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Our office is being repainted and re-carpeted, so we aren’t there right now. If you need to see us, please give us a call at the work number (501-374-1174), which is forwarding calls to our temporary office. We are still receiving emails, so you can reach out to us that way, too. We plan to be back to normal after the 13th.
A lot of the financial consequences in our lives come from our decisions, but those decisions are dictated by the set of possibilities we think exist. Often, we think we have fewer options than we actually have.
Thinking you have fewer choices than you actually have is very common. Often, when I hear people talk about financial decisions, they speak of decisions between two options. This is called a *false dichotomy*. It’s called a false dichotomy because there may be more than two options. An example of a false dichotomy is the decision between paying an electricity bill or taking out a payday loan. What are some other options? Let’s brainstorm.
- Pick up some extra work to make a few more bucks
- Sell some of your stuff on Craigslist
- Partially pay the bill
- Put the bill on a credit card
- See if your utility company has emergency assistance
- Get help from your church/congregation
- Ask for help from a community action agency
- Contact a non-profit for help
- Ask friends or family for help
- Sell blood plasma
Wow. There are ten more options that I just came up with in about three minutes. Some are better than others, but now we have a few to choose from. It’s certainly a lot better than getting fixated on two bad options.
Sometimes, I hear people say they were forced into a bad decision. I wonder, how many options did they think they had available? If I hadn’t brainstormed for a few minutes to come up with some options for our false dichotomy, what would’ve happened? We would’ve thought about the consequences of two bad choices. Fail to pay the bill, and lose electricity (horrible); or pay the bill with a payday loan, and put yourself in a cycle of debt (very bad). The most immediately useful choice is the payday loan.
Later, to hear the person tell it, they were limited a set of bad choices, and they took the best way out that they could find. They’re the victims of circumstance. Except, they could have widened their choice set-their list of ideas to fix their problem. The likelihood of a more desirable outcome could have increased, because they weren’t misled by a limited choice set.
Just to let you know, everyone’s going to be out of the office this Friday, May 16th. Cindy will try to get on email during the day, but may not be able to. So, if you have something that needs to be done before Friday, please let us know by tomorrow, Wednesday May 14th. Otherwise, we’ll be back during regular hours on Monday.
You may have heard of the Heartbleed Bug, which has exposed information on some internet systems. You can read more about the Heartbleed bug here: https://en.wikipedia.org/wiki/Heartbleed.
We were worried that your private financial information may have been exposed due to this bug. The majority of your financial information is kept in our office. We keep it on our custom server, which is protected by a physical firewall and is monitored 24/7 by our outside IT specialists. However, some of your personal information is transmitted over encrypted connections to outside companies.
The last few days, I’ve been calling the companies who have access to, or store, your personal information. These are companies we use to serve you, such as Fidelity, Federated Investors, ShareFile and so on.
As of this time, all the companies we talked to have said that they don’t use Open SSL and are not exposed to this bug.
Even so, we’d like to encourage everyone to use ShareFile when sending us personal information or forms. You can log into ShareFile here: https://congerwealth.sharefile.com. You can get your password by clicking the “Forgot Password?” link. If you have trouble using ShareFile or need some help, just give me a call and I can walk you through it. By using ShareFile, you prevent your documents from being exposed on the internet while they’re in transit.
I like a point this skit makes, that University can only get you a diploma 1) if you do the work and 2) if you pay for it. Universities aren’t an automatic ticket to a job, which seems to be the big fantasy of our generation. However, this doesn’t mean that University is worthless. You should make sure your expectations are in line with reality.
Speaking of reality, here’s a resource for anyone who’s getting ready for college or who’s helping someone get ready for college: Paying for College from the Consumer Financial Protection Bureau. There are a lot of clear, step-by-step tools for comparing college costs and figuring out a reasonable plan for financing college.
Here’s a little more reality for students as the enter college to get their four-year degree. Did you know that not all the people who start attending college complete college? It’s true. Check out College Affordability and Transparency Center from the U.S. Department of Education.
This is a great tool for researching the college you think you want to attend. For example, I put University of Arkansas at Little Rock (which is the college I’m attending for my MBA) in the calculator. I found a lot of great information about retention and graduation rates. I was amazed to find that one-third of first-time students who are seeking bachelor’s degrees do not return to UALR to continue their studies the following fall. Furthermore, only 1/5th of full-time, first-time students graduated or transferred out within 150% of “normal time” to completion for their program. These are not good odds for the new student. It’s also important to remember that the vast majority of people who enroll in college and then drop out intend to graduate just as much as someone who enrolls in college and does graduate.
This video is brilliant, and it only takes 30 seconds:
Cost of good quality professional clothes: $1,200
Cost of personal grooming: $140
Knowing the guy in the suit is actually qualified: Free.
It’s that time again, the time of year in which you eagerly await your federal tax refund. If only there was some way to hover over the IRS’s shoulders and breathe their neck while they work. Well, today wishes come true.
Let me introduce you to the “Where’s My Refund?” tracker on the IRS website. You need to know your social security number, your filing status, and the amount of the refund you filed for. Its’ super easy and takes less than a minute, and will tell you how close you are to your refund, and when you should expect it to hit your bank account. It only updates once a day, which is good for the mental health of everyone involved.
That’s what U.S. News and World Report did when they voted Little Rock one of the 10 best places to retire on $75 per day. According to the article, “Retirees who rent pay a median of $627 monthly to live here. Senior homeowners pay a median of $1,064 monthly or $355 without a mortgage.” Meanwhile, you can enjoy theater and the arts, museums and trails, and the glory of the “Natural State.” Little Rock is frugal and fun—my kind of town!
In an earlier post, I talked a little bit about impact investing – how investors are making a difference in people’s lives through the power of capital. Our speaker was Gloria Nelund, chair and CEO of TriLinc Global Impact Fund. She spoke about her impact investing fund, and how the fund seeks to both make a competitive risk-adjusted return while creating positive economic impact. It was absolutely fascinating, and lunch was lovely. If you weren’t able to make it, you missed out!
So, you can probably guess that playing the lottery (and most other forms of gambling) are poor ways to invest your money for the future, but do you know why? I comes from the idea of expected value.
Expected value is a statistics concept that gives us an expected outcome if we perform a random act an infinite number of times. Let’s use a fair coin toss as an example, one with 50/50 odds. Pretend that, every time heads comes up, you get a dollar. Every time tails comes up, you get nothing. Now, if we were to repeat this game just a few times, it’s possible to end up with nothing, or perhaps win every time. However, if we repeat this game millions upon millions of times, the average outcome for each game will be $0.50. So, the expected value of this game is $0.50.
This is a pretty good game, right? After all, you can either win a dollar or lose nothing. So it would make sense to play this game over and over again. What about the lottery? Does it make sense to play that game as much as you can? Let’s think about it for a minute.
First, every prize granted by the lottery must be paid from ticket sale revenues. Next, the lottery has to pay all the other costs of running the lottery from ticket revenues; things like lawyers, staff, and other distribution expenses. This means the output of the lottery in prizes must be less than the input in ticket sales. We don’t even have to know the exact numbers, we can surmise the expected value of any lottery game is going to be negative. Even if you played every lottery ticket, you’re going to come out behind, because the prizes will never exceed the cost of purchasing all the tickets.
Good investments are expected to have positive expected value over time. Lottery games have a negative expected value. The negative expected value is why the lottery (and gambling in general) is not a good investment.
Do you wan to invest such that your investments make the world a better place? Then you may be interested to learn about impact investing. Impact investing seeks to invest for environmental and social benefit, while earning a competitive return. Impact investing is meant to harness the power of capital for the good of the earth, the people, and the investor.
I love the idea of impact investing, and as does Cindy and many of our clients. We love it so much, that we’re even hosting a luncheon next week (for clients only) about impact investing. We’ve invited the CEO of a developing markets impact investment fund speak and tell us about her experiences. If you’re a client, and you would like to find out more, give me a call at (501) 374-1174.
So I had to dress up for Halloween, and I’m supremely lazy about that sort of thing. Here’s the solution. It’s the scariest thing I could think of.
A friend of the firm and attorney, Nick Livers, is doing a guest post for us. A lot of us have pets that we love, but what happens to them after you die? How can you provide for them? Let’s see what Nick has to say:
When my grandma passed away a number of years ago, there was talk among the family about who would take care of her dog. My grandma was a meticulous person, but the one thing she did not plan for upon her death was who would care for her dog. I do not recall what decision was made, but I do remember that there were very few family members who wanted or needed another pet. Since that time, I have had a number of conversations with clients about establishing a trust for their pet to provide funds to care for the pet after their death. A pet trust has the benefit of giving the pet owner peace of mind in knowing their pet will be cared for after their death and giving the person who agrees to take care of the pet resources to do so.
When thinking about estate planning and financial planning, people are primarily concerned with having enough assets to live comfortably during their lifetime, and about who will receive assets remaining at the time of their death. While these topics must be the center of conversations regarding estate planning, it is also important to give thought about who will care for a pet at the time of a person’s death. Adequate funds should be paid into the Trust to provide for the needs of that pet for the remainder of the pet’s life.
A number of years ago, the State of Arkansas passed a statute permitting a person to establish a trust to provide funds to care for an animal that the person owned during their lifetime. To create a trust for a pet, a person needs to name a Trustee. The Trustee will be the person that one selects to care for his or her pets after death. In addition to naming a Trustee, a person needs to fund the Trust will adequate funds to care for the pet during the pet’s life. This can be done by leaving a specified sum of money to the Trustee under a person’s Will or Trust. For example, a person may direct that upon his or her death, a sum of $10,000.00 will be paid to a Trustee to be used for the care of the pet. Finally, upon the death of the pet, the Trust will terminate. Upon the termination of the Trust, the remainder of the assets can be paid to a person or charitable organization. For example, the remaining funds may be paid to the Trustee to compensate the trustee for caring for the pet, or may be paid to a charitable organization such as the Humane Society or other organization that cares for animals.
A pet trust is easy to establish when a person is making his or her Will or Trust. Such a trust will give the pet owner peace of mind knowing that their pet will be cared for after their death and will make sure that the pet will not be a financial burden on anyone after the owner’s death. Anyone with a pet should consider incorporating a pet trust into their estate plan for these reasons.
Melissa’s been reading “Empty Mansions: The Mysterious Life of Huguette Clark and the Spending of a Great American Fortune” by Bill Dedman and Paul Clark Newell Jr. She turned me on to the strange, sad tale of a fabulously wealth heiress to a copper fortune, who withdrew herself from society. There’s a great article about her in the Washington Post titled “Will The Corcoran Get The Monet? The Battle Over an Eccentric Heiress’s Last Wishes” by David Montgomery.
When I hear stories about startlingly wealthy people who descend into mentally and physically unhealthy situations, I often wonder if their problems are exacerbated by their wealth, or if we just notice it more because it’s in the news. I have to say, though, that if someone has to go through what this poor woman went through, it’s better for her to have had the money than to not.
I’m going to use this as a jumping off point for conversations about elder abuse. While, to my knowledge (which is super-limited,) that didn’t exactly happen here, it raises the topic of appropriate elder care from institutions. In the heiress’ case, a hospital kept her under its care for at least 20 years, while soliciting her for donations to the hospital. Lovely.
Also, there’s a good Frontline investigative report episode on inappropriate institutional care for the elderly titled “Life and Death in Assisted Living.” It talks about the conflict between for-profit institution’s drive for profit versus the fragility of the elderly in their care.
It’s important that we acknowledge the vulnerability of the elderly to abuse and exploitation. If you want to learn more, click over to the Administration on Aging for information on signs of and resources against elder abuse.