Budgets

Americans Are Shopping Differently

March 19, 2018 By Twila Van Leer

Americans aren’t shopping like they used to do, and that is having a great effect on retailers as they try to cope with the added competition posed by online buying and other technology-related changes in the market.

Nobody feels the changes as much as the shelf-stockers, sales personnel, cashiers and others who used to handle things with no competition. They are hustling to address changes in customer behavior and preferences.

Mundane tasks like tracking inventory and checking out customers have been automated and the retailers are trying to capitalize on the thing they do have – direct contact with the buyer.

Sometimes the retailer is interacting in a whole new way. A Best Buy clerk, for instance, may find himself in the customer’s home helping to compare and analyze the choices in electronics. At Walmart, a worker skims the aisles hand-picking products to fill online orders. They will be delivered to the consumer who waits in a car outside the store.

Some advocates for the retail workers believe this may over time mean fewer, but better-paid, employees. As of now, the better pay part of the equation has not been apparent.

With many customers using their electronics to compare prices before making any buying decisions, the nature of in-store selling are changing, Sometimes, a clerk spends time explaining the merchandise, only to have the customer comment, “I’ll buy it online.” Sales people have to work harder to hold their ground.

In 2017, some 66,500 retail jobs disappeared. Some of that loss was made up by hires in accounting jobs in distribution/call centers. The hardest-hit areas of retailing are in clothing and consumer electronics. Department stores have been hardest hit, but many small businesses also are feeling the pinch.

Retailers who survive are scrambling to meet the challenges. The jobs they offer are likely to involve new duties. How these jobs will change depends on three factors: the pace at which online shopping expands; the changes that occur with robotics and shifts in hourly pay. Entry level jobs in retailing will disappear. There will be more pressure to perform. So far, surveys of these personnel show, the pay has not kept pace with the new demands.

Walmart, hustling to meet the Amazon challenge, now has 18,000 personal shoppers with very specific guidelines to do the picking for customers. They have 30 seconds to find an item or, if it is not available, to find a suitable substitute. They report that they come to know the tastes of certain repeat customers and routinely satisfy their shopping desires.

Target stores, too, are training more specialized sales persons in such areas as clothing, consumer electronics and beauty products. They pay them more for the expertise they bring to the job, which results in greater sales.

Value Of Money Changes

February 26, 2018 By Twila Van Leer

Do You Know The Time Value Of Money?

Wimpy, of the old cartoon show, Popeye, loves hamburgers, a passion that leads to his signature line, “I’ll gladly pay you Tuesday for a hamburger today.” This line leads us to our topic of discussion today. Will the dollar you have today be worth more tomorrow?

A dollar this year may be worth much more next year. The opposite of what Wimpy was suggesting. This variation in the value of our dollars is one of the fundamental principles of finance and you need to firmly establish it in your mind as you contemplate investing. Your $1 today invested wisely can be worth much more next year. The best advice you can take is to remember this forward -looking growth statement. You need to realize the value of every dollar that comes into your possession.

Using your money wisely can offset such factors as inflation. If you can invest and earn a dividend or capital gains on your dollar, you stay ahead of the decline in value related to inflation. Realizing the full potential of every dollar you have is key to building wealth. Think of dollars as seeds. You can eat them (spend) or sow them (invest.)

Think in terms of the future value of your dollar, not what it is worth at the moment.

Assume you are 30 years old and 35 years from retirement at age 65. That means that an investment you make now has 35 years to compound. If you invest at a good rate of return, you’ll have a good nest egg when you retire. The historic rate of return on the stock market is 12 percent. The return on bonds is slightly lower. A combination of both could predictably give you a return of 10 percent.

Using these variables and estimates, you could assume that failing to invest $20 today could cost you approximately $562 over 35 years. Adjusting for inflation, the cost could be closer to $140. Even so, your purchasing power would have increased some seven-fold.

Multiply $20 by whatever amount you are able to invest, and you can see that failing to invest now has significant impact on what you can expect to have in the future.

Seen in this context, you may reassess how much a seemingly small luxury you indulge in today can add up to a significant loss in the future. Think ahead.

Beginners’ Guide To Saving Money

February 24, 2018 By Twila Van Leer

Saving money is the keystone principle to financial success. It’s what makes it possible for you to take advantage of opportunities, such as going back to school, starting a business or buying shares of stock when the market crashes.

The logical questions are: How much should I be saving? What is the difference between saving and investing? What are the safest methods for saving?

There is a huge difference between saving and investing. Both should have a place in your financial planning, but they have different roles. It can make a difference in whether you experience a bare-knuckle survival through a recession or depression or sleep soundly knowing you have spare liquidity on hand. Knowing the difference is vital to building wealth and finding financial independence.

Many individuals have lost everything in an economic downturn despite having wonderful portfolios because they failed to appreciate the role of cash in their calculations.

Making money for you is not always the first role of cash.

Knowing the basic differences between saving and investing may help. Saving involves putting cold, hard cash away where it is safe and liquid. Some successful money managers suggest keeping a lot of cash hidden on hand to be a source of quick availability. Savings should be in FDIC-insured accounts, including U.S. treasury bills. Money market accounts are good, but money market funds require a careful look at the holdings and structure. Savings should be immediately accessible so you can deploy them with minimal delay according to circumstances.

During the 2008-09 economic meltdown, some hedge fund managers actually had their spouses getting as much cash as they could from ATMs because it appeared that the entire economy was going to collapse. Not widely publicized, such activity nevertheless showed the depth of the concerns.

The objective in saving is to keep ahead of inflation.

Now, about investing. That’s a process of using your money to earn a return. There is more volatility in the process than in saving, but it is the basis for building wealth. Learning the tricks of investing is a process and many helps are available, including the book, “How to Start Investing.” Professional help is available if you are a real novice. The trick is to start. Learn as you go.

Stocks, bonds and real estate are the most popular avenues for investing.

So, given the differences, how much of your income should you dedicate to each of these money-management techniques? Obviously, the answer is individual, but the bottom line should be: “As much as you can,” even to the extent of sacrificing some of your immediate desires to maximize your savings and investment options.

Put savings before investments (unless you receive a sudden windfall such as an inheritance, etc.) A good savings cushion will fund your investments. The two primary purposes for savings are as a hedge against the loss of income, through a layoff, downturn, illness or for special purposes such as a house down payment, car or other big-tab item. Ideally, you should have six months of coverage for essential living costs. That will give you a sense of security that you can’t get from the market, which can be extremely volatile in the short-run.

You shouldn’t consider investing until your savings program will give you the assurance of being able to take care of emergencies and/or saving for the items that will take more than five years to pay for. Having health insurance should take precedence over investing as well. Without it, a single health incidence could wipe you out.

Savings and investing. Make both a matter for long-term personal financial health. But start with the savings.

Retirement Sneaks Up On You

February 13, 2018 By Twila Van Leer

When you are young and just starting down the employment path, it’s easy to ignore the fact that you’ll face retirement some day. But some day is not as far away as you think. If it arrives and you haven’t prepared, you may face some tight living in your “golden” years.

How much you need to save to be prepared is a personal question. How well do you want to live in retirement and how much do you earn? A rule of thumb is to estimate what you will be earning the year you retire. Subtract your retirement income, such as Social Security, pension, trust accounts, etc.) and then multiply it by the number of years you expect to live after retirement. Not exact, but at least a figure to shoot for.

The answer to how much you should be saving, simply put, is “as much as you can, but not more.” The earning years should not be miserable in order to finance the retirement years. But retirement savings must be high up on your priority list.

You can’t get a loan to finance your retirement. To make the figures more real, make a pie chart with five “slices.” Label them “bills,” “debt,” “spending,” “short-term savings” and “long-term savings.” If the long-term savings (i.e., retirement) is too small, look at the other categories and see where it is possible to make a shift. Possibly you need to trim short-term savings a bit in favor of long-term. Be wise, don’t decimate your emergency funds to make the difference. Be willing to sacrifice a few things, like lunching out, being too free with entertainment expenses, making unnecessary clothing purchases. Focus first on the necessities.

What kind of retirement account should you consider? How long do you have before retirement and how much do you make? Taxes should be a large part of your consideration. Some programs, such as an employee-sponsored 401(k), allows you to defer payment. Optimize your contribution to a company plan, especially if your employer offers a match.

Speak with a professional if you need help understanding your options, how to invest to maximize your returns. He or she can guide you through the maze of possibilities and help you adopt the best plan for your circumstances.

Yes, there are many questions. But the one that can be easily answered is: When do I start? The answer: Now.

When To Quit Saving

February 9, 2018 By Twila Van Leer

Once you have your million, you can sit back, relax and quit saving, right? No way, says self-made multi-millionaire David Bach. Saving should be a lifelong habit, he advises. Learning to ”pay yourself first” is one of the basics he shares in his book, “The Automatic Millionaire.” He also is co-founder of AE Wealth Management.

He and his wife, Michelle, make it a practice to set aside the first 20 percent of their gross income.

“That may sound like a lot, but because we’ve worked up to it gradually over the course of 15 years, it has become our new “normal.”

Bach didn’t become a millionaire overnight, he points out. “When I first heard of this concept (paying yourself first) I was doing what most people do – trying to budget, beating myself up for failing and then scrambling at the end of the year to find some money to put in my retirement and savings accounts, only to find another year had come and gone and I had not made any financial progress,” he writes.

When the idea caught on, he began setting money aside regularly, but it was 1 percent of his paycheck, not 20 percent. After three months, he realized how easy 1 percent was and he kicked up to 3 percent. “I can tell you from personal experience that once you decide to pay yourself first and then make it automatic, it’s done. Within the first three months, you forget that money that is going into savings.”

As he was able he continued to increase his “pay-myself” contribution up to 10 percent, then 15 percent and on up to 20 percent.

Bach doesn’t accept excuses. Anyone, regardless of income, can put money aside and let it accumulate, he insists. A lot depends on one’s mindset. “If you are not paying yourself first now, it’s probably because you think you can’t afford to, but once you decide to do it, and make it automatic, you’d be amazed how effortlessly you can learn to live on a little less.”

If 1 percent seems a reasonable self-pay goal for you, it’s better to start there than not to start at all, he says. It’s a decision that, over time, can assure your personal financial health and set you on the path to wealth.