personal lives and the nation’s consumer economic problems are perpetuated. So, using common household lessons, teach your kids about money and credit. Put that at the top of your New Year resolution list.

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