Which Is Better - Stimulus or Austerity?

Here's an interesting article comparing the ongoing responses to the fiscal crisis that started in 2008 - both the European response and the American response.  The American response has primarily been one of stimulus - the government is taking on additional debt to provide a stimulus to the public sector.  Conversely, the European response has primarily been one of austerity - cutting government workers and programs and raising taxes.  Let's take a look at the likely outcomes of these policies - and how these may impact your investments in the future.

Year-End Planning - An Immediate Raise

It's getting close to the end of the year, so I thought I would do a series of short posts with some financial aspects that you may want to look into before the end of the year.  Today's tip is a way that you may very well be able to get an immediate "raise" in your take-home pay until the end of the year. 

What Are You Thankful For?

In honor of Thanksgiving, I thought it was a good time to take a moment and think about some things I am thankful for.  This is by no means a complete list, but here are some things I am thankful for.

"Diversify" With Whole Life Insurance?

In response to my recent post about life insurance, a commenter said:

Great blog, thanks for your efforts. I'm curious if you think there is a diversification value in whole life insurance. That is, are there circumstances under which one is better off putting $500 per month into an S&P index and $500 per month towards a whole life policy as opposed to putting $1k into the S&P?

That's a good question.  Diversification can be powerful and sometimes whole life policies are marketed this way.  However, I think that they are often disingenuous in this regard.  For example, a policy might promise you a minimum 4%/year, but often what you get is not what you expect.  Also, the purported diversification is extremely costly in your example.  See below for more details.

Life Insurance - Do You Need It?

I have had a couple of people ask me about life insurance lately.  One thing that new attorneys sometimes don't realize is that once your bio and contact number go up on the firm website, you become target #1 for salespeople - after all, they "know you make a lot of money because you are a lawyer," right?  One of the areas that seems to be aggressively sold to lawyers is life insurance.  Lately, insurance salespersons are also approaching young lawyers under somewhat false pretenses by emphasizing their "certification" as a financial planner or something similar.  They say that they want to give the young lawyer a "free financial planning checkup" or something similar.  The attorney goes to a meeting with the insurance salesperson and "lo and behold!" it turns out that what the young attorney needs more than anything else (in the eyes of the salesperson) is insurance - typically life insurance.  The fat commission to the salesperson is not mentioned.

On the other hand, life insurance is not all bad - and can be something that you should have in some cases.  However, there are a whole host of confusing questions to consider.  I'll provide some answers below.

Restoring Dignity To The Law - Lawyers Part 1

In previous posts (Part 1 , Part 2) I saluted the new blog Restoring Dignity To The Law and it's mission to restore dignity to the law.  I also discussed some ideas about how to restore dignity to law students.  But what if you are already a practicing lawyer?  Here are some ideas about restoring dignity to the practice of law:

Blatant Conflict Of Interest?

JJD's post on The Jobless Juris Doctor alerted me to this ABA article which includes the quote:

David N. Yellen, dean of Loyola University Chicago School of Law and chair of the ABA subcommittee that considers what consumer information law schools should be required to report, tells the Law Bulletin that law schools need to be more transparent about job prospects.

"I believe the time has come to mandate that law schools publicly disclose more information about job outcomes," Yellen is quoted saying.

My first reaction was "Good!  At least some law schools are starting to acknowledge their responsibility! Way to go, Yellen!"

However, my second reaction was - "Wait a minute.  This guy's the dean of a law school and he chairs the committee that sets the policy about what information law schools have to provide and how they will provide it to their consumers/students?  How is that not a blatant conflict of interest?"

That prompted me to do a little digging and what I found will most like stun you, horrify you, and explain why the ABA has not taken any action in this regard.  Brace yourself and see below.

Restoring Dignity To The Law - Those Entering Law School Part 2

In Part 1 we saluted the new blog Restoring Dignity To The Law and it's mission to restore dignity to the law.  We discussed some ideas about how to restore dignity to law students - and we present more below.

Restoring Dignity To The Law - Those Entering Law School

A recent new blog entitled Restoring Dignity To The Law has dedicated itself to its titular mission of seeking to restore dignity to the law.  That's a really tall order.  I am reminded of the words of Daniel Burnham, one of the designers of Chicago - "Make no small plans, for they have not the power to stir men's blood." 

Like the author of the blog, I have noticed a significant decline in the dignity of various aspects of the practice of law over the last two decades.  It's actually kind of insidious - like a crumbling decay that just gradually goes on in the background and you really don't notice how bad it has gotten until someone calls your attention to it.

I have a few thoughts about restoring dignity that I will throw out - and I'll do it in stages so that the posts don't get too long.  For this first post, I'll talk about some ways to restore dignity to those entering (or considering) law school.

PawnStars and Pawnshops

OK, I admit it, I am addicted to PawnStars.  In case people don't know, PawnStars on the History Channel is a reality show that follows the owners of an upscale pawnshop.  People bring very diverse merchandise to the shop - including fine art paintings and museum-quality civil war relics - and the owners price it and negotiate with the sellers.  The negotiations are fascinating - as are the refurbishment the owners do on many of the purchases. PawnStars got me interested in pawnshops and there are a couple things that I learned that I will discuss below.

Game On!

Wow.  The Presidential Commission on Reducing the Public Debt released its draft proposal today and it really puts a lot of options on the table.  Here's a New York Times article summarizing some aspects of the plan.  This could be the start of a very large discussion that changes the fundamental operating parameters of tax-and-spend government.  Or else it could be a flash in the pan like President Bush's bi-partisan, blue-ribbon tax panel in 2005.

Will the new proposal actually be the catalyst for serious change - or will it operate much like the Bush panel - proposing great, practical ideas that are really for the best long term interest of the country, but get summarily ignored because politicians don't want to risk telling voters that they will actually have to pay for the benefits that they are getting?  Let's take a look below.

Investment Advisors - Part 2 - Market-Beating Advice

In Part 1, we took a look at several types of investment advisors.  We concluded that if you have very little experience at investing, then it may be cost effective to go to a fee-based financial planner to get a basic education about investing - although a similar education can be had by reading books.  However, most other types of investment advisors (at least in my experience) don't deliver an increased return on a consistent basis. However, there are a couple of things that have been working well for me for the last few years to deliver above-market returns - and I'll tell you about them below.

Investment Advisors - Should You Have One?

A reader recently sent me the following question:

I've just discovered your blog and have enjoyed reading through your prior posts.  I'm curious about your thoughts on when to use an investment advisor/portfolio manager and when to go it alone.

That's a good question.  Let's take a look at the types of investment advisors and their potential services below:

Emergency Fund Example

Here's a comment that I got in response to a recent article on Emergency Funds:

So, given the reality that the average associate is using all 'extra' money to pay student loans and probably isn't saving much more than max 401(k)/IRA contributions (if that), do you advocate having a separate non-retirement brokerage account for emergency fund purposes, or is it good enough to have the ability to borrow from the 401(k)/withdraw from the IRA if needed? This isn't hypothetical; I'm a second year associate with about $50,000 in retirement savings, a few hundred in a traditional brokerage account, and never more than $2,000 in the bank. A HELOC isn't an option, as I live in NYC and rent.

That's a great comment and it raises several points to consider.  Let's take a look at them below.

The Hidden Cost of Emergency Funds

"Emergency Funds" - It seems like just about every financial advisor these days wants to tell you you are doomed (DOOMED!) if you do not have an emergency fund.  Most of them agree that an emergency fund is an amount put aside in a savings account or money market that you can quickly access in case of emergency.  How much?  Well, some say 3 months, some 6, some 8 or 9.  Also, some base the number on living expenses and others base the number on salary.

I say that emergency funds - as envisioned by the "experts" - have significant hidden costs (100K+) over the life of the average employee.  Also, there is no need for the "expert's" vision of emergency funds.  The average person can set up something that provides more value with no loss of timeliness of access.  Read on below.