Archive for the ‘Personal Finance’ Category

Time to negotiate-for everything

Monday, June 2nd, 2014

My mind was elsewhere as I was scanning my emails while waiting in the pickup lane at a local CVS when I heard the pharmacist say, “Sir, do you realize that the cost of the prescription is $372”. This statement snapped my attention back to reality and I said “No I did not. It is supposed to be a generic”.

Well it was a generic drug. I then started a casual, more in-depth conversation about alternatives to paying such a high price. I finally ended up getting a similar alternative drug for $170 –a 54% savings from the original price!

This episode seems to happens frequently in my life. I want to buy something, I check out the product and the price, and then start to figure how to negotiate the price down. You would be surprised at how often I am successful.

On a recent trip to Cancun, I marveled at the buying process that was going on around me. It seemed like everything for sale was sold at a price other than the listed price, and usually much lower.

Now I admit that I really don’t like to barter. It is uncomfortable and takes time. But if it can work in Cancun, why not here in the States?

Also, the facts are that Americans love things-a lot of them- and much more than years ago. And these new things cost money that exceed the average take home pay.

Take cell phones, a product that didn’t even exist 20 years ago is a must have today, at a price of $200-$400 per month for a family.

And of course there is education. A bachelor’s degree in 1974 at Mizzou cost $2500 for the WHOLE year-compared to 10 times that today.

The list goes on and on: computers, clothing, fitness clubs, vacations, day care, etc. More and more things we want while dealing with less and money in our pocket.

Now is the time to negotiate. Try this process:

 1-Get mentally ready that you really need the item. Is it a need or a want?

2-Then decide what will drive your purchase-quality or price.

3-Know the cost of other competing products beforehand (this could never be easier than today with the internet).

4-And finally ask if they will take a lower price or if there is a similar item at a lower cost. Or use the phrase-“that price is much more than I expected to pay”.

Sometimes it doesn’t work, but even if it does one out of ten times, that’s a 10% savings!

 

John Marklin

www.marklinfinancial.com

 

Staying secure in a hacker’s world

Tuesday, February 18th, 2014

In the past month, I have been the victim of a forged check scheme at one of my store’s bank accounts, and a hack job with my personal credit card from the Target debacle.

The days of armed robberies are being supplanted  with cyber-space crime. It is everywhere and becoming more popular than ever.

What is a person to do? Stick your head in the sand and avoid paper checks or transacting business on the internet? That is not likely. In fact, online shopping is growing at a breakneck pace due to the ease of comparison shopping and the option of free delivery if you look hard enough.

Here are some things that can help. I do some of these, not all. But all seem to give you a better sense of safety in an unsafe world:

1-If you have to pay with a card, ALWAYS use credit instead of debit. The protection is far superior with credit if something goes wrong with the transaction.

2-For smaller and more risky purchases such as in a restaurant, use cash instead of a credit card. Can you think of a more unsafe process than to give your card to a complete stranger, who then goes out of your eyesight to potentially do whatever with your credit card numbers?

3-If possible, eliminate paper checks with electronic checks that YOU control. Paper checks can be easily duplicated and forged through online check writing programs and blank check stock from Staples. Electronic payments only go to the intended party’s bank account.

4-Only allow regular monthly payments to be auto debited from your bank accounts. This would include mortgage payments, utility bills, and communication services like cable and internet.

5-Review your banking and credit card activity frequently, (I recommend daily). Recovery is more likely for a claim to be processed if found sooner than later; not to mention the loss of cash in your bank account or an inflated bill to pay on a credit card statement.

6-Consider placing a security freeze on your credit information with the top three credit companies (Experian, Transunion and Equifax). A security freeze prohibits anyone from checking your credit without your pre-authorization. And the number of credit card solicitations you get in the mail will likely drop. Here are the three websites: Experian, Equifax, Transunion.

7-Shred all unused or old credit and debit cards as well as banking and credit card statements. Don’t give a dumpster hunter the opportunity to get your private information.

8-Change passwords often and use symbols, CAPS and numbers.

9-Avoid doing online business with vendors who allow weak passwords. Check out the this article for unsafe websites as the results may shock you.

10-Always have an up-to-date virus protection program on your pc. I use Avast. And it is free.

 

I hope you find some of these tips helpful in staying safe.

 

John Marklin

www.marklinfinancial.com

The perfect storm

Wednesday, January 8th, 2014

I am no economist, but I can make predictions just like anyone.

I see several patterns, three to be exact, taking hold and possibly causing negative results in the near future. And if they do, and all happen in 2014, well it could form a “perfect storm” of bad events.

1-Stock market correction-the stock market is up 22% in 2013 and 91% over 5 years. It has crossed the 16,000 mark for the first time in history and PE values are very high. Here is a look at the trend over the last 30 years.

dow jones

 

 

 

 

 

 

I have been through several corrections in my life time. I feel another major one coming.

2-Medical costs will rise, dramatically-They had been increasing at a fairly large clip the last decade, and there is no sign of it stopping now. The new Affordable Care Act (Obamacare) was partially put in place to reduce the rise of medical costs and make healthcare available to millions more. But the combination of the botched healthcare.gov website and the reluctance of young, healthy people to sign up will inevitably raise medical costs in a big way in the future. Once the insurance companies get a better history of the low number of signups, premiums will rise even more later this year.

3-Inflation-The Fed has been literally printing hundreds of billions of dollars over the last few years through its Quantitative Easing program to stoke the economy. This practice is in a taper phase now, but the damage is done. This surge of new money, not backed by any real economic event, will eventually result in much higher prices. I see it every day in my grocery store with food costs. Beef, pork and chicken have all consistently risen over the standard cost of living in the past couple of years. And the extra demand of “healthy” consumers wanting organics or untainted food pushes the cost up even more.

I hope that I am wrong and some or all of these do not happen. If so, 2014 will be a wonderful year of prosperity.

So my advice is to always plan and live within your means. Frugality should trump greed. Wants should be replaced with necessities. And if you are in the market and older than 50, talk to your advisor and consider moving some of your investments to safer havens.

 

John Marklin

www.marklinfinancial.com

Grandfather’s other meaning

Friday, November 1st, 2013

IMG_3530Becoming a first-time Grandfather this year has been amazing. Watching, visiting and babysitting Sarah has brought back memories from 30 years of how I raised kids. Actions seem the same, but the mindset is different. Having the time to enjoy the moment is top of mind today.

Grandfathers represent different things to different people, but words like old, experienced and learn-from-mistakes sometimes define a grandfather.

Today, grandfather is being used in other different venues.

1-Obamacare has spotlighted grandfathered medical insurance policies that one currently has. Some insurance companies are asking customers to renew grandfathered plans prior to premiums hikes associated with new plans, either through private insurance or the healthcare.gov website.

2-Cell phone plans and wireless wifi is no exception. I was told that if I changed to 4g from 3g I had to go from a grandfathered “unlimited” data plan to a limited one, costly twice as much.

3-The same holds true for old policies with most service industries (web service, satellite TV, fitness clubs, yard service, you name it). Most merchants will honor long standing relationships and not change older plans as long as you continue to pay your bill on time. But make a change, or be late on a payment, and your grandfathered contract can be cancelled and you will be looking at an increase.

Bottom line, keep your old plans and contracts in place as long as you can. And know that a change will probably result in a price increase.

 

John Marklin

www.marklinfinancial.com

Focus on value first and cost second

Tuesday, July 23rd, 2013

One of my stores has old T12 fluorescent lighting in the ceiling. This type of lighting will eventually be discontinued and migrate over to the more narrow and energy efficient T8 or LED lighting. The estimated cost to replace over 200-twelve foot bulbs, ballasts and fixtures was well over $20,000, a figure that I almost gagged on and made me decide to stay with the old lighting until I was forced to make the switch when there would be no more T12 lights available.

What I failed to see was the 20% savings in my electric bill which equated to a 3-year payback on the cost of the new lighting. Not to mention the additional light (lumens) that would come with the new lighting. And every customer would love a brighter store!

I found myself making a decision based on cost first rather than looking at the benefits of the purchase.

How often does this cost first, value second happen in your life or business?

-Did you think of the price of the car first before you investigated its style, drive, feel, look and gas mileage?

-Did you think about the price of your vacation first before thinking about the beauty of the location and the stress-free condition it will put you in?

-Did you think about the cost of a medical insurance plan for your company before looking into the benefits it could provide to your employees?

-Did you opt to use TurboTax because it was cheap regardless of the fact that you may have left some money on the table in missing tax loopholes?

-Did you think about how much those roses were going to cost before you thought of the pure joy it would give to your wife.

Now what if you did just the reverse, and fixated on the value first and cost second with the transaction?

-The car now becomes personal and fits your life style.

-The vacation becomes a “bucket list” item and something you can look forward to.

-The medical insurance plan becomes a significant piece of your overall compensation package.

-Your taxes become less of a burden and you have a feeling of confidence that a professional has looked at all the angles to save you money, and

-Your wife will love you more and more each day.

This doesn’t mean that you should just spend your money wildly and lose fiscal responsibility. Not in the least. What it does is prioritizes your wants and desires, and then you focus on negotiating the absolute lowest cost possible. And if it still doesn’t fit in your budget, just move it to a future pending folder, something to be done when you can afford it.

Focus on the prize and then negotiate the lowest cost possible.

 

John Marklin

www.marklinfinancial.com

Life Insurance

Thursday, March 21st, 2013

To my younger readers who are considering whether to buy life insurance, here are my suggestions:

Why?

The only reason to buy life insurance is to have money available to pay bills after your death, such as: a mortgage, student loans, taxes on your estate, and living expenses for your spouse or dependent family members. Life insurance is not for passing huge sums of money to heirs for no apparent reason.

Type?

Life insurance, in its simplest form, is a contract between you and the company, each betting on how long you will live. This is called term insurance. A premium paid based on your age, medical condition and the amount of death benefit. Term insurance premiums are cheap when very young (below age 30) and get very expensive when older (after age 55).

Whole life insurance mixes a term policy with an investment. The premiums are much higher than term because you are “earning” money on your premium. Whole life policies are usually very complicated and come with a bunch of rules regarding payout of the earnings and can have a significant tax effect if you borrow against the policy to pay the premiums. I usually advise people to stay away from whole life insurance; you can probably do better investing the higher premium on your own through the stock market or bonds.

How much?

I generally advise a minimum of $500,000 to a maximum of $1,000,000. This is a customary amount for loans and other debts when you are between 30 and 50 years old.

When?

When you marry, have kids, buy a house, have loans, etc. you have a need for insurance to pay bills after you die.

But there is one reason to get insurance when young, even if you are single, rent and have no debts. Not only is insurance cheaper and more affordable when young, but you are usually healthier and more willing to qualify. Generally, once you qualify and continue to pay premiums, you cannot lose term insurance.

As you grow older, you may develop health conditions that will disqualify you from getting new insurance, from any insurance company. Please do not overlook this.

 

John Marklin

www.marklinfinancial.com

Cost of education

Wednesday, January 9th, 2013

Now that I have a grandchild (Sarah Marie Tompkins), my mind is thinking about her future. And what the world will look like when Sarah grows up.

Let’s take one topic, the cost of college education, for a moment.

Just Google projected cost of education and see what pops up. There are many estimates and assumptions needed to get to a projected cost. Here is one  projection for tuition and fees only in the year 2030 (when Sarah is 18)

-$108,000 for 4-year in-state college

-$210,00 for 2-year community college and 2-year private college

-$363,000 for 4-year private college

Tack on room and board and the figure could easily be half a million bucks for a private college.

Now how to fund such a huge amount? There are UTMA accounts, college savings plans, Upromise and one that I really like is the 529 plan.

A 529 plan is a savings plan with a state tax deduction, and federal tax exemption on the interest and withdrawals. It must be used for school, but it can also be used for tuition, room and board, and books. From the people I have talked to, there is quite a bit of leeway as well (for instance, room and board could be an apartment rather than a dormitory).

I like the concept of a 529 plan because the owner of the plan remains you. Hence it stays out of the child’s name, and may be excluded in their calculation of funds available for financial aid. Plus, with you controlling the funds, you can be sure it is used on college expenses, and not a fancy car.

There are a bunch of rules and each state is different. Virginia happens to get high marks for its 529 plan and its historical returns.

Regardless of how you fund a child’s education, the important thing is to start early.

 

John Marklin

www.marklinfinancial.com

A refreshing new idea from a bank

Wednesday, October 31st, 2012

Many of you know I have a general disdain for banks. This comes from many years of trying to work with them on behalf of clients. My experience is that banks look the other way when you really need them, yet want your business badly when you are doing well.

This theory has been accelerated since the recent bank bailout. Congress has gotten tough on banks. And banks have responded by going too far in screening loans and are less reluctant to take a risk. Think I am wrong? Have you tried to get a mortgage or refinancing lately. The reams of documentation that is now required to satisfy the laundry list of FNMA guidelines is ridiculous. The loan officer has been reduced to a document-gatherer and a list checker-offer.

That is when a new idea emerges from a bank, it can stand out as a refreshing idea.

My brother Ray called and told me about a new product with a bank in St. Louis. This bank is offering an Equity Loan product to refinance his mortgage. It is a very low rate, fixed for a certain amount of years, and NO CLOSING COSTS.

I called the loan officer and asked how this could be? Usually “no closing costs” still come with some other type of fee. Or an equity line of credit is usually a floating low interest loan with low or no closing costs.

But a fixed rate loan with no closing costs is a refreshing idea. It is done very quickly and can save you thousands of dollars needlessly spent on appraisals and lawyer fees.

Now that is an idea worth pursuing!

Send me a note if you want to know the name of the bank.

 

John Marklin

www.marklinfinancial.com

Looking into 2013

Saturday, October 6th, 2012

2013 is shaping up to be a potentially damaging year for the economy.

First, the US had a record drought in 2012. Many farmers lost their crops and reduced the amount of feed for cattle. The number of cattle has also been reduced as it was better to slaughter the cattle early due to the lack of food. The immediate impact was to lower beef prices as the market was flooded with  a high supply of beef. But as that inventory reduces, beef prices and milk prices will rise. Have you been to a grocery store lately? This is the beginning of a prolonged inflationary period in food.

Second, the US Government has been printing money like mad. Now well into the QE3 (third round of Quantitative Easing) the Fed is buying bonds ($40 billion a month until 2015) at a very low interest rate. This action is flooding the market with cheap money now in order to spur the economy. Bond experts are worried and as a result our credit rating has been lowered. Even Fed Chairman Bernanke admits concerns of inflation as a result of this move.

Third, the “Fiscal cliff” lingers. “Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect. Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron’s, over 1,000 government programs – including the defense budget and Medicare are in line for “deep, automatic cuts.”

No one knows what will happen about the “fiscal cliff” and whether Congress will act to modify its effects. However, anything done to extend the Budget Control Act of 2011 will only worsen the deficit and push the problem out further. Spain and Greece kept pushing the problem out and look where it got them.

This perfect storm of events, I believe, will likely result in another recession in 2013. The last recession hit millions of Americans very hard. Not only were jobs lost, but the stock markets took a hit.

Have you seen the stock market lately. Up 36% in two years! It is near the levels of 2008, before dropping a whopping 50% the next year.

So, what can you do?

-First, if you have a job, be thankful.

-Second, be frugal with your money.

-Third, consider moving some of your stocks or funds, which are trading at an all-time high, into cash. Don’t replicate 2008-2009 all over again and lose half of your money if the stock market takes a dive.

-Fourth, after the first of the year, consider buying some stocks or funds back at lower prices.

I am not alone in my thinking about moving from stocks into cash. US corporations are sitting on record levels of cash because of future uncertainty. This pessimism keeps money out of the market which is one reason our unemployment rates continue to be so high.

I hope I am wrong about these predictions. If so, the worst I have is cash.

 

John Marklin

www.marklinfinancial.com

Check your escrow statement

Thursday, August 23rd, 2012

I just received my annual escrow analysis statement from my mortgage company. For those unfamiliar with the escrow process, often times banks will require you to pay for your real estate taxes and insurance premiums along with your monthly mortgage payment. The thought process is that a monthly payment has less risk in missing a tax or insurance payment from the bank’s perspective.

Escrow accounts are trued up every year requiring a shortage to be adjusted in the next year’s monthly premium.

Now back to my real life story. My escrow statement said I was $503 short and I had to pay the amount immediately or have the mortgage payments go up $50 a month. That’s right. $50 times 12 is $600; $97 more than the shortage!

But the illogical didn’t stop there. My insurance only went up $124 from last year and taxes stayed virtually the same. So why the extra required amount of $379 to get to a $503 shortage?

The customer service lady tried to explain that the reason is because there is a 2 month cushion required by federal law to be in the account. So I asked her if I needed that cushion a year ago? She said yes. So I asked then why do I have a $503 shortage instead of $124 if I started off in a trued up situation?

She had no answer but said it was the law.

The correct answer is that it all has to do with timing. If the insurance and tax payments all hit at or near the same time, it will put the running balance in a very low situation, and below the two month required cushion. Why should I be penalized because of the timing of the payments?

I asked if I could get off of escrow. She checked and said yes, since I had not missed a payment in two years. So I am now escrow free.

If you have an escrow account, I urge you to check it when you get the annual Analysis statement. Better yet, see if you can get off of escrow and avoid the madness.

 

John Marklin

www.marklinfinancial.com