Steve Davis, principal of Davis Financial in Mansfield, MA has moved his blog to: blog.talkwithdavis.com

By Steve Davis, CERTIFIED FINANCIAL PLANNER™




If my elementary school teacher could see me now!  Earlier this year I was approached by the AOL-backed Patch website and was asked to write a personal finance column for the Mansfield, MA news site.  I agreed and to my suprise, I have actually grown to really enjoy writing.  Who knew?

As you can imagine, I had a lot of positive feedback from my first columns (thanks, Mom!) and consequently felt emboldened to share my written thoughts with not only the fine folks of Mansfield, but also with my friends, clients and business associates.  For the past year my blog has been hosted here on Google's free blog publishing tool, Blogger.  The price was right, but in exchange for the free publishing, I have come to learn that the content I've been publishing hasn't been helping my company's search engine results.  In other words, if my blog entries were posted to my website talkwithdavis.com instead of blogspot.com, I would likely get better search results. 

My friend and website designer, Barry Roos, has helped me make my blog more "search engine friendly" and we've now moved it to blog.talkwithdavis.com.  This means that when people now search for "Financial Planner in Mansfield", "Financial Planner in Easton", "Financial Planner in Foxboro" or in any of the surrounding communities, my firm, Davis Financial, should start to show up higher in the rankings.  In the old days, businesses would use "creative" business names like AAA Financial or A1 Financial in order to show up first in the phone book.  But since the phone book has gone the way of the buggy whip, search engine optimization is the way for smart businesses to get better placement.  If you would like to learn more about Barry and his company please visit his company's website:  Roosites Web Development.





Steve Davis, CERTIFIED FINANCIAL PLANNER™ has a new blog. It has been moved to blog.talkwithdavis.com. Please visit the new site to read current thoughts and insights from the owner of Davis Financial in Mansfield, MA.

George Washington's First Thanksgiving

Financial Lessons from Thanksgiving


By Steve Davis, CERTIFIED FINANCIAL PLANNER™

President George Washington designated November 26, 1777 as the first Thanksgiving Day recognized by the US government. In the years that followed, each state scheduled its own Thanksgiving holiday at different times, until Abraham Lincoln made it an ongoing National holiday. His proclamation read, “I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwells in the Heavens.” For most of us, Thanksgiving goes by in a blur of family, friends, holiday preparations, and a table of traditional dishes. The story of the first Thanksgiving was very different from our own and holds important lessons for us today.

The Fruit of One’s Labors:
After landing on our shores, life was almost unbearable for the Pilgrims for the first few years. Crop yields were poor and many went hungry. William Bradford, the Governor of Plymouth Bay Colony later reasoned that the old English tradition of farming in common – where the harvest was collected and rationed based on need – led to a lack of productivity. It seems that some of the colonists resented not receiving a share of the harvest proportional to their labors. When Bradford decided to abandon farming in common in the spring of 1623, things changed. He set aside a plot of land for each family as their own private property to supply themselves with corn. The result was a bountiful harvest. The idea of enjoying the fruits of one’s own labor caused productivity to soar. Bradford wrote, “It made all hands very industrious, so much more corn was planted then otherwise would have been by any means.” And so, in the fall of 1623 Governor Bradford “set apart a day of thanksgiving.”

Recover from Mistakes:
When the Pilgrims first packed their belongings into trunks and crossed the rickety wooden gangplank onto the deck of the Mayflower, they were setting sail much later than they had originally planned. Instead of reaching their planned destination in Virginia, they found themselves hundreds of miles off course. They anchored in Massachusetts and braved a frigid first New England winter and then suffered three years of near starvation. Many would curse their bad luck and consider giving up, but not these hardy souls. The Pilgrims accepted the things they could not change and adapted and adjusted to their unforeseen and new conditions. How do we respond to setbacks? If you have experience investment losses, or if you’ve racked up too much credit card debt, or if you’ve made some bad career moves, resolve to recover and bounce back. We can learn from the Pilgrim’s example and ability to overcome.

Weather Hardships:
The men and women that first landed on these shores back in 1621 were not seasoned explorers or soldiers; they were mostly a group of religious Separatists who held regular jobs. They were farmers and printers and shoemakers with no experience or knowledge in establishing a settlement in an adverse land. During that first traumatic winter, half the pilgrims died.


And here we are, almost 400 years later, living in vastly different times. Still, human hardship remains. People get sick, loved ones die and we sometimes struggle because of unemployment or any number of other life events. The Pilgrims were a small group who leaned on each other and their Native American allies. What is your support network like? As you gather with your family and friends this week, take time to develop and appreciate the ability you have to offer support and guidance to one another.

Move Ahead:
Those first years in Plymouth must have been dreadful. Of course they didn’t have consumer confidence surveys back then so we don’t know the sentiment in the early 1620s. Eventually, the fledgling colonial economy became so successful that Governor Bradford wrote these words 24 years after the first Thanksgiving, “Any general want or famine has not been amongst them since to this day.” Years of abundance followed the first few hard winters. Eventually the colony produced enough corn to spare and trade for other comforts and enjoyment.

What about today? According to Bloomberg Consumer Comfort Index, confidence hovered last week near a record low. However, unemployment is slowly improving, businesses generally have good balance sheets and profits have been boosted by cost cutting on everything including capital spending and inventories. While the economic data doesn’t point to robust economic growth, the economy is expanding. It is my hope that soon workers will be enjoying the fruits of their labors with years of abundance.


Give Thanks:
Before you enjoy your meal this Thursday, perhaps you might like to share the words of President George Washington with those at your table. Here is his Thanksgiving Proclamation from October 3, 1789:

     Whereas it is the duty of all nations to acknowledge the providence of Almighty God, to obey His will, to be grateful for His benefits, and humbly to implore His protection and favor; and Whereas both Houses of Congress have, by their joint committee, requested me to “recommend to the people of the United States a day of public thanksgiving and prayer, to be observed by acknowledging with grateful hearts the many and signal favors of Almighty God, especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness:”
     Now, therefore, I do recommend and assign Thursday, the 26th day of November next, to be devoted by the people of these States to the service of that great and glorious Being who is the beneficent author of all the good that was, that is, or that will be; that we may then all unite in rendering unto Him our sincere and humble thanks for His kind care and protection of the people of this country previous to their becoming a nation; for the signal and manifold mercies and the favorable interpositions of His providence in the course and conclusion of the late war; for the great degree of tranquility, union, and plenty which we have since enjoyed; for the peaceable and rational manner in which we have been enable to establish constitutions of government for our safety and happiness, and particularly the national one now lately instituted for the civil and religious liberty with which we are blessed, and the means we have of acquiring and diffusing useful knowledge; and, in general, for all the great and various favors which He has been pleased to confer upon us.
     And also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech Him to pardon our national and other transgressions; to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually; to render our National Government a blessing to all the people by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed; to protect and guide all sovereigns and nations (especially such as have shown kindness to us), and to bless them with good governments, peace, and concord; to promote the knowledge and practice of true religion and virtue, and the increase of science among them and us; and, generally to grant unto all mankind such a degree of temporal prosperity as He alone knows to be best.
     Given under my hand, at the city of New York, the 3d day of October, A.D. 1789.

The High Cost of Weddings: 4 Consequences to Newlyweds

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™



My wife and I have four children – all boys – and I used to joke that this was a strategic financial planning decision because it meant that we wouldn’t need to pay for any wedding expenses in the future.

The short-lived Kardashian celebrity wedding covered by the E! Network was said to have cost $10 million. And TLC’s “Say Yes to the Dress” routinely shows brides and their parents forking out tens of thousands of dollars for a dress. According to Bride Magazine, the average cost of a wedding in 2010 was $26,501. Sure, that’s chump change next to the Kardashian debacle, but seriously, 26 grand? Are you kidding me? These days the average cost of a wedding almost makes a year at Northeastern University affordable.


Running of the Brides at Filene's Basement


The news gets worse for frugal brides: just last week Filene’s Basement filed for bankruptcy protection. For years, Filene’s advertised an annual bridal sale where dresses sold for $249 to $649 – a huge markdown from full retail prices of $900 to $9,000. Now that the 102-year-old retailer is closing its doors, their annual “Running of the Brides” event is a thing of the past.

The cost of dresses, photographers, caterers, flowers and honeymoon all add up.  So what kind of impact does this sort of expense have on newlyweds? Here are four consequences:

1. Debt.
Some couples start their marriage deeply in debt. Sure, it’s not unusual for most twenty-somethings to have school loans to pay back, but adding debt to pay for an expensive wedding compounds the problem and often strains a couple’s resources and adds stress to a young marriage.

Couples can avoid wedding debt by listing what they really want and identifying what they can do without. Learning to prioritize is a key financial skill for couples to develop. What is more important... to have a down payment on a house or a big wedding with a costly open bar? If you can afford both, great! If not, make some concessions: invite fewer people, change the venue, use a DJ rather than a band. In all cases, couples should make a budget and avoid wedding debt by putting money aside. The old wedding custom of “something borrowed something blue” wasn’t referring to bank or credit card debt.


2. Lost Opportunity.
The biggest cost of a wedding isn’t the actual dollar spent on the event itself. It’s all the money you could have accumulated if it were saved instead. Economists call this “Opportunity Cost”. Here’s a hypothetical example using a 25-year old bride who invites fewer people to her wedding and consequently cuts her wedding expenses by $10,000. If she saves that $10,000 over her working life of 40-years, her savings could grow to more than $70,000 assuming a five percent interest rate. Some would say that the true cost of inviting the extra guests wasn’t $10,000, but $70,000.

3. Obligation to Dom and Dad.
I often advise parents that they should not create a retirement problem down the road by trying to solve a wedding funding problem for one of their kids today. According to wedding planners, the tradition of having the bride’s parents pay for everything is slowing fading away. Why? Because newlyweds realize that if mom and dad can’t afford to pay for their own retirement, they’re going to have to have to invite mom and dad to live with them, or pay for their assisted living.


4. Crime?
Here’s a weird story. Earlier this year, police say that one Pennsylvania couple resorted to crime in order to pay for their wedding. April Carter, 24, and Joseph Russell, 23, allegedly stripped more than $7,000 worth of copper wire from 18 utility poles and then sold it to a salvage company. PennPower officials inspected the area and found that transformer ground wires had been cut. Surely there are better ways to plan and pay for a wedding than resorting to theft! I can’t imagine that spending a honeymoon in the clink would be much fun either…

Furious about Fees -- Bank charges go up again

By Steve Davis, CERTIFIED FINANCIAL PLANNER™


Outraged about bank fees? You’re not alone. Citizens Bank recently started charging me $3 per month to mail my monthly bank statement. Bank of America recently announced they would soon start charging $5 per month for using their debit card. And just last week three large banks were sued for allegedly colluding to fix ATM fees. Add to these costs, overdraft fees, phone transfer fees, inactive account fees and you’ll see that it’s a veritable fee for all! According to an April study by the Pew Charitable Trust, checking accounts at the 10 biggest U.S. banks had a median 49 different types of fees.

Infamous Banker Ebenezer Scrooge 
from Walt Disney's A Christmas Carol 

So what’s going on? The problem is that banks are finding it more difficult to make money the old fashioned way. Loans aren’t as profitable as they used to be -- interest rates are at historic lows. Additionally, a new law caps the amount banks can charge merchants, from an average of 44 cents per debit card transaction to 24 cents. According to JPMorgan, this new law will cost them $300 million each quarter in income. Sadly for consumers, the banks have turned on them to recoup the revenue.


Here are 5 tips to help you avoid rising bank fees


1. Talk to your bank: You may qualify for free checking if you sign up for direct deposit of your paycheck, use your debit card a certain number of times, or keep a minimum balance. It’s not always easy for consumers to get clear information about bank fees so make a point to call or sit down with your branch manager and ask.


2. Don’t Use Out-of-Network ATMs: Why tolerate high ATM fees? It is not uncommon for consumers to sometimes pay twice for one ATM transaction – first your bank charges you $2 and then if you’re using an “out of network” ATM, the ATM owner charges you another $2 surcharge. That’s crazy, especially when you’re withdrawing $40 for a night out on the town.

Make a point of using your own banks ATM and withdraw enough cash to last you until you can get to the “free” machine again. If you find yourself without enough cash, get cash back at the point-of-sale when using a debit card. Go to a grocery store or any other retailer that would give you cash back. Buy a small snack if you don’t need to buy anything else. Heck a $1 can of soda or bag of chips is cheaper than $4 in ATM fees; plus you get to enjoy the snack!


3. Go Paperless: You can save money and often avoid statement fees, fees for copies of cancelled checks and other costs by choosing to receive your statements online, or by email.


4. Avoid Penalties: One way banks are trying to recoup revenue is by increasing penalties for bounced checks and late credit card payments.

The Overdraft or the NSF fee is one of the most expensive fees banks charge. The very best way to avoid this is to manage your checking account wisely -- reconcile your account each month and develop a system so you don’t forget to deduct ATM or check payments. If you don’t already have overdraft protection, be sure to apply for this feature. If approved, the bank will link your checking account to a line of credit so overdrafts are paid. You’ll still pay a fee for this service, but it’s a lot less than a bounced check fee.

Similarly, late payments on credit cards are brutal. Miss the due date by even one day and don’t be surprised to see a $35 late payment charge. One easy way to avoid these mistakes is to set up a monthly payment (EFT) that will be automatically deducted from your checking account each month.


5.  Change banks: A recent Facebook campaign organized by the Occupy Wall Street movement is urging Americans who are fed up with escalating bank fees to close their accounts at the large banks (especially the ones that took federal bailout funds) and move their money to small banks or credit unions by November 5.

But switching bank accounts isn’t easy, especially if you use direct deposit, have set up electronic funds transfers to pay for your gym membership or have set up online bill payment. Still, many small banks and credit unions are seeing a flood of new depositors. According to Jim Rice, Senior Vice President at Harbor One Credit Union, “Over the last several months, we have seen a noticeable lift in new account sales as a result of consumer frustration with big bank fee increases."

Keep in mind that fees should not be the sole determinant to whether you stay at your existing bank or not. Personal service, branch location, the size of the ATM network and a variety of other factors should be considered before making a change. As in life, it’s not usually a good idea to make decisions purely on emotion.

Quartery Review: Third Quarter of 2011

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

I’ve been reviewing my clients' September 30 investment statements and I’m sure you have received your copies by now too. If you're a local reader and would like to review your accounts together or would like to recieve a second opinion from an independent financial advisor, please contact me. In the meantime, this post will attempt to provide perspective on the economy and financial markets over the past 90 days.


Tug-o-War

Growth vs. Sentiment

If there was one thing that jumped out at most investors during the third quarter, it had to be the huge swings in the market. Over half the trading days in the period saw the Dow Jones Industrial Average move more than 100 points in either direction. It was like a tug-o-war: On one side was the strongest quarter of economic growth this year and on the other side was increasingly negative investor and consumer sentiment.

Economic Growth: While the economic data doesn’t point to robust economic growth, the gross domestic product (GDP) is increasing. In the second quarter, GDP was up 1.3% and the third quarter is on pace to grow at a 2–2.5% rate, the strongest growth rate so far this year. Furthermore, the Index of Leading Economic Indicators (LEI) suggests continued slow growth and that a recession is unlikely. Still, the economy is expanding at a pace that is well below historical averages at this point in an economic recovery. 1

Investor and Consumer Sentiment: For some, the slow pace of growth probably feels like a recession. Despite the lack of recessionary indicators, consumer sentiment was at near 30-year lows and this pessimism overwhelmed the market in the third quarter. 2

  

Market Performance
The third quarter was ugly with extreme volatility and the sharpest decline since the first quarter of 2009. The main drivers of the decline seem to have been European debt worries and the waning confidence on both Main Street and Wall Street as analysts began to second-guess the recovery.

 

Below are results for key markets. These are in local currencies, so the effect of swings in the dollar is not reflected.

Source: MSCI


Looking Forward
So that’s what’s behind us – the key question is what’s ahead. What will have to happen to help this market climate improve in the coming months? There are three potential catalysts that might emerge.  

1. A decisive and truly unified effort by the EU to address the debt crisis.
2. A strong corporate earnings season featuring frequent, pleasant surprises.
3. A stream of data vouching that the economy is still growing.

Historically, the fourth quarter tends to be a very good one for Wall Street. Over the last 50 years, stocks have gained an average of 3.6% in the last three months of the year. 3 While the past is no predictor of future results, we can hope the historical pattern repeats in 2011.

Economic challenges and market volatility remain it is important to remain cautious.  But for those investors who need growth to achieve their long-term goals, it is equally important to take a longer view and know that fund managers are seeing many outstanding companies available at inexpensive prices.  For investors with cash on the sidelines, now may be the time to start putting some of that money to work. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.  The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
 1. Source: Bureau of Economic Analysis, Haver Analytics 10/02/2011 


2. Source: University of Michigan Consumer Sentiment Report 09/14/2011 
3. Source: usatoday.com/money/world/story/2011-10-03/world-markets-down/50640738/1 [10/04/2011]

What To Do With That Rock?

Guest post by: Burt White, Chief Investment Officer, LPL Financial

Burt White

As a kid, there was nothing that I liked more than going to my grandparents’ farm in West Virginia. The animals and acres of open land offered many opportunities for a youngster to have some serious fun and, from time to time, find a bit of trouble to get into. However, I never understood springtime on the farm. Every other house along the four-hour drive from my home to the farm looked so green and adorned with flowers, while my grandparents’ farm in the spring consisted of acres of dirt as far as the eye could see. It certainly didn’t look like spring.

My grandfather would always remind me that on a farm there are three distinct milestones on the farmer’s calendar: the time to plant, the time to grow, and the time to harvest. Sure enough, underneath that springtime dirt were the seeds of future growth. By the summer, when other yards were brown under the scorching sun, the farm was alive with the growth of those springtime plantings that continued well into the fall harvest.

I believe the same can be said for investments. There is indeed a “planting” season when it comes to investment opportunities. The harsh winters on a farm serve as a means to refresh the acres of dirt tired from a season of growth to get ready for the spring plantings, which is similar to how tough economic environments, stock price declines, and recessionary periods cultivate the investment landscape for the next potentially great investment “harvest.”
 
There has certainly been much to be concerned about over the last few months, which could be the “winter” that opportunistic investors have been waiting for. While the childish bickering in Washington, the concerns over the debts of many nations in the developed world, and Europe’s seeming inability to unify to find solutions to their economic challenges are presenting a significant headwind to economic prosperity, what typically comes out of challenges are opportunities.



What are you going to do with that rock?

 
My grandfather used to always remind me that one of biggest enemies of any farmer are rocks — they can damage the plow and reduce the effectiveness of the land. During the spring, when most kids were on an Easter egg hunt in colorful flower beds and green yards, I would have a different game that I would play with my grandfather in those dirt fields. Instead of eggs, we would go on a search for rocks.
 
Click here to read the rest of Burt's article.
 

The Financial Value of Networking

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

It used to be that there were two types of people in the world: the haves and the have-nots. Today, there are three: the haves, the have-nots and the have-not-paid-for-what-they-haves. While we might smile at this description, it really isn’t funny. One of the most important, if not most difficult, principles of finance is to spend less than you earn.

So how do you do that in today’s economy? Many folks focus on trying to cut costs; they skip their morning Starbucks in favor of coffee brewed at home, for example. But really, how much does this help when gas prices go through the roof? Admittedly, there are some ways to cut significant monthly expenses by refinancing to a lower home mortgage rate, or switching insurance coverage for your home, auto or health. But there is only so much you can do to cut your spending. Earning more income, however, may be a better option to meet the goal of spending less than you earn.

One way toward increased earnings is through building better relationships. Long before Facebook and LinkedIn, a wise man once said, “It’s not what you know, but who you know that makes the difference.” The reality is that income is often derived from the relationships we build and nurture. Think about it for a moment. What happens if your relationship with your boss and your coworkers sours? You lose your job – your income goes down. What happens if you build stronger relationships with your boss and your coworkers? Your income goes up – you get raises and promotions. For many families, adding income means taking a second job or starting a small business – and there is nothing better than having a strong network of friends and associates to help you get the interview or find more clients.

Jen Vondenbrink is co-host and producer of the upcoming “Not Business as Usual” networking conference. She says, “The key to networking -- whether it’s online or in person -- is to enjoy it. Gone are the days of merely collecting business cards. Today, networking is about demonstrating your willingness to give and add value before ever asking for anything in return.” With some willpower and effort, developing an extensive network of friends and business partners is attainable. Having good relationships -- true friendship and reliable business partnerships -- is one secret to happiness, wealth building and career success.

Here are two tips to get you started:

1. Talk to people. Surround yourself with people by going to where the people are. Attend conferences and conventions and meetings.

• The Chamber of Commerce offers all sorts of opportunities such as small seminars and a monthly networking event called “Business After Hours”. They’re currently holding a membership drive too so now is the time to join if you’re not already a member.
• The “Not Business As Usual” Conference will be held at the Mansfield Holiday Inn on October 27 and according to Vondenbrink, promises to “connect you with innovated strategists, business professionals and industry experts who will inspire you to “take-action” towards growing your business and becoming more profitable”.

2. Follow up and Keep in Touch. If you say you’re going to do something, by all means do it. Otherwise you’re just another schmoozer. According to local business coach Greg DeSimone, “Sharing information – whether it’s a website, article, report of referral -- builds your credibility. When you meet someone you would like to keep in touch with, send a quick follow-up email inviting them to connect with you on LinkedIn.” DeSimone continues, “You build relationships by being useful to the other person and helping them. If you can do that consistently without expecting anything in return, a funny thing happens -- people reach out to help you.”

This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/