To Be Continued........

I will no longer be updating this version of my blog.  But have not fear, the writing continues--on my website www.MCDadvisors.com.  See you there!!!!

Happiness....

Here is an article I came across about happiness which I thought would be nice to share since money is involved. (from  www.psychcentral.com blogs)

5 Reliable Findings from Happiness Research

By John M Grohol PsyD

Yes, I know. There are dozens of books written about how to increase your happiness, probably hundreds of different blogs all promising you the secrets to the keys of happiness, and thousands of articles written on this topic. Since the positive psychology movement got started a while back, it’s been going bananas. And why wouldn’t it? Who wouldn’t like to learn some “secrets” to unlocking their inner happiness?
Happier people tend to live longer, live healthier lives, make more money and do better at work. It’s a chicken and egg problem, though. Does happiness bring those kinds of things, or do those kinds of things lead us to be happier?
While we may not exactly know the answer to that question yet, we do know the answers to many other questions about happiness.

1. You control about half your happiness level. Although the exact level will vary from individual to individual, it appears that up to about 50 percent of our happiness levels are preset by genetics or our environment (called our happiness set-point). But that’s good, because it also means that about 40 to 50 percent of our happiness is within our power to raise or lower.
2. Money doesn’t buy happiness. Once we get to a certain level of income that is enough to pay our bills and keep us in the lifestyle we’ve grown accustomed to, more money doesn’t result in more happiness. The only two exceptions to this rule is if you give money away, or if it significantly improves your social rank. People who give money away appear to sustain greater levels of happiness over time than those who don’t.
3. Lottery winnings create only temporary, short-term happiness. Winning the lottery makes people happy in the moment, but that happiness fades fairly quickly and then people return to their prior level of happiness. People who have won the lottery appear to be no more happy than those who haven’t in the long run. Sure, we could all use the extra money, so play the lottery or gamble only what you can afford and for the sheer enjoyment of doing so — not for the potential big windfall.
4. Relationships are a key factor in long-term happiness. While research has demonstrated that this effect is strongest for married people, other research has shown that strong social connections with others are important to our own happiness. The more of these you have, generally, the happier you will be. And while marriage is significantly correlated with increased happiness, it has to be a strong, healthy marriage in order for that to be true.
5. Focus on experiences, not stuff. People who spend their time and money on doing things together — whether it be taking a vacation to someplace other than home or going on an all-day outing to the local zoo — report higher levels of happiness than those who buy a bigger house, a more expensive car, or more stuff. That’s likely because our memories keep an emotional photograph of the experience, whereas the material things don’t make as big an emotional imprint in our brains. So ditch buying so much stuff for yourself or your kids — you’re only buying artificial, temporary happiness.

FREE Teleclass: Women & Investing-How To Overcome the Fear

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April is Financial Literacy Month

I found a website celebrating financial literacy month.  This is what they show as the first step...and I love it!!!!! Check out the rest of the website at www.financialliteracymonth.com.  I know I will.

Take the pledge

Willing, Ready, and Able to take financial responsibility

Are you ready to accept responsibility for changing your financial situation?
Do you believe that you can and will change the way you make financial decisions?
Can you identify at least one benefit you hope to gain by changing your money management behavior?
If you consistently answered yes, pledge to continue on the path to financial wellness:

1. I will make informed financial decisions, understanding the difference between wants and needs.
2. I will communicate with my family about money matters so that we are all working toward the same goals.
3. I will be aware of the effects of advertising on the financial decisions I make, and resolve not to be influenced by them.
4. I will take care of my finances today by tracking expenses and creating a budget that is flexible and realistic.
5. I will take care of my finances tomorrow by saving for my future.
6. I will meet the credit obligations I have made on time and as agreed.
7. I will continue my personal education about financial health, budgeting, credit, and personal debt.
8. I will plan for periodic expenses, including the next holiday season.
9. By good example, I will teach my children the importance of budgeting, saving, and the wise use of credit.
10. If I am over-obligated, I will take the necessary steps to seek assistance.

I pledge to take steps to improve my financial wellness.

March Returns

A solid first quarter for the markets! Stocks did better than bonds but bonds are holding their own.  High yield bonds in particular are still doing well.  International markets lagged due to a stronger dollar.

The Monthly Index Report for March 2010

Index	Mar-10	QTD	YTD	Description
S&P 500 Index*	5.9%	4.9%	4.9%	Large-cap stocks
DJIA*	5.2%	4.1%	4.1%	Large-cap stocks
Nasdaq Comp.*	7.1%	5.7%	5.7%	Large-cap tech stocks
Russell 1000 Growth	5.8%	4.7%	4.7%	Large-cap growth stocks
Russell 1000 Value	6.5%	6.8%	6.8%	Large-cap value stocks
Russell 2000 Growth	7.9%	7.6%	7.6%	Small-cap growth stocks
Russell 2000 Value	8.3%	10.0%	10.0%	Small-cap value stocks
EAFE	6.3%	0.9%	0.9%	Europe, Australasia & Far East Index
Lehman Aggregate	-0.1%	1.8%	1.8%	U.S. Government Bonds
Lehman High Yield	3.1%	4.6%	4.6%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	2.2%	1.7%	1.7%	Managed Futures
3-mo. Treasury Bill	0.1%	0.2%	0.2%
All returns are estimates as of March 31, 2010. *Return numbers do not include dividends.** Returns are estimates as of March 30, 2010.

Documentary on Enron

If you have not seen this documentary, you need to watch it.  I have seen it three times and I still find it absolutely amazing.  Tonight at 9:00 p.m. on CNBC; ENRON: The Smartest Guys in the Room.

Recordkeeping guidelines from the IRS

This is an excerpt from the IRS website.  I would suggest checking out the entire article on their website:

Why Keep Records?

There are many reasons to keep records. In addition to tax purposes, you may need to keep records for insurance purposes or for getting a loan. Good records will help you:

• Identify sources of income. You may receive money or property from a variety of sources. Your records can identify the sources of your income. You need this information to separate business from nonbusiness income and taxable from nontaxable income.
  
• Keep track of expenses. You may forget an expense unless you record it when it occurs. You can use your records to identify expenses for which you can claim a deduction. This will help you determine if you can itemize deductions on your tax return.
  
• Keep track of the basis of property. You need to keep records that show the basis of your property. This includes the original cost or other basis of the property and any improvements you made.
  
• Prepare tax returns. You need records to prepare your tax return. Good records help you to file quickly and accurately.
  
• Support items reported on tax returns. You must keep records in case the IRS has a question about an item on your return. If the IRS examines your tax return, you may be asked to explain the items reported. Good records will help you explain any item and arrive at the correct tax with a minimum of effort. If you do not have records, you may have to spend time getting statements and receipts from various sources. If you cannot produce the correct documents, you may have to pay additional tax and be subject to penalties.
  
  
  The entire publication can be found at this link:
  http://www.irs.gov/publications/p552/ar02.html#en_US_publink10008576

Universal fiduciary standard shot down

The financial-reform package recently introduced by Senate Banking Committee Chairman Christopher Dodd, D-Conn., dropped an earlier provision that would have imposed a fiduciary duty on anyone offering advice on investments.  Th Financial Planning Coalition has lobbied for months to include a requirement of fiduciary duty to all those who hold themselves out as a financial planner.  Apparently Wall Street special interest groups, with their huge political contributions, got their way.  And the investing public remains at a disadvantage.  Rest assured that I have always been and will remain a fiduciary, which means in short, that my clients' interests come before the interests of my firm or me.  For any new readers, this is a good question to ask your current advisor.  You need to know if you can trust your advisor and whether he/she has your best interests at heart.

Fortune article: relationship between client & planner

I came across this article from Fortune magazine.  I encourage you to read it for yourself.  Here is the link:
fortune

The most important thing I read was the last two paragraphs, "Finally, the yes-man problem can't just be pinned on advisers. A 2007 survey from the Employee Benefit Research Institute found that two-thirds of the people interested in meeting with a financial planner were likely to implement advice only if it conformed to their own ideas.
So if you want to improve the input you get, perhaps the first step is to look for someone who challenges your ideas, rather than echoing them."

Something to think about.....

One year later

Last week marked the one year anniversary of the bear market low.  Money invested last year at this time grew by an amazing amount.  According to Morningstar's indexes, large cap was up 65%, mid caps were up 74% and small caps were up 87% with value stocks beating growth stocks.  Small cap value returned the best results with an increase of 109%.  So what have we learned (if anything).  First, don't panic sell--as that usually happens at the low point in the market.  Second, have a diversified portfolio with plenty of liquidity, by liquidity I mean, money you can get your hands on instantly without having to sell in a lousy market.  Only those with ample liquidity can withstand the claws of a bear market.  There are other lessons but these are the most important--lessons we keep having to learn over and over again.

In case you were wondering.....

The number of U.S. households with a net worth of $1 million or more, not including primary residence, increased 16% to 7.8 million last year, according to a report released Tuesday by Spectrem Group, a Chicago research company. The increase last year follows a 27% decline in millionaires from 2007 to 2008.


Similarly, the number of ultra-wealthy households, which have a net worth of $5 million or more, rose 17% to 980,000 last year.

February Results & ROTH Conversions

The market made a nice comeback during February.  There has been much volatility, wide swings from day to day--which is why looking at your nest egg every day can be stressful!  So don't do it!  There is no reason to be looking at your portfolio that much--all it really does is make you much more emotional about your money when we want to be rational.  Probably the biggest news last month was the Federal Reserve Board raising the discount rate (the rate at which banks can lend from the Fed) to .25%.  That's right, .25%.  The market was a little rattled by this action as it symbolized the beginning of higher rates to come.  We still have a long way to go it seems to me.
There has been much talk about the ROTH conversions which are now unrestricted by the amount of income you have in any one year.  Generally speaking, the conversions are optimal for those who really don't need their IRA assets and who have the money to pay the tax on the conversion outside of the IRA.  Though many of the articles out there seem to support the idea that young investors in particular should be utilizing this conversion tactic, I am still on the fence about it.  I think there is some reasonable risk that 30 or 40 years from now when you start using the money in the ROTH that it will be taxed in some way.  That's the problem with the tax advantaged vehicles--the tax code could always change...especially if there ends up being huge amounts of money in these ROTH accounts.  If you want me to look at your specific situation to see if it makes sense for you to convert, please send me an email.  There are may variables that come into play.

Here are the February results:
The Monthly Index Report for February 2010

Index	Feb-10		YTD	Description
S&P 500 Index*	2.9%		-1.0%	Large-cap stocks
DJIA*	2.6%		-1.0%	Large-cap stocks
Nasdaq Comp.*	4.2%		-1.4%	Large-cap tech stocks
Russell 1000 Growth	3.4%		-1.1%	Large-cap growth stocks
Russell 1000 Value	3.2%		0.3%	Large-cap value stocks
Russell 2000 Growth	4.4%		-0.3%	Small-cap growth stocks
Russell 2000 Value	4.6%		1.6%	Small-cap value stocks
EAFE	-0.7%		-5.1%	Europe, Australasia & Far East Index
Lehman Aggregate	0.4%		1.9%	U.S. Government Bonds
Lehman High Yield	0.2%		1.4%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	1.1%		-0.8%	Managed Futures
3-mo. Treasury Bill	0.0%		0.0%
All returns are estimates as of February 26, 2010. *Return numbers do not include dividends.** Returns are estimates as of February 25, 2010.

WOW rates are low....

I thought I would share what many of you have already noticed in your money market funds--the yields are LOW.  According to Barron's, the average money market fund is only earning .03% and the average tax free money market fund is at .02%.  Remember, money market funds, savings accounts and checking accounts are not investments.  Over long periods of time the earnings on these types of accounts do not even keep up with inflation.  However, the reason we keep money in these accounts is to provide liquidity--ready access to cash that is risk free.  For this benefit, savers receive paltry returns.  One of the most frequent questions I get is what to do with this money when rates are so low--the answer is: how much risk are you willing to take?  If you can stand some risk, we can buy bond funds and perhaps some stock funds.  But if you don't want to lose any money--guess what, you're stuck with these abyssmal rates.

Stock Market vs. Bond Market

Every opportunity I get I will continue to talk about the different markets, specifically the stock market and the bond market.  When you hear folks talking about "the market" they usually are referring to the stock market.  A stock represents ownership in a public company.  A bond on the other hand is a debt obligation of whoever issues the bond: it could be the U.S. government, it could be corporations, it could also be government agencies.  In general, bonds have less price volatility than stocks and are considered more conservative (this is a general statement as there are many different types of bonds, some of them quite risky).  What you really need to know from this brief post is that the two markets typically move in opposite directions.  For example, last week "the market" (the stock market) was DOWN .71% and the bond market was UP .31% (both returns are based on Morningstar indexes).  The rule of thumb for diversifying portfolios is to have your money invested in BOTH the stock market and the bond market.  The percentage of each that you should own will be dependent on your specific circumstances including how much risk you are willing to tolerate and what assumed returns your financial plan dictates for you.

Results of a bank study

A study conducted by Union Bank found that most people believe financial stress negatively affects health.  The study also indicated that 60% of those surveyed felt they were not doing what they could to get themselves financially educated but believed that being fiscally fit is as important as being physically fit.  The article lists some very good suggestions for those starting out with the financial planning process or just a reminder for those who already are on the right track.  Read the article here:
https://www.unionbank.com/company_information/company_information/news/press_release_index/press_releases/study_confirms_financial_stress.jsp


Thanks to one of you for sending this to me--I always like to pass this good information along!

Charitable Deductions for 2009

From the IRS:
People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service. Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.

Estate Planning

Here is a brief answer to a question someone had about the current status of the Estate Tax:

On 1/1/2010 a funny thing happened that we all knew about but thought it would get changed before actually coming to fruition.  As of 1/1/10, the estate tax is repealed (that means 0% estate tax for anyone who dies now), the gift tax went down to 35% and the generation skipping tax was also repealed.  One caveat, upon a person's death, the inheritor receives the assets at the original cost so when the inheritor sells, she will have to pay capital gains on the sale.  There is an exemption amount but I'm not going to get into that here as it isn't really that important.

All of the above is only in effect for 2010.  On 1/1/2011, we revert back to a 55% estate tax/gift tax, a 1 million dollar exemption and the  generation skipping tax returns at 55%.

Congress has been working on a bill to make permanent the estate law changes enacted in the 2001 Tax Act, however they have been unable to do so as of this writing.  The worry is, if they do come up with permanent estate tax relief, will they make the changes retroactive, thereby nullifying any action people took during this time?  No one knows--it is a huge mess.

What many people with wealth are considering is GIFTING of assets and paying the tax at the 35% rate.  If permanent changes occur and made retroactive, I am sure there will be masses of people who will challenge the constitutionality of such a decision.  But in the worst case scenario, the person who gifted would end up paying the new gift tax rate (what ever that may be).

Finally--Year End Return Numbers

Well, 2009 ended on a good note for most areas of the market.  I'm still in disbelief that in one year we went from Armageddon to "everything is back to normal"--as least as far as the market is concerned.  From an economic perspective, we still have a long way to go.  But the market always leads.  Here are the year's numbers:


The Monthly Index Report for December 2009

Index	Dec-09	QTD	YTD	Description
S&P 500 Index*	1.8%	5.5%	23.5%	Large-cap stocks
DJIA*	0.8%	7.4%	18.8%	Large-cap stocks
Nasdaq Comp.*	5.8%	6.9%	43.9%	Large-cap tech stocks
Russell 1000 Growth	3.1%	7.9%	37.2%	Large-cap growth stocks
Russell 1000 Value	1.8%	4.2%	19.7%	Large-cap value stocks
Russell 2000 Growth	8.6%	4.1%	34.5%	Small-cap growth stocks
Russell 2000 Value	7.6%	3.6%	20.6%	Small-cap value stocks
EAFE	1.5%	2.2%	32.5%	Europe, Australasia & Far East Index
Lehman Aggregate	-1.6%	0.2%	5.9%	U.S. Government Bonds
Lehman High Yield	3.3%	6.2%	58.2%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-3.0%	-1.8%	-4.4%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.3%
All returns are estimates as of December 31, 2009. *Return numbers do not include dividends. ** Returns are estimates as of December 30, 2009.

Helpful Tip from the IRA on filing status

Eight Facts About Filing Status 

Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.

Here are eight facts about the five filing status options the IRS wants you to know in order to choose the correct filing status for your situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2009, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2007 or 2008, you have a dependent child and you meet certain other conditions.

There’s much more information about determining your filing status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Link:

• Publication 501, Exemptions, Standard Deduction, and Filing Information (PDF 196K)