FIREPROOF

This is a movie suggestion. If you have not seen the movie Fireproof yet... run to the theatre. Don't walk, run- oh, and don't forget your spouse. You will be happy you saw it.

The premise of the movie is a couple that looks typical to the outside world. But that's the problem, they are typical. They can't communicate properly, they fail to prioritize each other and they are heading down the path to divorce. Yeah- this movie is a bit too typical unfortunately.

I'm an advocate of attending regular marriage promotion events (at least annually). It's just good to get the oil change periodically. I'm not saying Annette and I have the perfect marriage but there is no doubt these retreats have significantly strengthened our relationship. Fireproof is along these lines. So instead of attending a 5-8 hour event, I suggest you start with a 2 hour movie. It will be the best $15 you've spent in a long time... err- maybe $20...

ENJOY! Charles

Bear Market Perspective

Things are a bit crazy right now. There's a lot of fear out there. I think its a good time to put things back into perspective. I suspect Habakkuk (Old Testament minor prophet) probably saw his share of bear markets as well- and he didn't have $700,000,000,000. Here's his response to tough times:

Habakkuk 3:17-18 "Though the fig tree may not blossom, Nor fruit be on the vines; Though the labor of the olive may fail, And the fields yield no food; Though the flock may be cut off from the fold, And there be no herd in the stalls— Yet I will rejoice in the LORD, I will joy in the God of my salvation."Economies and markets come and go but some things remain constant.

Spending Spree!!!

I'm just wondering if anyone is keeping track of just how much NEW spending has been proposed/passed by our government over the last 6 months. Forget $700B, I count $3.01 TRILLION Here's an estimated breakdown:

Original cost of Fannie/Freddie $200,000,000,000
US guarantee to JPM for Bear Stearns $29,000,000,000
2-yr loan to AIG $120,000,000,000
Exchange rate stability funds $50,000,000,000
Increase to FDIC $500,000,000,000 (Proposed)
Authorized Fannie/Freddie to buy mortgage backed securities $500,000,000,000
RTC type portfolio for banks $845,000,000,000
Pelosi/Obama stimulus package $115,000,000,000 (Proposed)
Hurricane and Flood Victims $24,000,000,000
Detroit Automakers $25,000,000,000
Heating for the poor $5,200,000,000
Budget Increases- Pentagon/Homeland Sec/Veterans Affairs $600,000,000,000

Since none of this money actually comes in the form of payment from an account but instead the printing of additional money people need to seriously consider how inflation will be impacted in the near future.

Bottom line: Dump your variable liabilities (ARMs, credit cards, HELOCs with variable, etc). The next 10 years could easily average an inflation rate double what we are currently seeing.

Take care,
Charles

I wake up and find I'm incredibly in debt!

There are different degrees of debt management. Your situation may be in the "crisis" stage. If this is the case, I suggest the following:

1) Analyze your debt: know what you have, what rate it's at and what the monthly payments are. Get a free credit report (annually) and make sure it's accurate (www.freecreditreport.org).

2) Minimize debt growth: more than likely you've gotten used to spending on a credit card or some other unsecured method of debt. Break the habit by putting the cards away. In the freezer if you have to (this eliminates impulse spending since you literally have to wait for the card to thaw out!). Move to debit cards wherever you can. For existing credit cards, can you move to lower interest rates (without getting ripped off after the intro period)? Stop automatic bill payments that go directly to the cards. Can you trade for a less expensive vehicle?

3) Itemize your life: this is the part where planners (present company included) tell you to budget. In my experience, if you had a budget you wouldn't be asking this question. More than likely you are not going to just pick up a full blown budget tomorrow. So start with a snapshot. Get your card statements, checkbook, receipts, etc. Everything that indicates an expenditures for the last 30 days. Write it all down. Next, scratch EVERYTHING. Then rebuild your expense list beginning with the most critical things. This will help you prioritize your expenses. Begin eliminating the lowest priority items and try to continue moving up the list.

4) Crown cash king: For a period, start carrying cash again. Not big bills waiting to get robbed but begin paying for small purchases with cash again. This way, if you don't have it you don't spend it. Debit cards are great but we can still get lost in the idea of having a mystery amount of money out there.

5) Increase cash-flow: You've already removed those unnecessary expenditures. Now let's increase your take home. Reevaluate your job. Are you earning the appropriate amount? Is it possible to pick up some part-time or contract work during evenings or weekends? "Garage Sale" over EBay?

6) Reconsider strategies: This is controversial but it is my experience so here you go. People will liquidate and get penalized by taking out their long-term retirement money (401/IRA) in order to cover short-term cash flow needs. Until you get debt under control, suspend contributions to retirement and savings plans. Remember, short-term cash crisis needs must be satisfied in order for long-term savings plans to be realized. Also, if you own a home consider whether or not it is in your best financial interest. I've had clients sell their home and move to a smaller, more manageable place and get a hold of their debt. Make sure you have "emergency money" which may even include available balances on credit cards (911 only).

Just a few expense reduction ideas: * If you have roadside coverage via AAA or your dealership, see how it balances out to the one offered by your cell phone plan. Choose the best option.

Reduce your cell phone plan and use land lines more. Most people can save $20-$30 per month with this.

Change life insurance from cash value policies to much cheaper term policies (consult planner first).

Check web bulletin boards for advice before making major purchases. Compare prices and get consumer advice.

Get healthy: trade Starbucks for water... tap water. Eliminate fast food ($6-$8 and clogged arteries per visit).

Shop at discount stores like Big Lots and $ stores for basic household items- even cheaper than Walmart.

Check company websites for coupons before utilizing their services (ie- getting your car fixed by a national chain).

Hope this helps!
Charles

Who do you trust when shopping for a new Home Loan?

If you are JUST looking for a home loan then you are looking for a commodity and price is your only concern. Research prices and then have different companies compete by sharing their paperwork with one another. www.bankrate.com is a good site to begin with. You can get an estimate on what a mortgage in your area should run.

If, on the other hand, you are looking at increasing your overall net worth then you want to talk to a mortgage planner. They see the big picture and don't make you sacrifice your long-term wealth potential for their short-term commission. A mortgage planner will have you consider the asset and liability side of your books and treat a mortgage appropriately. If you need one let me know and I can make a suggestion. I've felt comfortable referring my clients to him in the past and he has done a good job.

Charles

Do you have some tips to help save money on wedding costs?

You'll always have some things you spend a little more on. I suggest you put the extra money towards things that will last, like photos. 10 years later, I'm glad we spent the extra money on pictures! Most everything else is consumable and will not last beyond the week. Congratulations!

Charles

Out of the box thinking. Is it good or bad for the team?

I'm going to take the approach that out of the box thinking is generally good. The reality is that the team leader sets the tone. Here are two guidelines that may help prevent the deterioration of the team spirit.

1) Out of the box thinkers are different. Often they are A-type personalities and driven to succeed. They need to be aware that they have a strong tendency to become overwhelming. Their comments and discussion points need to be tempered with a heavy dose of patience and respect for other team members. This can be difficult if they feel like they are the only one that "sees" the real answer. When a member hits that point they need to close the ONE mouth they have and use the TWO ears they were given before going any farther. Quite often teams are balanced with out of the box thinkers and those who live in and for the box. It's not a bad thing but the two have to understand each other. The team will have trouble when these two individuals cannot see the other's perspective and the project essentially becomes a turf war. This is where strong leadership is crucial.

2) You can argue a decision only until the final decision is made. Once the decision is made team members have to stop the debating and get on the same page. This may be a time for out of the box thinkers to calmly and quietly make their way back to the box. If your organization is running in circles it's probably because your leaders are not leading. If this is you and your company then I am going to suggest an expert/website in leadership training that your organization may want to have a conversation with.

www.theliveinstitute.org

Charles

Whether to pay off the mortgage

You have some good financial answers listed here. 6% is a pretty cheap mortgage and not a bad position for a liability. But it does need to be considered with the rest of your financial plan.

Here's something else to consider. You said you WANTED to pay off some part of your mortgage. You may really want to do this but are concerned you might be making a mistake. No, it's not a bad idea. You wouldn't be doing anything "financially-wrong". If you will sleep easier and it will give you a greater piece of mind- pay down the mortgage.

For the record, I run a financial planning firm. So I guess I would have to respectfully disagree with the other comments about advisors never suggesting you pay down the mortgage.

Charles

Top 3 Qualities When Considering Promotions

1) Loyalty- to me, to the company, to the mission, to the company as well as the employee's principals

2) Continuity- I look to promote a person who is, for all intents and purposes, already doing the job I am considering them for

3) Compatibility- What are their career goals? Is this promotion in line with their goals? If it is, then they will have a greater buy-in. This should result in better performance.

As for your other question- yes, I absolutely foresee more growth for my company and greater hiring/retention budgets.

Charles

What do you do with your ideas?

You raise an interesting question. Ideas will hit me at very random times. Ironically enough, refining points about previous ideas seem to hit just as randomly. I take the approach that ideas are great but the timing has to be right. There is no way the time can be right for all the ideas that hit in a single day! What I do is hold folders in a desk drawer (or electronically on the PC). Anytime I come across a follow up thought I write it down and place it in the folder. If I see a statistic, system, sample or anything else that will further that idea I take hold of it and place it in the folder. My goal is to get it out of my mind and onto paper as quickly as I can. Periodically, I'll sit and go through the folders. It is then that the creative juices begin to overflow.

Book recommendation: Hoover's Vision by Gary Hoover. Great book for those that think differently.

Hope that helps, CRG

Should I get a mortgage?

If your question is PURELY from a financial standpoint then here are some thoughts. I begin that way because mortgages usually have a psychological aspect that often outweighs the financial (ie- someone who says, "I'm just happy not to have a mortgage.")

Mortgage or no mortgage- who cares. Instead, think NET WORTH. When your end financial goal is to increase your personal net worth then all purchasable items become one of two things: an asset or a liability. Both should be used with the goal of increasing net worth. 4 years ago I would have said, take the mortgage. Why? Because you could get a low cost mortgage locked in for 10 years at 4-ish% then invest in a high quality fixed instrument for the same term at 5-ish%. Then you could write off the interest (to an extent). The bottom line was that you had your bond paying your mortgage and you were able to net money off the spread... thus, increasing net worth. Some people may gripe about this strategy but the fact is I did it for a client and it continues to work exactly the way we planned it. Today you're not going to find the fixed 4% mortgage or the high quality 5% income product. No, if given a choice I would not do the mortgage in today's environment.

Another component. With the above strategy you only use low risk products. You wouldn't use an adjustable mortgage and you would ONLY use high quality fixed investments. You need equal amount of risk on each side to properly counter balance your leverage (mortgage). You cannot offset the potential risk involved with using the stock market (US or non-US). So I would have to recommend against the strategy you described. As for advisors, get advice from someone who is referred to you by a trusted source. Make sure their fees are reasonable and they know what they are talking about. I recommend only using someone with the CFP credentials behind their name. I wouldn't stress about what "type" they are (ie- commission, fee based, fee only, etc). After 10 years in the business I've seen good, bad and ugly on all sides. The PERSON brings integrity, not the firm, the designation or the type of practice they run.

Hope that helps, CRG”

What do you do with your 401k after you reach age 70 1/2 and you are retired?

First off, if his 401k included any low basis company stock DO NOT ROLL IT TO AN IRA. He needs to consider the potential benefit of what is known as Net Unrealized Appreciation. If you need additional info see a CPA or ask on this board. I'm certain there are a number of knowledgeable professionals familiar with NUA. I see some insurance/annuity suggestions on this board. I'm familiar with the strategies described. I doubt I will ever be comfortable generating that type of current year tax hit. Next, does the owner of the 401k have a company of his own? Even a side business or something that could easily become a part-time company of his own? If he does then there may be ways to delay the withdrawal of the 401k. There are some provisions were a worker is not required to take the required minimum distribution if he is still gainfully employed. If he's the only employee of his business then he may be able to have a solo-401k. He should be able to roll the money into that plan and delay the distribution. As with anything, definitely consult a tax advisor and retirement specialist before doing any of these. Hope that helps, CRG

Texas Supreme Court

I just finished ready John Grisham's "The Appeal". I wasn't a huge fan of the book's ending but being a law school student it sparked my interest. The book is a fictional story about voter manipulation in the Mississippi's Supreme Court election. Interested, I decided to take a closer look at our Texas Supreme Court makeup. Uh-oh; not good. If you're interested in my findings/opinions keep reading...



How unbiased do you consider an elected body made up entirely of one political party? How much debate and consideration is given to decisions when that body unanimously agrees with itself over 90% of the time? Herein lies my struggle. In Texas, Republicans have taken total control of the Supreme Court; 9 for 9 seats. This may sound odd coming from a conservative voter who votes, most of the time, for the Republican seat. Consider what this group has looked like on paper:

• The court overturned decisions made by juries in consumer cases 81% of the time
• The court ruled against consumers 84% of the time in their last term
• The court overturned 92% of appellate court decisions
• The court overturned 70% of trial court opinions
• Between 60-75% of each individual justice's campaign finance comes from law firms and energy/natural resource companies.

[Source: www.tpj.com Texans for Public Justice]

Was some of this necessary- I'm certain it was. But the numbers are overwhelmingly against consumers. The overturning of civil jury decisions is alarming- why even have a trial by jury? One could make an argument on that but trial by jury is how our system is run.

I am all for tort reform. The most common discussion around tort reform is the capping of punitive damages, or punishment for bad/non-criminal behavior. The fact is too many times someone purposely drops a can of spaghetti sauce at a local grocery store then lays next to it feigning injury. Before you know it the grocery store is being sued for ridiculous amounts. Many trial lawyers certainly have their pockets filled by unscrupulous claims. Sadly, even for legitimate claims several lawyers aren't fighting for what's fair- they fight for what's possible (I'm referring to awards). There is abuse out there and it should be prevented where possible.

On the other side, I think we can all agree that not every company out there is completely ethical. It's true that SOME company leaders will lie, steal, cheat and defraud in order to make profits. Not that we've seen any of that lately! If a company with an unethical decision maker develops a bad product they will consider the consequences. Say the company can reign in $100 million in profits with this product. They learn of the defect or bad process and consider how much it would cost them. A recall could eliminate the entirety of those profits. A lawsuit could not only cost them the profits but could also jeopardize company assets through potential punitive damages awarded by a jury. In this case the company is better off doing the recall and the consumer is safer.

Now consider for a moment if we had a limit to punitive damages. What if the cap was, say- $10 million in punitive damages. Well, our unethical company considers the worst case scenario. $100 million in profits minus up to $10 million in damages = $90 million in profits if we get caught! The profits or the total loss via a recall? The unethical company will take the profits.

We don't have caps on punitive damages here in Texas at this time. But instead of a cap we have a Supreme Court that seems to be more than willing to institute its own version of tort reform (a job for the legislative branch by the way). The Texas Court is overturning decisions that include punitive damages awarded by juries at an alarming rate. While it is not an outright cap it certainly makes life easier for our unethical company since they know that even if they lose a judgement and incur large punitive damages for their ill behavior- they can appeal to a friendly Supreme Court which appears all too willing to reverse the lower courts' decisions.

Is the jury trial system really being used? Are companies really being held accountable? Are we, as consumers, really that much safer?

I suggest two items for consideration:

1. Eliminate elections for Supreme Court justices. The "tainted" level is ALARMING. "Tainted" is the descriptive used when one of the lawyers presenting to the court has given money to one of the justice's campaigns. In business we call that a kickback! Instead, initiate appointed positions like we do on the Federal level (FYI- many states have adopted this with mixed success).
2. Tort reform should be initiated but with limits of "% of profits affiliated with the ill-behaviour" instead of an outright dollar figure.

I certainly don't want a Democratic Supreme Court in Texas. But I don't feel very confident with an all-Republican one either. For this reason I'll be voting for two Democrats in this year's Supreme Court Justice (Houston and Yanez for those interested). Maybe with some difference of opinions the court will begin to have a little less bias in its decisions.

Thanks for listening. Feel welcome to reply. Overall, it's just intended as food for thought,

Charles