Is Holiday Gift-Giving a Waste of Money?

When I do budgets with my clients, I’m frequently shocked at the annual outlay for gifts. After housing and food, gifting is one of the larger annual expenses for individuals in terms of percentage of income dedicated to it. For one of my clients who earns around $100,000 per year gifts accounted for roughly $3,500 (3.5%) of her gross income. For another client who only earns around $60,000 gifts accounted for almost $2,400 (4%) of her annual income. And that’s after taxes! The percentage of income dedicated to gifts was noticeably higher for people in their late 20’s and early 30’s when wedding season tends to hit hardest. So the question begs itself: does gift giving come back to reward you, or bite you?

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The Dollar: Too Big to Fail?

There is an interesting article in this month’s Financial Planning Magazine which questions how realistic it is for the dollar to “fail” on a global scale. These sorts of articles aren’t unusual these days as much debate takes place over US debt, continued foreign investment, rising gold prices, etc. The article’s main contributor, Frank Wei of FundQuest, argues that the dollar is too important to both the global economy and the financial system for it to experience a sudden collapse. Any further declines, he argues, will be gradual.

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Fixing the 401k Problem

The 401k industry is in a pretty sweet spot. Corporate pensions are quickly becoming obsolete and now more than ever employees need to rely on their own ability to save money. What could be easier than an automatic payroll deduction plan such as a 401k or 403b which provides tax-deferred growth and in some cases an employer match? Many people I know who really don’t have much investment savvy accept the 401k as one of those investment programs which they need to sign up for and that’s all there is to it. Sounds a little hasty, right? Well, according to a 2008 survey discussed in the November, 2009 issue of Registered Rep magazine (Introducing 401k 2.0), about 77% of 401k plan participants claim to have little, basic or no level of investment understanding. And despite Department of Labor requirements regarding improved efforts to educate participants, the reality is that many people simply don’t have the time or energy or desire to educate themselves about stock and bond investments. What they really need is good advice—a person or team of people whom they can reach out to on short notice to provide specific advice relevant to each participant’s situation.

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